How To Retire Early And Never Have To Work Again

There's nothing better than being free to do whatever you want. However, unless you're born with a multi-million dollar trust fund, you'll unfortunately have to work for your freedom. This article will discuss how you can retire early and never have to work again.

You can follow my savings guide to increase your chances of a wonderful retirement by 50-65. But, what if you want to retire earlier? Say at the age of 40, 45, or 50?

You're in luck. I have a very simple, yet effective plan for you on how to retire early. This is something I've been following since I graduated from college in 1999.

In 2012, I was able to finally leave my day job in finance at age 34. I haven't returned since. The catalysts for my early retirement were: 1) negotiate a severance that paid for five-to-six years worth of normal living expenses, 2) having enough passive income to cover my living expenses, and 3) having something to retire to.

As I look back upon my time as an early retiree, there really isn't much I would change. Having all the freedom in the world is priceless. You will not regret all the work it takes to achieve financial freedom. But you may regret looking back on your life and wishing you didn't try harder or take more risks.

What's important is recognizing your inner frugality, your Herculean discipline, the government's generosity, and your enormous hustle. There's nothing better than taking action with your finances and seeing results!

How To Retire Early: Example From People Who Have

Realize that it's an absolute fallacy you must work until 60-65 to be able to retire. It's up to you whether you want to have the freedom to do whatever you want. You just have to make some sacrifices.

I will assume that you enter the work force at age 22 after college. All you have to do is work for 18 consecutive years and save 55% of your after tax profits without fail. At age 40, mathematically you have now saved enough to last you 20 more years until age 60. At age 59.5, you are then allowed to withdraw any money from your tax-deferred retirement savings penalty free.

The money you saved in this time period can be spent in full, if so desired, every year until you hit age 60. By the time you are 62-65, you are then eligible for Social Security benefits to complement your other tax deferred retirement savings.

How To Retire Early: Average Jane

How To Retire Early And Never Have To Work Again On An Average Income

Jane is a University of Colorado grad who majors in English. She gets a job in Denver as a telecom services provider sales rep.  It's not the best job in the world given her interests, but it pays the bills while she stays with her parents for the first 3 years to save money. At the age of 25, she moves out and co-habits with her boyfriend, saving money in the process.

From ages 41-60, Jane can spend roughly $29,163 a year until age 60 and never have to do anything at all! That's right. With her $530,250 saved up, she doesn't need interest or investment returns to spend $29,163 a year. So long as she doesn't increase her lifestyle she's grown accustomed to for the past 18 years, she's fine.

Jane can also earn a risk-free 2% return on her $583,275, which yields roughly $11,500 to go on top of her $29,163 to equal roughly $39,000 in after tax income a year.

If we exclude the interest income, $29,163 a year is not exactly a lot to spend, but during her working years from age 22 to 40, she was only spending about $32,000 a year after taxes anyway.

In order to make her money go farther, Jane could move to a cheaper country, live with a working spouse, work part-time, or attempt to invest their money. If she's been used to living off $32,000 working, suddenly, there are 8-10 hours more a day to make $2,837 a YEAR to close the difference and then some!

How To Retire Early: Floyd, The Go-Getter

How To Retire Early And Never Have To Work Again - Floyd, Financial Samurai

Floyd graduates from Virginia Tech and becomes a software Engineer at a small software company in San Francisco. Floyd isn't the most brilliant of software engineers, which is why he couldn't get into Google, and therefore doesn't make as much as his fellow Googlers. That said, he's making a healthy six figure income by age 30.

With a $902,605 nut Floyd has accumulated over the past 18 years, Floyd can spend a healthy $45,200 a year for 20 years without having to do a thing. At a risk free 2% return, Floyd can earn $18,000 a year to boost his annual spending to $63,200 if we want to get a little more realistic.

Couldn't you live off $63,200 in AFTER-TAX income in practically every city in the world?  Imagine if you found a spouse who worked, or actually made and saved the same amount of money you did? 

You could both live of $126,400 a year quite comfortably. But, the theme of this post is to retire early and only depend on yourself, so this is what Floyd will do.

How To Retire Early: Felicity, The Talented

How To Retire Early And Never Work Again - Talented Felicity, Financial Samurai

Felicity graduates in the Top 3% of her class at UC Berkeley and gets a job at the Boston Consulting Group, one of the world's leading strategy consultant firms. She has a fantastic career and gets promoted every 3-5 years on average until she becomes a senior executive at age 38. She has a couple little ones, and decides to retire at 40.

With a retirement savings of $1.36 million, Felicity can spend $68,000 after-tax a year as she stays at home and spends time with her 6 and 7 year old sons.

Felicity didn't have the best of luck with love, and divorced her $300,000 a year husband soon after the kids were born. They share custody of their sons, and also share the cost of raising them.

At a 2% risk free return, Felicity can generate $27,000 a year in interest income, boosting her annual spending to roughly $88,000 after tax. Felicity was living off of around $88,000 a year in disposable income at the age of 35, so it's not that big of a stretch for her.

Related: The Negatives Of Early Retirement Nobody Likes Talking About

Study This Simple How To Retire Early Chart

The Secret To Retiring Early
Save more, work less. It's that simple.

If you save 50% of your after-tax income a year, you only have to work 1 year to accumulate 1 year of retirement savings. If you keep saving at this rate for 15 years, you will logically accumulate 15 years of retirement savings. Finally, if you save only 10% of your after tax income a year, you have to work roughly 10 years to accumulate 1 year of retirement savings!

The key here is after tax income and what you live on. The default, base case scenario is that one can live off 50% of their after tax income. Living off less for an extended period of time without making more than $100,000 a year is not very realistic or sustainable.

Use a simple $100,000 after tax disposable income figure, and a $50,000 yearly living expense target for retirement to work the math yourself. Save half of $100,000 = $50,000 = 1 year of retirement.  Save only 10% of $100,000 = $10,000. You need to save $10,000 for 5 years to accumulate your $50,000 annual living expense!

Below is another savings good you can follow to help you retire early. I recommend saving at minimum 20% of your after-tax income. If you can save 50% of your after-tax income a year, you should be able to retire after 18 years.

Early retirement savings rate chart - how to retire early

How To Retire Early With Children?

Children are obviously a big determinant in whether you'll have the ability to retire early or not. But, are children really that expensive if you see plenty of couples who earn $50,000 or less have multiple children? The Child Tax Credit is worth up to $2,000 per qualifying child in 2022. The age cut-off remains at 17 (the child must be under 17 at the end of the year for taxpayers to claim the credit).

The conventional wisdom is that if you decide to have children, you should immediately slap roughly 22 years of work to your life. You want to be able to provide for their living expenses and tuition through college, just in case your child isn't that gifted to get a scholarship, or work to support themselves.

The good thing is that conventional wisdom is often times wrong. If two parents decide to save 55% of their after-tax income every year after college for 18 years, the “Average Janes” of the world will have $78,000 a year to retire on and provide for a family.

The “Floyds” of the world will have roughly $120,000 a year to spend, and the “Felicities” of the world will have about $170,000 a year to spend. Can you make these numbers work to provide for your family? I think so, but it will obviously be much harder if you were a single parent.

It's Not Easy Retiring Early With Kids

What's even “easier” than both parents saving 55% of their after-tax income is that one parent works, while only one parent saves as aggressively. This way, the early retiree parent can simply be added on the working parent's healthcare and all other benefits.

Hey wait a minute, I think this is what happens already for stay at home moms or dads. Again, the difference is the aggressive savings plan, so study the chart above once again.

As a father now, one thing I strongly believe is this saying: “have children and the money will come.” I have never been more motivated to earn more and provide for my family than after my son was born.

But I will be honest with you guys, we pay a hefty $2,380/month in health insurance premiums in 2023 for a family of four. When the stock market began melting down in March 2020, I felt an uneasiness I had not felt in over 10 years. Retiring early with more than one child is hard!

Not only are we aggressively saving in each child's 529 plan, we've got to pay for preschool tuition and potential grade school tuition of our children do not get into a good public school that's close by.

What About Inflation Eating Away At Returns?

If you want to retire early, you need to pay attention inflation. Inflation was elevated (~8%) in 2022 due to tremendous quantitative easing by the Federal Reserve and the Federal Government. Inflation eats away at your cash and earnings power.

Inflation rises when the economy starts to heat up, and falls or stays flat when the economy cools. Therefore, in a way, higher inflation is a good thing if you are invested in assets that inflate with inflation. We're talking mainly real estate and stocks.

People often ask, “What happens when inflation hits 8%+? We need to invest and save more! We'll be screwed!” We won't be screwed. If inflation ramps higher, it means the economy is ROCKING AND ROLLING! There is too much money sloshing around the system, and demand is too great, causing prices to rise.

What happens when “prices” rise? Your income, stocks, and real assets rise. Nominal interest rates also start to rise. Meaning the real interest rate return on your investments, money market savings rates, and real estate also rises.

Take a look at this year-over-year rent change chart for 2021. If you own rental properties, you are benefitting not only from rising rents but also from rising property prices. I expect higher prices will continue for years, which is why I've invested $810,000 in real estate crowdfunding, physical rental properties, and other online real estate investments.

I want to ride the inflation wave for as long as possible.

Rising rents come with rising inflation

Real Estate Can Help You Retire Early

Inflation is why I'm a big buyer of real estate. Not only does the price of real estate rise and often increase faster than the rate of inflation, rental income also rises with inflation. One of the easiest ways to gain exposure to real estate is through Fundrise, my favorite real estate crowdfunding platform.

