Has anyone else planned out an early retirement? I am targeting retiring by 40, and my plan is below. Would like to hear what flaws might be present in this plan and what others might have planned.
- I would like to have $X/year post retirement (X=$200k for me)
- I am assuming a market where (conservatively) I can get R=6% annualized returns in the long run. I am basing this on SP500 average annualized returns for 15+ year windows being 8+% over the last 50+ years.
- I would like my retirement savings to support me for Y=35 years.
Based on the following formula, where P is the principal:
P = X(((1+R)^Y) - 1)/(((1+R)^(Y-1))R)
I would need to have just over $3 million in savings.
1) I am not accounting for inflation, but I am using a conservative interest rate, so hopefully that accounts for it. Would love to see if anyone thinks 6% is not conservative.
2) There could be a huge down turn in the markets, just as I am about to retire, where my principal can get cut by 50% (as has happened many times during recessions). How should I account for this. Simplest solution is to have double the capital, but that's a tall ask. I can always work a few more years and wait for my principal to recover, before I start withdrawing.
Would love to hear everyone's thoughts.
If you think you will see the world, travel on a yacht, get out of that fantasy. It will get boring in six months.
To live a good life you need purpose. Retiring at 40 means you will have no purpose. Even volunteering will be boring.