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. Caveats: 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.
Check out the financialindependence subreddit . Based on the 4% rule, your numbers are a bit low. $200k withdrawal a year would need about $5 million, not 3. My personal number is $2.5 million invested for a $80k yearly withdrawal. I'm on track to hit that before 40.
Wait, how would you survive on a 80k per year? Are you including housing and kids? Location?
I'm in Phoenix, so LCOL/MCOL. Already have a really nice house, and my mortgage is less than $2k. Our household expenses are currently less than $40,000 a year. We estimate expenses to double with kids. "Surviving on $80k" is pretty easy if you live outside the Valley/Seattle/NYC area. Keep in mind that your expenses post retirement won't include things like 401k contributions, not do you have to pay FICA tax. Your $200k expenses should drop quite a bit. No kids yet, but we plan on a couple. The $80,000 will be pure, passive income. It should have about a 95% chance to last over 30 years. To be honest, I'm not interested in retiring early. I just want to have enough invested to cover my family expenses. I'll probably drop my big tech job and do something like academia or government.
If you are only considering 35 years need post retirement, how will you survive after that?
I don't plan to pull of 200k every year. More likely around 150, and hopefully as I get older I will spend less (but health insurance might take a bigger toll). Too many variables, so trying to fudge things a bit. But thanks for the call out.
I enjoy working. I couldn’t imagine retiring at 40. I stayed home for a few months and got sick of it very quickly. It’s no fun being home when the rest of your age group is at work.
Totally agree. Plan is to do stuff I enjoy more, than sitting behind a computer, but those things won't pay anywhere close to what I would like to have in retirement.
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🤣I'm not. I have a long way to go still and trying to plan well ahead.
What are you planning to do after retiring at 40? Don’t tell me you are going to have fun. All of your peers friends will be working 9 to 6. You will have nothing in common. 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.
I love non-profit work and travelling. That's my plan. I would like to start a nonprofit and run it. Might do some consultancy work as well, I have a bunch of friends that are independent consultants. I once didn't work for 3 months and know the feeling, it sucks if you are home from 9-6. I would personally go nuts if I don't work.
I am guessing you are in your twenties, no kids, possibly not yet married. And you don’t want kids. Call it social pressure or evolution, you will feel the need to have kids when you are 35+. I know, you are gonna say not me. You think kids are not for you. Too much work. That attitude will change. With 99% probability you will. Kids give you purpose in life. If you still end up with no kids, retiring at 40 will make your life hollow. So it’s a wishful thinking that I see too prevalent in young blind community. Give it time. You will see. You can’t override evolution. There’s reason human being are this way
Health insurance?
Does this plan account for kids at all or do you plan to not have them?
Have 2 kids, according to gh4yk, 200k is not going to be anywhere close to enough. Our current spending is less than 200k (minus the taxes at 200k), and I don't plan on sending my kids to fancy private schools. What's a good number with 2 kids.
OP, what is your location? Do you already own your house? 200k is definitely not enough for a mortgaged single family home in bay area or seattle.
Are you sure you have 2 kids
Not accounting for inflation is deadly. Especially if you retire that early. Also don't underestimate medical expenses. Once you reach 45/50 years old the chronic pain and relentless health issues begin.
How would you account for inflation and what do you think the medical costs would be? If someone pulling in 200k an year won't be able to survive due to medical costs, this country is totally f***ed