With Fundrise, you don't need to come up with a 10% – 20% downpayment. You don't need to take on massive leverage to buy a single property. You can invest a small amount in one of their specialty eREITs. The eREITs give you exposure to specific regions of the country. Fundrise is free to sign up and explore.


Also check out CrowdStreet, another top real estate crowdfunding platform that has over 100 individual deals a year in 18-hour cities. 18-hour cities have cheaper valuations, higher cap rates, and higher growth rates. You can build your own select real estate portfolio with CrowdStreet. However, before investing in each deal, make sure to do extensive due diligence on each sponsor. Understanding each sponsor's track record and experience is vital.

Everything is rational folks. Don't let the inflation pollyannas scare you. Look at the 40-year chart of the 30 year mortgage rate. It's done nothing but go straight down.

But if inflation does tick up, interest rates will tick up. If interest rates tick up, risk-free coupon yields, dividend yields and rental yields will also tick up. In other words, you'll be earning a higher rate of return on your income producing investments.

You just need to have the appropriate investment exposure. Always invest congruently with your risk tolerance. Don't let investing FOMO make you take excessive risk and blow yourself up.

What If You Desire To Do Something After You Retire

Believe it or not, some people actually want to continue being active during their early retirement. Maybe they become park rangers, tour guides, freelance writers, or consultants.

If your monthly individual operating expense is $50,000 a year, and you find a job you enjoy that lets you work part-time and make $20,000 a year, then you've suddenly bought yourself many more years in living expense coverage. Or put it differently, all you need to do is be an “Average Jane” in the example above.

There are thousands of things in this world that you can do to make money. And to let your mind languish after retiring from your day job is one of the dangers of early retirement. By making just $20,000 a year in a hobby she enjoys, “Average Jane” increases her disposable income in retirement by 50% to $59,000 from just $39,000 previously.

How To Retire Early: A 4th Early Retiree Example

For 13 years after college, I saved 50-80% of my after tax income. As a result, I was left with roughly 16 years worth of living expenses. The chart shows 13 years x 1.2 based on my cash savings.

If I decide to sell my house and downsize, my living expense coverage rises to about 25 years. And If I sell my rental properties, the living expense coverage shoots to over 30 years.

What's important is not so much the amount saved, but the annual living expenses coverage saved. This is important since each person's desirable living expenses are different.

Maybe some people in the Midwest are happy with $3,000 after tax a month to live on. While others in NYC need $10,000 in after tax income to comfortably survive. Shoot, some of you might even want to move to Southeast Asia where $2,000 a month in after tax income will let you live like Kings and Queens! The right dollar amount. It all depends on the individual.

My Journey As A “Fake Retiree”

Since leaving work for good in 2012 at the age of 34, I've done the following:

Clearly, I've been very busy since retiring from finance in 2012. At times, it's been overwhelming, especially when I was writing Buy This, Not That during the pandemic while raising two young children during lockdowns. However, I was doing what I wanted to do, so I can't complain.

Some of these post-retirement activities bring in income, which is why I refer to my situation as fake retirement. And you know what? Awesome! I love being able to make money doing what I enjoy. Who doesn't?

Latest Passive Income Streams

In 2017, I decided to sell my SF house I bought in 2005 for 30X gross annual rent and reinvested $550,000 of the proceeds in real estate crowdfunding for less hassle, lower valuations, and higher passive returns.

The below passive income streams are what fund our early retirement lifestyle with two young children. We aim to generate $300,000+ in passive income for a third year in a row. Hopefully, our investments will beat inflation each year so we can stay “retired” or stay at home parents.

Financial Samurai passive income investments 2023

My wife and I no longer have to work day jobs again. We can remain stay at home parents because we have saved and invested regularly for the past 20 years.

I love to write online, coach high school tennis, and stay active in the community. Ideally, I'd like to spend 15-20 hours a week working on only things that bring me purpose and joy.

During a bear market, ironically, it's easier to generate even more passive income. With interest rates higher, investment yields on everything are higher too. Silver lining!

The Sacrifice Is Worth It

If I wasn't whipped so hard my first two years out of college, I would never have saved so much. Thank you sir, may I have another!  I worked for a firm that made me get in at 5:30 am every morning and have me stay until 7:30pm on average every evening. Some evenings, we went to 10:30 pm, which was brutal.

Further, I constantly had to work at least five hours a weekend, leading to a total time spent of roughly 75+ hours a week. I gained 20 lbs, was constantly under pressure, and was generally pretty stressed. Despite the pain, the one thing I knew was that if I could just get through these first two years, I would be set.

Given the difficult experience right out of school, I swore to myself that I would save like a maniac to have the optionality of retiring early if I wanted to. I NEVER wanted to go back to that situation again. I overcame the desire to earn maximum money.

To be able to have the freedom to answer to no one is priceless. Hence, saving 50-75% of my after tax income is such a bargain for priceless!

There is no rewind button in life. Save aggressively, invest consistently, and I'm sure that after 10 years, you will be able to see the finish line.

The Best Time To Retire May Be Under A Democratic President

The 10 Worst Times To Retire Early Or Normally

Recommendation To Help You Retire Earlier

Get a handle on your finances by signing up with Empower formerly Personal Capital. They are a free online platform which aggregates all your financial accounts on their Dashboard. This way, you can see where you can optimize.

Before Empower, I had to log into eight different systems to track 28 different accounts. Now, I can just log into Empower to see how my stock accounts are doing. I can also see how my net worth is progressing and where my spending is going.

One of their best tools is the 401K Fee Analyzer. It has helped me save over $1,700 in annual portfolio fees I had no idea I was paying. Just click on the Investment Tab. Then run your portfolio through their fee analyzer with one click of the button.

Finally, they just launched the best Retirement Planning Calculator online. Unlike other retirement calculators, their calculator pulls in your real data. It runs a Monte Carlo simulation to produce the most likely financial scenarios. You can input multiple different expense, income, and life events to see how your finances shape up.

Retirement Planning Calculator - How to retire early

Join 60,000+ others and subscribe to my free weekly newsletter. Since 2009, the newsletter has helped people achieve financial freedom sooner, rather than later. How To Retire Early is a Financial Samurai original post. I retired early in 2012 for one year and got back to “work” writing on this site because early retirement is boring!

333 thoughts on “How To Retire Early And Never Have To Work Again”

  1. I retired last month at age 58 and I plan to start a side-business or side-hustle to supplement my income. Having enough passive income to cover my bills and health insurance sure gives me attractive options. I’m planning the side hustle to give me extra income to travel and fix up my house.

    Thanks for all of the great articles on early retirement Sam. They are very timely and informative for me.

  2. Love this article. I learn so much from this type of material. I’m curious if you would be willing to share the capital contributions/investment amount in each of the passive income stream categories for 2023. I’m working to build to a similar goal of $300,000 passive a year and it would be helpful to know how much total invested dollars you have to get to your $380,000. Thanks!

    1. Hi AJ,

      It’s reasonable to shoot for a 3% to 5% return, especially with Treasury bonds yield over 5% now.

      Hence, for $300,000, we’re talking $6,000,000 to $10,000,000.



  3. Shaun Roberts

    “What If You Desire To Do Something After You Retire
    Believe it or not, some people actually want to continue being active during their early retirement. Maybe they become park rangers, tour guides, freelance writers, or consultants.” In my book, then you’re not retired. Retire definition: “leave one’s job and cease to work…” The key part is “and cease to work.” If you quit your job then start another job and/or freelance/write for money you’re NOT retired. You’re still working. Sure, you’re probably not working as many hours as you did in your previous job. But, yep, you’re STILL working.

      1. Hi Sam, I kinda agree with Shaun. When I think of early retirement I think of quitting my high paying job and doing something I enjoy with no requirement for making money. for instance I am thinking of doing a prison ministry or volunteer drug addiction counseling (maybe very small pay). With all due respect I don’t really see you as retired. I see you as “getting out of the rat-race and becoming an entrepreneur and doing what you love on your terms.” Don’t misunderstand me. I love your work and follow you religiously, but you are making aot of money and are sitting on big bucks when you sell this website. I really don’t see you as ever having retired yet, you just became an entrepreneur. You went from working for THE MAN to working for yourself.

        I am 57 and when looking at needing 50X annual expenses, or about 7.5 million and investable assets for early retirement, that would be my target. Not 5 mill and then make up the rest by working…In that case I’ll just work five more years where I am. Don’t love it but not interested in working 20-30 hours somewhere for $15/hour.

        I do think 50x seems awful aggressive. My wife and I can live comfortable with 150k per year. With a target and reasonable conservative 4% portfolio return, then starting with 4 mill, there would be no drawdown in principal.

        1. Oh, I’m definitely not retired any longer. I stopped saying I was retired after one year of early retirement from 2012 to 2013. After traveling a lot, I decided to “get back to work” by writing more on Financial Samurai. I was too bored during early retirement. See: The Negatives Of Early Retirement Nobody Likes Talking About

          Everybody’s expenses and desires are different. Depends on what type of legacy you want to leave.

          See: Two Retirement Philosophies Will Determine Your Safe Withdrawal Rate

          Good luck!

          Psst… I plan to re-tire again soon though :) The best time to retire is under a Democratic presidency with a larger safety net and higher taxes.

