2 Funds for Life Calculator Beta Now Available!
2 Funds for Life Calculator
Chris presented a new web-based calculator to help investors explore the impact of adding small-cap value to a target-date fund. The calculator allows users to adjust variables such as age, retirement date, and contribution amounts, providing projections for future savings, risk levels, and survival rates. Chris emphasized that even a small increase in allocation to small-cap value could lead to better outcomes, including higher savings, improved resilience to market volatility, and potentially higher safe withdrawal rates in retirement.
Target Date Fund Investment Calculator
Chris explained how the calculator implements different approaches to combining target date funds and small-cap value investments, including a fixed allocation method and a scaling approach based on years to retirement. He demonstrated that the calculator supports the same glide paths described in his book, allowing users to create custom backtests and explore various investment scenarios. Paul inquired about the calculator's ability to model fixed annual contributions, and Chris confirmed that it supports both constant dollar amounts and contributions that scale with inflation. They also discussed how the calculator could approximate equity allocation strategies without the fixed income component that can affect early returns in traditional target date funds.
Target Date Funds vs. the S&P 500
Chris explained the differences between target date funds and the S&P 500, noting that the calculator is slightly more conservative due to its international diversification. He clarified that the returns used in the calculator are based on data from 1970 to 2024, while the safe withdrawal rate calculations go back to 1928 to account for the Great Depression. Chris also mentioned that the 4% safe withdrawal rate is conservative and that most people who use it in retirement will likely have a surplus.
Two-Fund for Life Strategy Overview
Chris shared insights on the Two-Fund for Life strategy, emphasizing its simplicity and potential for young investors who prefer hands-off management. He explained how the strategy could help individuals achieve significant financial growth over time, particularly if they start early and invest consistently. Chris also demonstrated how the calculator could be used to teach the impact of investing earlier. He encouraged parents to use the tool with their children to motivate early and disciplined saving, while also teaching about risk and volatility.
Links:
2 Funds for Life Calculator Video