    1. Planning for retirement typically includes saving enough to cover your expenses, reducing costs and maybe downsizing your home. All of this is done in anticipation of the day when you will finally be “free of working”! But will not working really bring you the happiness you are anticipating?

      Or is what you are seeking a way to spend your time doing something that you are passionate about? Being constantly under time pressure and on the hook for various nonsense and then constantly worrying about restructuring and being laid off does create a lot of stress. This can sap the enjoyment out of life, but suddenly going from the rat race to idle time with no commitments does not seem to lead to ultimate happiness. In fact, my observations have been that suddenly having nothing you must do can lead to feelings of boredom, isolation, depression and having no purpose. I have witnessed this happening within my own family.
      Family gatherings have gone from discussing:
      · How stressful work is, how bad management is, how unfair the policies are and what a bad boss they have and how they cannot wait to retire and get out.
      · Aches and pains, complaints about the government and society, dealing with limitations due to medical issues, losing touch with other people, regrets about opportunities not taken when they had the chance and never getting to enjoy retirement before it was too late.

      The point is, long term happiness is not as simple as ditching your job and then being totally stress free. The human mind is always active and you need something to focus your thoughts and energy on to keep you engaged and maintain your mental and physical health. This must be something compelling and meaningful to you. What we are really seeking is not to stop “working” but to spend our time “working” on something that brings us joy and satisfaction. Haven’t you heard people quoted as saying something like “do something you love and you will never work a day in your life”? The fact is that the people who are working in jobs they really enjoy don’t feel stressed and burned out, even if they are putting in many hours and lots of effort into their work. Think about people who could easily retire with the wealth they have built over many years, like Warren Buffet or Oprah Winfrey or Paul McCartney. But they keep “working” why? They choose to keep on with their work because this drives them, it is not a chore at all. And this is the one to the big keys to enjoying our “retirement years”.

      How many times have you heard some say “Once I retire, I will finally have time to …………”? So the questions is – why wait to retire? Why not start now? There are many part time ventures which can be started on the side while still working a full time job, and these can be scaled up or grown as appropriate. Pick something that you enjoy doing and could make you some extra money. I have a friend who has started a side business making furniture and has set a woodworking shop. Someone else I know makes jewelry and sells it online, another person I met makes stained glass window ornaments and sells them at flea markets on her website, and another friend write fiction novels and edits movie scripts on the side…

      ​For me my passion project is information publishing; writing instructional ebooks, how-to guides, business plans and printable items. This satisfies my creative side while utilizing my technical experience and I can see myself continuing to do this once I “retire”. It makes me enough money to fund itself and extra to invest and enjoy on fancy dinners and weekend getaways. Who knows, it might grow to make me enough money to retire earlier that planned. This is not just a sketchy get rich quick scheme. I view my side business as an investment in my long term happiness and health, just like investing in retirement funds, I am, investing in myself. You never know where this may lead you and you never know what will happen with your current company that says they are doing so well, as I’ve learned several times the hard way. Now is the time to start! Remember, it is never too late…until you decide to give up.

  4. Hi my wife and I are both 33 and want to pursue the early retirement goal but are reluctant to do so and worried we haven’t saved enough or invested in the investment. We’ve got 585k in cash, 200k in retirement accounts(50% is in cash), about 350k rental property equity in 4 rentals which brings in ~23k a year net cash flow, 100k in equity in our primary home.

    My wife used to have a 110k/yr salary plus healthcare but Covid put an end to that parade and I bring in 80-115k a year in self employment commission sales income, we’ve got two kids under 3 and are accustomed to spending 80-120k/yr. Trying to figure out what we should invest our cash in and what a good structure and strategy we should have to retire in the next few years. I’ve liquidated most of my stocks and have been sitting idle waiting on the stock market to drop but it’s doing the opposite of what it probably ought to be doing and is being influenced by the fed so I’m not excited about dumping 500k in the stock market, I know real estate very well but suck at stocks and equities. I’ve considered trying to retire at my sales job and focus on investing our 550k in cash into leveraged real estate. Figure if I can buy 13 200k homes with 20% down Loans at today’s stupid low rates I’d hope to net $500 on each 13×500= 78k a year plus our existing rental income. Then in 30 years when the homes have been paid off, we’d have a portfolio of 17 paid off properties we can live nicely off of. This is the safest strategy I’ve thought of, but if you have other suggestions please let me know.

  5. I’m 35 and want to retire at 50. 53 at the most. What’s my best strategy here? I can’t touch my pension til I’m 67. So that’s no help.

  6. rachel frampton

    My grandpa is planning to retire from his work after 25 years of serving; therefore, he’s currently looking for a service that can help him with his retirement plan. I never knew that if my grandpa has saved 10% of his after income tax, he will be able to gain a 1-year retirement plan within 10 years. Also, I never take into consideration that inflation is quite advantageous as well since real estates will most likely rise which will be beneficial for my grandpa.

  7. As with most Americans, you don’t understand the inflation devastation that is wreaking havoc upon our shores. Do you want to know the *real* inflation rate in the U.S.?? Look up the Chapwood Inflation Index and you will then understand why saving and investing in fiat currencies is a strategy born of delusion. If you think that inflation is running at 2%, you don’t shop at grocery stores, you don’t eat in restaurants, and you don’t pay rent or pay for health insurance. Convert fake money into real money ASAP. Do what Central Banks do, not what they say.

    1. Not sure why you think I don’t understand inflation. I have the majority of my net worth in real estate, stocks, and business equity is inflating faster than inflation since I retired in 2012.

      It’s been a great run thanks to the bull market.

      For feedback, did you read my post as saying most folks should keep their money in a bank or under their mattress? If so, I can clarify.

      Here are other pertinent posts:

      * The Best Way To Get Rich: Turn Funny Money Into Real Assets

      * Ranking The Best Passive Income Investments To Retire Early

      My latest after-tax (non 401k, IRA) retirement portfolio produces about $250,000 a year in income to fund our retirement. But our goal is to get to $300,000 by 2023.

  8. Hi Sam,

    I started noticing your blog and have been reading. Really enjoyed seeing your perspective on various topics you discussed.

    However, I have a question on the calculation you gave on your own financial income. For an SF condo that rents out for $3050 a month, you probably won’t get 12 times that as “income” per year given there would be insurance and tax even if it’s mortgage free, not to mention about possible repairs and maintenance.

    It would be fine if you want to treat “revenue” (instead of “profit”) as “income”. But I think it’s misleading in the context because you were comparing this amount of money to salaries from full time jobs. Just want to call it out so that your readers aren’t gonna think they can generate the same amount of income for a 100k annual salaried job with 3 of these rental properties.


    1. Nice to have another blog for the upper class.
      Why don’t you try something more challenging and describe how you can retire early on $30-50.000?

          1. Hi Nono372,

            Financial Samurai is correct, it IS entirely possible, but you must take action. Opportunity is ALL around you but most people just let it pass by- and it never fails to surprise me.
            I know because I did it. I become independently wealthy in under 10 years on a measly TEACHER salary. I started at 16k a year…a YEAR. You do have to get your income as high as you can first (which is barely around the 50k mark after nearly a decade in education) and then you have to find other ways to bring in income. I have multiple sources of income from real estate to stock investments and I am completely self-taught in everything that I do. I now own 5 houses all but one (the one I live in) produce a combined income each month that’s more than my teaching paychecks after 12 years of teaching (I still teach because I love helping kids, even though I don’t need the $). And I still invest all my profits, if not in real estate then in the stock market. I live very far below my means, save every penny I make, reinvest and repeat. I’m not even 35 by the way and had an incredibly rough start in the beginning. So, YES, yes you CAN do it, even if you are not upper class. But do YOU believe you can do it? As Henry Ford said, “Whether you think you can or can’t–you’re right.” I hope the meaning is not lost on you.
            And Sam- just wanted to give you a shout-out. Huge fan of yours for years, love that you are helping people by sharing your knowledge and you always get me to laugh somewhere in your posts. I just started a blog actually to try to hit the angle that Nono372 was talking about, so hopefully, I can reach more people who want to join the FIRE community (and FAT FIRE which is what I am going after now) even if they are making very low incomes. I’ve got a TON to learn about blogging, I literally know nothing about it–so I am also super grateful to you for your “how to start a blog” section, on top of the endless posts that you have shared with all of us over the years.
            Anyway, thanks for everything Sam, keep up the amazing work and Nono372–I hope you find the courage to believe in yourself. With that and a boatload of passion–anything is attainable.

  9. What a weird perspective and blog! Who TF wants to retire? What a sad prospect, may as well just die and get it over with. You just have to find and follow you passion and it isn’t even work anyway. I’m sure there’s a blog post here about the best way to save money is to stop living.

    You are alive but once and anyone of us might die TOMORROW.

    1. A lot of people want to tell their employers to pound sand and retiring early from that career allows them to so they can do what they want (i.e. follow their passion). Most people aren’t good enough at their passion to make a living out of it anyway and i’ts very unrealistic for the vast majority of people. If you respond, I’m curious what you do for a living? I love hearing stories of people making a living at something they love.

  10. Sam – Can you elaborate on your Stocks & Bond passive income of $112,000 per year. Is that all dividend income? Or is that Capital gain? I’m really curious what amount of S&B would be required to throw off that much cash per year? Close to $4mil?

  11. Nice article. Only “certain people” make six figure incomes, though. The economy is organized a certain way so only “certain people” can make it up top. I have not met anybody that has made 100,000 after 20 years.

  12. I love this blog and have learned a lot.

    We are age 50 now. We didn’t save much after marrying and what we did save went towards the purchase of a condo (our first home). We had children and many job losses and all of our savings went towards paying bills due to job loss. We’ve had some very lean and difficult times. Even now, in 2018, we both have degrees in good fields but cannot find work. So we both work in retail….Um, yeah.

    Obviously, we won’t retire at 40. We did make some good choices when first married by buying bonds and using my inheritance to put down payments on 2 rentals. It has added to our mortgage payments to do it, but we felt it was a good investment.

    Ultimately, if we sold our our home to pay the mortgages, lived in one rental and kept the other rental, we’d have passive income of only $500/mth to live on. So, we will probably have to work until age 67 (for full SS benefits), to make $2900/mth. Not bad if inflation and health problems don’t exist (diabetic complications are here along with other issues).

    We didn’t save or invest early enough but we’re hoping for the best possible scenario in 17 years.

  13. Hi Financial Sumarai —

    #1 – Great Blog.
    #2 – Great name you happen to share it with me ;)
    #3 – a few questions using Felicity the talented where do you derive the 68k per year in example 3 for felicity? To Summarize you’re concluding with 1.36 Mil at age 40 you will have 68k per year I am guessing from appreciation + 28k in interest/dividends? Can you confirm. If so i am assuming you use the 5% after tax rate of the 1.36 mil of appreciation and 2% for the dividends. Thus never increasing or decreasing the principle base but using the appreciation as money to live off? please confirm.
    #4 – I see this was written a few years ago you think this still applies today ?

  14. well, contrary to my previous reply on another topic i’ve read this above and wish i read it first. This is brilliant and i apologies for my abrupt post.
    i currently say between 800 and 1000 monthly, am single unfortunately lost my investments after marriage in the Philippines :( so had to start over.
    im happy living on 150 2 weeks for food, ive moved closer to my work and use 60 fuel monthly when i cant ride my bike aka CANADIAN Winters!
    My rent is in a 700,000 home which is not mine but i have a room for 400!! internet, hot tub, and all utilities.
    I prepare all my meals 52 for 8 days on sundays and into containers they go. meat, rice and a veg. (6 meals per day and small meals, whatever food group fits into the palm of my hand i consume per meals)

    So if you think you need 150,000 year to save allot you do not, check my current tracking path

    44 hour work week, clearing 1300 bi weekly after the man takes his percentage.

    expenses are 400 rent, 60 gas, 25 clothing (good will or salvation army) 10 coffee at 711 (no star bucks or tim hortons!)
    thats 505.00 expenses

    so 1300 -505 = 795 this month for investing, but its a 3 pay month thanks for september being a long month so i get an extra 1300!

    anyways you get my point to all who might disgree, it comes down to simply person sacrifice (do i want it now or later)

    I felt obligated to reply in length as my previous post was in erros for not investigating FS properly and venting out of frustration. Sorry FS

  15. Retirement saving may be more challenging today than it’s ever been. People are living longer and thus must support themselves for an increasing number of years. Saving for retirement takes discipline, but it can be a great motivator to focus on the fact that the sooner you start saving, the sooner you can retire.

    1. As the saying goes, compound interest is the 8th wonder of the world. I credit my dad for getting me to save at a young age. My wife and I both started contributing to our 401k’s in our early 20’s and 30 years later we both have 7 figure balances and a few homes that are paid for. Retirement is less than 12 months away now and it would not have been possible had we waited until our 30’s to start saving.

  16. Help me out here FS, I don’t quite follow your math for Felicity’s example, which suits my path (or pls link to article explaining). I’m 50 and currently have 1.180M invested 60/40. If I stay in my j.o.b. for another 1.5 years I should have close to 1.4M (yes, high income & big saver!). To retire in CA I need 60k to cover my expenses (still have mortgage & don’t plan to move–yet). I’m slowly dying on the vine at work, but my calculations tell me it’s worth the extra haul since it’s so much in a short period of time before I pull the plug.

    Do you think my plan to stay on is a good one or too fearful based on what I’ve got?

      1. Here are the stats:

        Age: 50yrs

        Income after retirement: only SS (unless I continue working p/t which is fine. SS will be appx 30k/yr if I take in full)

        Current investments: 1.18M (60/40)

        Equity in condo: 125k


        1. I’d gut it out for two more years. It is you’re working when you know the end is near. Use your sick days, take all your vacations, don’t sweat things too much. And if you really can’t take it, ask them to lay you off with a nice severance package like I did five years ago.

          My general recommendation is to accumulate a net worth of equal to about 20 times your average income. And if you cannot do that, then shoot for at least 25 times your average expenses.

          Good luck!

  17. Things were different back in my day for sure, but I can’t help but respect the time stamps you put in to get 75+ hours a week. That is the age for it though.

    My husband and I took a “little longer” to retire because we had kids and all sorts of obligations coming up over the years. Now I can’t help but think that those are a bunch of lousy excuses now!

    Since my kids are jealous that we don’t work anymore, I’ll be sure to share this article with them. They could use the help with their math.

  18. Hey, thank you for your blog, it is a very pleasant reading! I’m 24 and just started the financial independence journey.

    I have a question for you. I’ve seen in several of your post that you recommend Personal Capital. Aren’t you afraid to give all your financial details to a private company? I’m a bit put off by a possibility of a hack of some sort. Or even, by the saying “If it’s free then you’re the product”…

    What made you reassured enough to use it?

    1. Good question. Technically, everything is a leap of faith – be it using your credit card, opening up a bank account and checking online, applying for a mortgage, surfing the web, using a password protector, etc.

      A company must do everything possible to protect the privacy of their clients, otherwise trust is gone. The founders of Personal Capital founded a security firm beforehand actually, and are experts in privacy. Cybersecurity is big business right now.

      I am reassured because I spent 2 years consulting with them in their office and meeting all C-level management and their employees. I’m also a believer in leveraging technology for everything with benefits outweighting the risks.

      Everything in life is about taking calculated risks. For example, I took a risk in buying my first single family home in San Francisco in December, 2014, and it paid off big. My vacation property in Tahoe, not so much!



  19. Love reading your posts, this is a great site and I’m going to sign up for personal capital right after this. I had a question on which would be a faster way to retire early:

    I’m 31, single, living in the Bay Area, making 105k with a 500k NW (225k invested in Betterment and 165k in my 401K). Since it’s the Bay Area, I can’t afford to buy a house based on my income; I would need to use most of my savings to even barely be able to afford a small house in a not great neighborhood. Right now I’m just living with 2 others to keep expenses down and saving 50% of my post tax income.

    Do you think it’s smart to just keep living with roommates and have more savings to invest, forgoing buying a house? I know its recommended to buy a house, but I don’t want to use all of my savings on it — I don’t want to take all my money out of the market to use as a down payment, then I’m losing out on years of it growing via compound interest. Also seems disadvantageous if your first house purchase isn’t for you to live in — the rules seem to be against buying rentals as your first property.

    So… yeah, I feel kinda stuck right now. I’d like to own property, but not sure buying in the Bay Area would be the best way to go.

    Appreciate your thoughts.

  20. What about people that were not able to land a full time job right out of undergrad (behind a couple years in salary) and that live in very high cost of living city with a lower salary? I would imagine even with roommates living in an expensive city like NYC or SF with an under $50K salary would struggle to save over 50% of their income.

  21. Where do you recommend saving this money? Max out 401K first, then something like Vanguard mutual fund? You save after tax in that scenario then pay capital gains taxes on the earnings, but I assume the math still works out?

  22. Good post! For a lot of people making realistic incomes, it seems impossible to retire early. But after looking at the numbers, it is actually achievable to retire after ~20 years without sacrificing too much lifestyle.

    One minor point comment is that the math here would be a bit more realistic if it assumed that the money was put into some income generating asset like an index fund. For example, in the “average jane” case her total would be around $900k instead of $580 if she invested in stocks that generated around 6.5% per year.

    1. Hi Luis,

      Thanks for reading. I purposefully don’t include any returns for savings to keep things conservative. Hence, if history is any guide, a conceivable 5% – 7% return on savings a year is possible, thereby making retiring early even easier than what I propose.

      I just think it’s always better to end up with too much money, than too little since there is no rewind button in life!




      How Does It Feel To Retire Early? The Positives And Negatives

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  23. Sam. Why do you use $18k in your model? Most people can contribute $18k of their personal income plus whatever the company match is.

  24. Thank you for this post. Im an immigrant to this country. I networth 700000 in real estate equity and 403b after 16 yrs of work as a nurse. My problem is switching to a cashflow asset instead of just asset that grows.

  25. Jorge Rivera

    Thanks for the response. Very sound advice. What do you think about buying a small rental property as an investment and tax shelter if I can get it to cash flow/pay itself even after accounting for some vacancy rates, repairs etc.? This would be using debt but then covering the debt with rental income. Really interested in this. I am working on reducing debt and Im at 3k on cards already. Gracias!

  26. Slightly confused…

    I have degrees in accounting and data science so I am not usually dense. However, I seem to be missing something in this post.

    All of the scenarios end at age 60 as far as I can tell. Also, the net income is a straight calculation off the gross with the effective tax rate. Therefore, unless I am missing something there is no 401k or pre-taxed savings coming off their gross. This is where I am confused with your maths.

    It’s great that if they save 55% they will be able to live a relative lifestyle from 40 until 60 without working. However, there wasn’t room in your calculations for other retirement savings to get them from 60 onward.

    Therefore, at 60 they have to wait a few years until social security kicks in or else they are just out of money and have to return to work… how does this make sense and how is it sound advice?

      1. I believe the point of the question is that there is no specific mention of money going into any retirement accounts in the examples based off the gross salary and without that you have zero at any age because you have no retirement account.

        My only assumption that is not made clear in the article is that the “gross” amount is actually post tax deferred savings. This is implied by the statement “At age 40, mathematically you have now saved enough to last you 20 more years until age 60. At age 59.5, you are then allowed to withdraw any money from your tax-deferred retirement savings penalty free.” which would indicate that there is planned tax deferred savings going on and not included in the chart calculations. This is likely because what you can put away and company match and how it could be invested would vary and the article point here was to “buy” years of “early” retirement assuming you had planned appropriately for actual retirement.

        Just as a rough example assuming no 401K and no company match and just an individual IRA with an assumed inflation adjusted equivalent of $6K per year for 18 years at say 5% yielding about $170K at age 40 then it sits at 5% for twenty more years would give you about $450K at age 60. For the first example that would probably be fine because they would be used to living on $30K a year and once their SS kicked in chances are they would be able to run the numbers and determine when it would be best to take it to maintain their $30K a year. The higher earners would likely have better benefits and higher final nest eggs to draw from.

  27. Sam,

    Great post. One thing you have not covered is what happens after 20 years when the savings run out. You mentioned social security. But that is not going to be enough to match the expenses. 401k would be available. If it is around 1.5-2 million, that would help quite a bit.

    If you can cover that aspect it will be great.

    The other thing not covered is health insurance. When you work, the employer takes care of that. Post retirement, one might have to fork out 24K a year to have decent coverage.

  28. FS I served my country in thr army for 25 yrs but was never financially literate. I am 46 and have a small military pension of 2,100 gross monthly. I work at a non profit making 55k yearly. My wife same age is finally taking off and earning 120k yearly. However, we struggled through life putting kids through school, making bad decisions and now feel as empty nesters that we can finally focus and putting in some financial work. My mortgage is 3300 monthly (yes very close to DC metri area) owing 485k on a 515k loan. We have combined only about 81k in 401k $$.
    Owe 35k (2 14k car notes and about 7k in Credit cards).

    My plan is to eliminate CC depbt then car notes. Then either ficus on paying house down or increase 401k. Seems we now finally have disposable income but the metro area sucks you in and its hard to live like a pauper but we are begining to try to live below our means. So currently NO savings so that will be another area to work on. Any other recommendations? IVe thought of buying a cheaper home to rent as it woukd be a commitment to save (in ither words, paying the mortgage and having it rented would be mandatory) instead of trying to save via fighting your will. Any thoughts on kickstarting my situatuion? Thx for your blog.

    1. Hi Jorge,

      Thanks for your 25 years of service! Amazing work. I think you are in better shape than you describe. A $2,100 gross monthly pension for life is like having $1,260,000 in capital spitting out a risk free 2% yield for life. Well done! Then add on the $175K a year in gross income to cover your expenses and I think you’re doing fantastic.

      The no savings is a problem. You need to force yourself to save each monthly until it HURTS. If not, you are not saving enough. Start w/ maxing out your 401k, then shoot to save 20% of your after 401k and after tax income. Depending on your mortgage rate, you can probably pay down a little here and there. It’s not that big for your income.

      I’d really get rid of those 7K in credit card debt though. That is a big waste of money paying those usurious fees! You can easily set up an account w/ a digital wealth advisor like Wealthfront and automatically contribute after tax money each money based on the portfolio they construct for you. It’s free for the first 15K, and only 0.25% a year after. The key is to contribute a lot and regularly for a long time. You will see the wealth growth more than you could have imagined after 10 years of consistent investing.

      Finally, are you tracking your net worth religiously? If not, check out Personal Capital. They are a free financial tool/app/online that allows you to easily see all your accounts in one place. You should know your asset allocation by percentages, and everything. Once you know where all your money is, you can better optimize! I used to consult with them here in SF for 1.5 years and I think they’ve got the best financial app on the web today.

      Good luck!


      Pay Down Debt Or Invest? Implement FS DAIR
      Implement A Better Dollar Cost Average Strategy

  29. Similar story here. Worked for a big 4 CPA firm for a few years out of college. 80-100 hour work weeks are enough to make anyone want to retire early. After that I worked for a couple Fortune 500 financial institution saving aggressively and dreaming of the day I could exit the rat race. I just retired at age 34, and I’m the happiest I’ve ever been in my entire life.

    I now travel 100% (RV/boondocking) around the US (maybe eventually to South America). I live an extremely frugal lifestyle and have no children so my savings should last several decades, and I’m always looking for value investment opportunities to make those savings work harder.

    I may eventually do some freelancing / teleworking work, to keep my mind sharp and rebuild the savings as it’s depleted, but for now I enjoy waking up slow and doing exactly what I want (and only what I want) each day… I answer to no one… and it’s amazing.

  30. Readers new to financial planning should review distant history to discover that high inflation can exist in a poor economy with low asset values. High inflation has not always coexisted with economic growth. Just look at the late 1970’s and early 1980’s. The key with living in prosperity in the somewhat maddening economic model we live in, is to know when asset prices are cheap. When assets are inexpensive, wise investors can pick up assets that are likely to perform or provide dividends. The simple truth is that dollar cost averaging does not work very well in certain historical times. It is best to be a historian. It is best to live your life by the numbers hidden in the market averages. The news media will not point you in the prosperous direction. If you cannot follow this advice it may be best to invest very conservatively. Many advisors will tell you differently because they have a financial interest in taking your money and lastly, they won’t tell you the truth about financial history.

  31. The advice here is very valid. I set out to retire at 40 following similar strategy . I had a few financial setbacks including cost of raising family and college that had melody the plan to 55 however I ws able to take 3 years off to spend with kids when they were young and o wouldn’t change a thing.

    Soon I will retire at 59 with kids out of college with my net worth at 3m. Of that 2.3m is liquid .
    I am luck to still be in fairly good health.

    I achieved this by taking on more risk at work by switching from software programmer to commissioned technology sales.
    I lived off my base salary and saved / invested the commissions.

    Working self – employed and paid via 1099 for about 6 years helped me build a tax advantaged solo 401k that I can empty and live off until i replace with social security income. This will save on taxes on social security income down the road . The rest of my liquid assets are either in a roth or a cash account and the only missing piece is Long term care
    insurance. ( I am currently working to build up another saving account to pay for 30 years of coverage) this will protect remaining assists for my spouse and children.

    1. Ray,

      Wow, that’s awesome! I’m planning on having kids shortly and I’d like to learn more about your shift from programmer to sales. I’m currently a Product Manager very early in my career and thinking of making the switch. Did your take home pay decrease for the first year? Would you do it all over? What would you have done differently?

  32. Hey FS,

    Nice work on this. Retiring by 40 is definitely my goal. I have a question though, are you factoring in a max 401k contribution in each of your examples below? When I plug in my own numbers to the table above, I come out with significantly less saved than in your examples. I’m currently putting the max towards my 401k. My GI is 68k but my net is more similar to average Jane when she’s grossing 55k a year.

  33. You could comment on the retirement strategies for people who get a late life to earning good money…like doctors. Yes we make a good living but many of us don’t have any savings until we are 31-36 years old.

    1. Ok, a junior foot soldier then! :)

      I was just there last year and $2,000/month is good living! Just can’t live in a luxury high rise in KL.

      Malaysian food is the best!

  34. Hi Financial Samurai,

    I’ve been following your blog for about two years, but never left a comment yet. I’m 22, about to graduate in May, and will be a software engineer in Boston.

    I’ve made a plan for how I will save/spend in my first year out of school, and I wanted some feedback from the community on how I can improve this budget.

    Gross income: $100.5k/year, $8375/month
    401k: $18k/year, $1500/month
    Taxes: $22.5k/year $1875/month
    Roth IRA: $6k/year, $500/month

    Expenses: $24k/year, $2000/month
    Student Debt: $6k/year, $500/month

    Emergency Cash: $3k/year, $250/month
    Investments: $21k/year, $1750/month

    Net Accumulation: 18k+6k+3k+21k=49k, which is about a 63% savings rate after taxes, 49% pre-tax. Do you have advice on how I can cut down on my taxes/expenses, or how to earn extra income outside of my job? Thank you.

  35. Early Gen X here. No wife. No kids. I’m an introvert so not missing having family. I take home 8600 after tax every month. Have been doing so for 15 years. Have saved 1/2 my monthly income for 15 years. Plan to stay single and child free for life. Here’s my outlook if I want to retire at 62 (in eleven years):

    FUTURE SAVINGS (4000 x 12 x 11): 528,000
    Social Security @ 1888 PER MONTH x 20 YEARS: 453,000


    I don’t have a 401K or any other structured investments. I have cash and property only.

    Given the criminality of the stock market brokers, am I wise to keep my money in savings and property only? I currently live on 4300 per month. In retirement, if I live 20 years, I’ll have over 7000 per month based on projected savings and SS.

  36. My target retirement age from a regular job is in the mid 40’s. In the next 10 years I should be able to do what I want.
    As a couple, we can live on a tight budget but with children around its always a risk you will want more in your kitty. This is especially true in countries where children are dependent on parents till they get a job, it’s kind of like financial spoon feeding. I would like to move away from that trend.

  37. I started out earning $18,000 a year, retired 28 years later at $250,000 a year. So it can happen. I saved enough during that time that I can now live the same life style without working, but I do work. I now own a consulting company and work 6 to nine months, take off three or four months and then start back working for another 6 to nine months.
    Advise: Ask everyone you meet for their business card and then stay in touch via linkedin and/or facebook type media. I am now paid for who I know, not how much I can work a day. I am paid to make introductions for people. With people not talking any more, rather texting and e-mailing, most people don’t really know very many people any more. Get paid simply because you know thousands of people, that when you text and call they actually will text and phone you back.

  38. I have a question for you. I’m 31 and I am hoping to retire by 35. But I’m doing it a little differently. I make about $8k/month in after tax rental cash flow and after tax passive business income. I also still work a full time job taking home $5500/month after tax. I have 0 reserve funds because of my last RE investment. I ran some numbers and to live in the house I want, but health insurance, pay for gas meals entertainment groceries etc…I’m looking at about $6k/month in expenses. Right now I can retire and cover my expenses and still put away $2k/month. If I work for 4 more years until I’m 35, I can save an extra $300k as a reserve. But I don’t know if I have it in me to stay that long. I can also reinvest that 300k for an additional $2000/month conservatively. What do you think? Am I too worried about having a reserve? Would you leave now?

    1. Dude, you’re 31. relax. working a couple more years is not a big deal in the grand scheme of your life.

  39. You don’t have to read too much of this article to see how far removed from the real world the author lives. How can anyone earning 30k save 15% of their after tax income for 20 years? You’d have no life. And as for a software engineer earning 6 figures by age thirty – utter nonsense. The majority of software engineering graduates earn nothing like that. This is a fantasy blog written by someone either living in denial or some who was born into money.

    1. It isn’t nonsense. I recently graduated engineering school and can name 15+ students who started at over $100,000 (and I went to a state university). Only two were headed to a ‘high’ cost of living area. Engineers have great starting salaries (although it GREATLY depends on the engineering field and industry). Thanks!

  40. This is a great post. I love the examples you give. I look forward to sharing my story when I retire early. It will not be at age 40 but early by standards. Thanks for sharing this helpful info.

    1. Federal? 25% or a lot less if married. Add in FICA (social security/medicare), state, local, property and sales tax and you get to 30-50% taxes or 20-35% for a married couple at that income. This is true in most countries – the marginal rate on 100k is like 28% fed for a single person but you get to exempt out of 11k of income or more, the next 15k or so is taxed at 10% and then another large swoth is only taxed at 15%. If you put in $18k into your 401k and have a child tax credit or the like, a married couple with $100k income may only pay 5-10% effective rate.

  41. I’m fairly new to the World of Finance, even though I’m already 29! I figure it’s better late than never. I’ve become addicted to FS and I couldn’t be happier about it.

    I have a question though: When you mention a 2% risk free return, are you talking about T-bills or something along those lines?

    Thank you!

  42. Are the tax rates used above correct? Maybe this was only federal taxes? I live in California, and I’m pretty sure that it’s at least 10% worse. Perhaps this also doesn’t include payroll taxes?

  43. Pingback: The Health Benefits Of Early Retirement Are Priceless | Financial Samurai

  44. hi im a 18 year old who has a pretty good work ethic and is hoping to make $150,000 $200,000 at an age of 28 starting annually, and i am currently in 11, and doing my csecs, mostly technical subjects, im not the best of student but i had decided to make something of my life so i started to concentrate more on my books, its never too late. but i know i will make it in a university but don’t know what i what job or steps to bring me to this success. i am seeking Ur guidance as im really focused now.

  45. I love this post and I love that I discovered your blog! Very inspiring and motivational. I read a few others on early retirement and investing, but yours seems to resonate the most. Maybe it’s because I also live in San Francisco. I only wish I started thinking about these things when I was entering the workforce. I am 28 now, and have an embarrassingly small amount of savings. In fact I probably didn’t start saving at all till two years ago or so. But now it’s like a light bulb moment, where I realize what I want to achieve. Thanks for your detailed and well thought out posts.

    1. I’m 30 and I also feel frustrated at how far along I am financially. At my first job I saved 12% in my 401k. I remember talking about that with my co-workers and they thought that was an absurdly high amount. Now I wish I had done at least 20%. I also maxed out a Roth IRA one year and made some various Roth contributions in other years. During the 2 and half years at my first job I managed to accumulate 25k in my retirement accounts. I also bought a 25k car which was a terrible mistake but I plan to keep the car for 15 years to at least somewhat make up for that. Then a series of events led me into a deep depression and I basically burned up a year doing nothing and then decided to go back to school which has taken me 3 years. I’ve been working part time at various jobs but not really saving anything. I should finally be starting working again at about 50k a year at the beginning of next year and plan to start maxing out my 401k and saving every other additional penny that I can. In my career I can expect some fairly quick pay raises for the first 5 years so I could make 75k by the end of 5 years or if I am a high performer up to 100k. This will allow me to save an even higher percentage of my income. I could be just a few years away from retirement if I was smarter when I was younger but I think it is key to remember that I can still retire 20 years earlier than average which is a great accomplishment.

  46. Greetings from Seattle! Thank you so much for sharing Sam! You are creating a great website and community. It is so great to find similar minded people here. Can’t wait to read more! Have a wonderful day!

  47. I would just like to point out one thing to a lot of the posters on this particular article. If your mindset is “This doesnt apply to most people because they dont make over $100k a year” or “I cant do this because of x,y,z..” or any of the other number of excuses then NO it wont work for you. All of these strategies have one fundamental concept in common. You have to have the drive and the mental mindset that anything is achievable if you really want it.

    Think on this. 1) Statistically most multi millionaires never earn or have a combined family income of more than $86k per year. 2) A parking lot attendant here in Atlanta earns $12/HR and has managed to accumulate a $500k portfolio. ( Im sure he never said I cant do this because i only make $12/hr.

  48. I’m 51 and would like to retire within the next 3 to 5 years. When I say retire, it doesn’t mean do nothing…I will always work…but I want to pursue other interests like home remodeling, landscaping, woodworking, volunteering, helping my kids get a start in life, all of which I enjoy doing but work gets in the way and my own fears of losing a steady paycheck, we will never have enough money put away as I fear the unknown … inflation, taxes, healthcare. I grew up with nothing so I have this constant anxiety of losing what we have worked hard for instead of relaxing an enjoying life.

    My degree is in Finance and I have been in Technology and/or Technology Management within Banking, Insurance, Financial Management firms for the last 30 years. My wife and I have 2 kids. No debt, No Mortgage, both kids college saved and paid for and a Net Worth of $2.7M (Approximately 20% Property, 45% IRA/401K/Pension, 20% Taxable Investments, 15% Cash). Living expenses are approximately $75K/annually. My wife stayed home to raise our kids so we lived on one income well below our means.

    I have been using Quicken to manage our home finances since 1988 aggressively budgeting, saving, buying, holding & diversifying our holdings. Living in the Midwest is where we have grown up and raised our kids so we all have a very good work ethic.

    I would like to work on generating more passive income with very little risk and the confidence that our “nut” is solid and I can enjoy life with the confidence that we are doing pretty darn good. Any suggestions or recommendations or a kick in the butt from you and your readers!

  49. Steve Humphries

    Great to know that people want to reclaim their life without giving it all to a corporation until they die. I am 56 and want to retire in 2015. I own my home, auto, not in debt, and have monthly bills less than $1000. I have a solar powered home with my own water system. I have a savings account, gas royalties , and a 401K. 15,000 of the 401K is after tax while the other 215,000 is pretax that I am told I can roll over to a (Roth or IRA?) If I am living off savings, gas royalties ($300) and the pretax 401K until 59.5 what do I count as monthly or yearly income if I am not working? I ask this based on the current health care insurance requirements even though I do not use the medical system and have little confidence in their ability to treat me with their poison pills. I have a lot of questions and need a lot of answers before I do let my company go. What is the tax rate for cashing in the 401 K/ Roth at 59.5? There are questions I don’t even know yet to ask but I need freedom. I can’t stand the communist/socialist control the corporations and governments want now and I must find a way out. I have been at my current location for 20 years and it has become progressively despicable. I will take the early social security at (62.5?) and it will be sufficient to cover my expenses. I know the propaganda they tell you to not take the early SS but I have had family that worked for the SS system and they have told me that the real numbers of how much you will draw are still greater with the early draw if done for a longer time of course. How much more will you get if you just don’t live to take the later draw? There is some good advice here for people beginning the job market but I am ready to leave and I will but thanks for your help or advice should you respond. How is the best way to proceed?

  50. Gen Y Finance Guy

    Love your posts. I am just now 28 years old and the only debt that I have is the mortgage on my primary residence and my rental condo. The wife and I bring in almost $200K a year and will have our primary residence paid off in 6 more years. We continue to max out my 401K at $17,500/year (which I have been doing since graduating college in 2008), and starting in 2015 will be putting $5,500 away in an IRA for my wife.

    We have over $100K in our retirement accounts and about $60K in the bank. We made some financial mistakes early on, but everyone does. I am sure even you have made some that you would go back and change if you could.

    For example, I bought my first house at 19 when they were giving them away like candy. I was still in college and it was 100% financed. Long story short is that after several years I eventually let it go into foreclosure and it cost me about $35K (the difference in the monthly expenses and what I could rent it out for over two years). It probably wasn’t quite $35K, because I did get some good tax benefits for two years out of college since it was technically considered a primary residence.

    Prior to this I had lost $14K in the stock market in 2007 when I put way to much money in a one tick pony (bio-pharm company). I was sure I was going to make 100X my money. Little did I know at the time. But it was a great learning lesson.

    Then in 2011 I decided I needed a new car, when my car was only 4 years old. After I sold my car for $4K, I had to come up with another $28K which was like 43% of my gross income at the time. I did pay cash, but that could had been used for investments that would had put way more money in my pocket. Then the next year we did the same for my wife and spent another $25K for a new car for here (again here care was only 4 years old).

    We also go married and paid $30K for our wedding (yes we paid for it ourselves). In hindsight this could had been used to put more money down on our primary residence or into another investment.

    So when you add all this up. We have wasted about $133K in the past 7 years, but still managed to make some really good decisions along the way as well. We are way ahead of our peers.

    Take our mortgage for example. Our monthly payment is only 15% of our gross income where some of our friends are paying up to 50% of there gross income or worse they are paying that in rent still. We own both of our cars outright, when many of our friends have a car payment or two if they are married. We have no credit card debt. We have a rental property that is cash flow positive.

    We have the wind at our backs as each financial goal becomes closer and more attainable.

    Looking forward to more posts and inspiration for my own Finance Blog.


    Gen Y Finance Guy

  51. Samurai San: Help me with your logic and your math work on your comment below taken from example 2 -Floyd – coz it just does not add up

    “With a $902,605 nut Floyd has accumulated over the past 18 years, Floyd can spend a healthy $45,200 a year for 20 years without having to do a thing. At a risk free 2% return, Floyd can earn $18,000 a year to boost his annual spending to $63,200 if we want to get a little more realistic.”

    – How can Floyd earn the 2% return on the $902k nut while eating through it year on year. Isn’t the calculation of $63200 a year therefore, misleading instead of ‘realistic’ as you suggest?

    p.s. Love your blog and agree with most of your suggestions. I think most of the things you write about are universally true.

  52. Great advice! I am a senior in college and have recently accepted a job offer for post graduation in May. I have also realized how little I know about investing, a 401k, CDs, etc. I found your blog when I first started researching information and I have been furiously reading whenever I get the chance! I am currently developing a budget for next year and I greatly appreciate all of your advice and information regarding saving. I was curious if you have a suggested booklist for someone starting out? I love reading and am going to make my reading list for the next few months rife with personal finance information. Thanks again!

    1. Great job starting so early! If everybody started as early as you, our country’s personal finance situation would be so much better!

      PF is pretty boring, but I remember enjoying David Bach’s books you can check out at the library. Good luck!

    2. Hey Caitlin, I know it’s been over a year since you posted, but I too love reading and disagree with Financial Samurai–personal finance is the most interesting non fiction literature in the world!! My ‘trinity’ of beginning financial independence reading is The Richest Man In Babylon (almost like a children’s story, 100 pages that are worth their weight in gold) Rich Dad, Poor Dad (an illustration of how simple decisions and the correct MINDSET can unleash your inner financial genius) and Think and Grow Rich by Napoleon Hill. The Millionaire Next Door, a virtual case study on millionaire postmen, nurses, teachers, plumbers and secretaries (yes, you can do it too!), gets honorable mention. There are SO many excellent personal finance books, you will take something from all of them. Read these books with a highlighter, sticky notes and a pen and mark the hell out of them!!!

      After digesting those, ask yourself what you’re interested in. There are so many different investment vehicles, which ones interest you most? Learn about those subjects first. For instance, I’ve spent almost a year researching real estate in depth after seeing what an incredible investment the house I bought in 2014 turned into. There is an endless quantity of knowledge on the Internet and in books about real estate, and I’m taking the real estate agent exam for my own personal benefit in about a month. My first interest was stocks, so I spent most of college studying the market and economics while I was getting my accounting degree. Study what you’re interested in, you will learn in 10X better than forcing to read about real estate if that subject bores you or about derivatives when you loathe the stock market. It’s like learning a language; if you’re fascinated by it, learning French will be easier than learning Spanish even though it’s a ‘harder’ language. And like a language, once you master one discipline (stocks/real estate/FOREX etc) the vocabulary you learned will help you learn the next thing you study, and so on and on. What kinds of investments seem interesting or exciting to you?

      I hope your career has started like you’d hoped, and that you’re on your way to whatever financial dream you have for yourself. It’s different for everyone!!

      Eric Cogan

  53. Man I love this blog. Discovered it a few weeks ago and now just reading the backlog of posts.

    I would love to get to this point, to have the freedom of retiring early but I don’t feel particularly optimistic. I mean, I’m 20 and about to enter the last year of my degree, so I’ve got a lot of time yet. I feel that the ceiling for major earnings is much lower in the UK though. Might have to ship out to the states to earn that dollar.

  54. Save 10% of every penny you ever make.. invest 70% in a highly rated mutual fund and re balance once a year.. This is how the people who retire comfortably do it.. Of course you can save more when you can but 10% is the way.

    1. I honestly do not think 10% is enough. I would shoot for 20% at least and keep on going until it is unbearable to save more. And then keep on going.

      Few people test their savings abilities. But if people do, they will surprise themselves!

  55. Dude, i am 22, with a 32k salary. can you please give me advice to save for retirement (doesn’t have to be early) and strategies to pay student loan (31k)? At this point i am completely lost but i want to be able to make wise decisions regarding my finances. Thanks!

    1. Well, since you stumbled across this retire early post at age 22, then it should mean that you are SERIOUS about your money now. My advice would be to continue to live like a poor student so long as you have student loans. That means no fancy car, no fancy clothes, rooming with someone or living at home, and saving like a mad man. Everything starts with savings while figuring out a way to be the best employee possible to get paid and promoted.

      Read this:

      1. I am very serious indeed! I will definitely take your advice. Also, I was reading your blog post, “Are There Really People Who Only Work 40 Hours A Week Or Less And Complain Why They Can’t Get Ahead?” and hilarious because I have been working an average of 70 hrs a week every summer and winter vacation. Being a young female I always get asked if I have kids to support -.-

        1. Glad you enjoyed the article! It’s good you are thinking about your finances seriously now. That is so important and far ahead of many other people. Fight on, and never surrender!

          1. My goal is to hire both of you, the guy who made the comment and you mr.Sam as a samurai bodyguard, anyway I think you have people who are Employees , and then you have people who pay them it’s “you either cut the checks or cash the checks” for example. It takes two to tango I an told. You either want to be the best employee with high pay or hire the best people as employees and pay them even higher”… I’m opting for cutting the checks and if Things go south, maybe I can work for you how bout it (put an extra galloon in “The Moose” forget the 401k for a few extra miles of ROI) Great service and even greater audience you’ve built Sam. Thanks , It’s appreciated even if they dont say so and instead contradict…they know it , I know it, and you know it”… But I disagree ” I believe The Work stops when Your Heart stops… If your not learning something you should be teaching something…”

      2. As someone who is 32 and doing AmeriCorps a 2nd time with some other jobs before 1st time Americorps gig, it has been a valuable life lesson brought on that it is never worth rooming with someone especially if the person is unknown turns out toxic/different from what expected. Sadly, in such situations at very worst the other roommate acting leechy, moochy or known to explode over trivial issues and deflect responsibilities and fall behind on payments. This was found out with one guy and part of a one-year lease which had to be broken even if other unknown roommates in the past have turned out ok.

        Wonder of another way he or she can save money in housing while sharing a space, but not rooming at all with anybody and not having to worry about the other ahole not cleaning up, acting out or acting domineering as totally unacceptable?

  56. All of these scenarios make me feel like a piece of SHIT!!! Do that many people earn $150,000 a year???

      1. I wonder if six figure pensions will be a thing of the past.

        I wouldn’t be surprised to see pensions disappear in the public sector much like they have in the private.

      2. Firemans wife

        I don’t know any cops or fireman that make that much.. what part of the country are you quoting?

          1. Police sergeant in a major metropolitan city. Depending on overtime, I usually do $150k to $160k. Unbelievable pension locked in @ 8.25%, and a 457 and 401k(…of which I max both – $18k per year). I know guys that have retired and the pension alone(in a pension-friendly tax state), they’re bringing home $10k-$12k per month…. NOT including social security or any other retirement accounts. The higher ranking officers like lieutenants and captains can make $180k – $200k, possible even more depending on seniority and discretionary promotions within their ranks (IE-Detective Lieutenants or Captains appointed to act as Inspectors or Chiefs).

  57. Eric J Broadus

    Hello I have a question. In all three examples you presented how much they could spend over a twenty year period. I also see the 2% risk free rate. my question is if they spend that amount of money each to live off wouldn’t the amount they earn in interest decrease each year?
    Please explain.

    Thank you.

      1. That doesn’t make sense.

        “With her $530,250 saved up, she doesn’t need interest or investment returns to spend $29,163 a year.”

        How are you not touching principal if the money isn’t coming from interest or investment returns? Even if you really mean to say that the $29,163 is assuming a 5% withdrawal rate over 20 years (assuming your assets will stay steady gaining 5% a year) then there would still be no way to add the additional 2% into the mix because you can’t have money both in the stock market and in the risk free rate at the same time (at least, not the same money)

        Also, where did you get the $530,250 figure to begin with? You have her total savings at $583,275. To be even more picky… 41-60 is technically 19 years.

        1. Any updates on this? I had the same question.. and I’ve exhausted my actuarial thinking to solve it.

  58. Your examples are certainly one way to retire early. It seems to be a pretty difficult way to do it, however. Why not retire in months instead of years or decades?

    Instead of working a job for 10 to 20 years trying to save up a million and live off the interest, why not just self-educate yourself on how to BUY an existing monthly income stream?

    If you are willing to push yourself through a learning curve, you can “retire” in months, not decades. Just buy one multi-unit residential income property with 30+ units and you can earn enough monthly income to pay all property expenses, a manager to run it and all your personal bills too. With a good manager, this type of income can be 95% passive.

    Rentals get a bad rap sometimes because the owners don’t have enough units to afford to pay a manager and to pay others to do repairs. Landlording can quickly burn you out if you try to do it yourself. In my experience, 30+ units is the magic number. I’ve chosen mobile home parks because they provide the most income with the least capital expense. If you self-educate, you really can buy just one property and “retire” as soon as you can complete your learning curve.

    Multi-unit residential rentals are an income stream that you can control. As inflation eats your income, you can raise rents, lower expenses or buy another park. REAL inflation, by the way, is running nearly 10% a year because the Fed Gov keeps changing the formula to make it look lower ( Wages, investments and savings will never retain their purchase power while this continues.

    I’ve studied the global financial system for more than 10,000 hours and must sadly report that a massive collapse or massive devaluation of dollars and digits is certain. In my opinion, it’s far better to own real goods and real income-producing property than paper and digits, which are just promises to pay. When the crisis climaxes, the holders of your paper and digits may want to pay, but will be unable due to people being unable to pay them.

    Another advantage of multi-unit residential rentals is you don’t need a ton of savings to buy a large property. I self-educated and learned how to buy my first mobile home park for $1,000 down and closed on the 5th so I’d get the prorated rents for the remaining month at closing. So I was actually paid over $5,000 at closing to take over the park. When you have no money in the deal, your yield is infinite. Ten years later, the park is worth 1,500 times my original investment, which was more than returned to me at closing.

    I now own two parks and my only “job” is to manage the managers. It’s secure, monthly, 95% passive income that allows me to be retired, live my life for “free” and own appreciating assets I can later sell, 1031-exchange or just live well off the rents as the properties pay themselves off. Because of the many allowable tax deductions available from owning rental properties, my taxes are very minimal too.

    Isn’t several months of self education better than the time and expense of attending college 4 years and working 10 or 20 years for someone else? Once you reach financial independence, you suddenly realize your most valuable asset is time. Trading time for money is a spectacular waste of your most valuable asset.

    Buying an existing income stream can get you off the employment wheel THIS YEAR if you focus on self-educating yourself how to do it. Save decades of time and years of stress and just BUY an existing income stream.

    I highly recommend this direct route to living “free” and retiring early.

  59. I know you have a financial interest in promoting capital, but that doesn’t mean it’s the best tool for tracking budgets and spending – Mint get’s that honor.

    Disclosure – I use both. Mint for the micro (spending), and PC for the macro (investments).

    1. I’ve never used Mint, so I can’t promote it. But from what I hear, Mint has a great budgeting tool.

      The reason w/ I like Personal Capital on this front is b/c they use a cash flow management tool. Budgeting is basic, like those who try to get wealthy just by saving money instead of trying to make more. PC is more focused on investing and building wealth through greater assets imo.

  60. If it was this easy then everyone’s life would be perfect! There is no way anyone who makes $35000 can earn $100,000 in 18 years.

    You are better off buying $1 lottery and hope to win Million Dollar jackpot.

    Simply ridiculous strategy.

      1. 3% inflation rate is not GUARANTEED by employer. If you are making $35000, there is no way in a million year you can start making $100000 in 18 years.

        Why would an employer pay a person $100000 after 18 years when they can easily hire someone after 5 year to start from $35000 and you can get lay off. There is high possibility that your new employer can start your salary to $35000 again.

        1. Nothing in life is a guarantee. You could get fired after two years because your boss hates your attitude, who knows. But you keep going out of self belief.

          If you have the mindset that you can’t even get a 3% raise a year during the upswing in your career, then I’m afraid you have a defeatist mentality which will prevent you from achieving your financial goals.

          What do you do for a living and how old are you? What is your education background? I’d like to understand why you are so pessimistic. Thanks

          1. I am optimistic about my career growth and have gained above average increase. This article is great but not realistic for all.

            p.s: I have subscribed to your news feed, so we’ll be in touch.

            1. A person can definitely increase their income. If a high school drop-out like me can, anyone can. It took a lot of drive and a lot of schooling but it is worth it.

              I did it in 13 years.

              In 2001, at age 25, I made $24,000 a year. After going back to school to obtain multiple degrees and graduating in 2010, I now make $105,000.

              Job 1 – GED – there for 6 years – started at $24,000, top salary was $40,000
              Job 2 – BS – there for 3 years -started at $48,000, top salary was $52,000
              Job 3 – MS – there for 2 years – started at $80,000, top salary was $92,000
              Current job – been there for 1.5 year – started at $100,000, currently making $105,000

          2. I’m sorry, but annual raises are just not realistic. I joined the workforce at age 21. I’ve seen one raise in five years, and I don’t anticipate any more raises. There are plenty of fields now where annual raises are completely nonexistent. If I followed this plan and retired at age 40, I’d end up having to live for 20 years on an annual amount of $18,500. That’s not defeatist, it’s realistic. Your view is an overly optimistic one that is simply not a reality any longer.

            1. I’m 26 now. I make $45,000 a year, and that’s pretty much as good as it’s going to get for me salary wise. One needs realism in today’s world, because things can and will go wrong. The days of the annual raise are gone, and to think this plan is realistic is akin to living in a fantasy dreamworld.

              1. What about a second job or starting your own business online? Working 40 hours a week is totally arbitrary. I worked about 80 hours a week for 10 years. Working on your side business before work and after work is possible!

            2. Who said anything about working 40 hours a week? I don’t think I’ve ever had a week where I’ve worked that little.

            3. The last thing you need is “realism.” I don’t know what that is. I would lose that word from your vocabulary.

          3. This is a funny thread. I was making about $35,000 18 years ago, now I make over $200,000. Do people not believe in the ability to switch jobs and learn new skills that may lead to greater incomes?

          4. You never worked for Temple University. I was there four years at a starting salary of $26K. They gave out annual raises of something like 25 cents an hour. Only you didn’t really get it. They took it away in the form of “contributions to your health insurance premiums.” In other words, the moment you got the extra $10 per week, they would decide to take another $10 a week from your pay check to contribute to your health plan which cost them $12,000 per year anyway. I am not sure why they had to nickel and dime their employees to death since there was no money shortage at that time (and they were able to increase the materials budget by a few million….but that’s off topic).

            The last time I was ever granted a cost of living increase of 3% was the early 90’s. Now the economy sucks so bad that no employer need bother with raises.

            Some people may land a job that pays $100K, but by definition most people will see their standard of living go down. I blame the oversupply of overqualified people on the fact that most jobs will be outsourced or mechanized. Even telemarketing is no longer done in this country.

            1. It’s true, due to globalization and the internet, there’s been wage arbitrage e.g. Indian IT, Philippines call centers, etc.

              The goal is to get on the tech/internet wave, and figure out how it can help you get ahead.

  61. Where are you getting the tax rates? 26% max? What about state tax over 10%, City tax, ect. Also, since when is tax rate capped at 26%? In the one example of income rising substantially, the rate will either increase to 36% or the ATR will kick in.

    In all cases, your Discretionary Income after all taxes is inflated.

  62. Pigbitin Mad

    A person making $30,000 will not be making $100,000 after 20 years.

    I actually make less than I did back in 1985 as a telemarketer. The economy is going to suck forever. We can only hope for massive deflation so that my nest egg is actually worth something. (If only I would actually take the money out and stick it under a mattress). As it is $1 million dollars will probably buy a loaf of bread, just like in Germany after the First World War.

      1. Except that income is very, very loosely related to inflation. Just look at the historical median income. It’s went from $31k to $51k.

        Income is more related to skills/abilities and motivation to move higher up. I would agree that most reading your blog probably possess said abilities to move up. That said, it’s nearly impossible to expect the “Average Jane” to go from $35k to $100k in 20 years. Not impossible, but not likely. The average aren’t going to move to specific big cities where they can work rough jobs that pay a lot, no are they going to put in the time to broaden their skill set in the first place.

        1. Gotta believe in yourself Ricky! I’m confident that anybody reading this post and reading this site, which amounts to about half a million a month now will have the tools to outperform.

  63. This sounds great & all, but I see your “average” Jane starts out at $35K & is making $100K by the time she’s 40. I certainly wouldn’t consider this “average”, especially not in the Ohio Valley where I live. The average income per capita around here is about $40-$45K, PERIOD. That’s even with a college degree, which I have BTW & still fall into the low end of this average. How, pray tell, do you suggest we save 50% of our income??? I’ve personally nixed out everything extra I can think of including cell phone & cable. I’m also debt free except for my mortgage, & there’s still no way I could save 50%. I’m doing good to save 20% & most months not even that. I even have a 15 yr mortgage on my home & make extra payments so it will be paid off in only 10 yrs. I’m about 3 yrs into it. Bottom line, I feel like I’m doing the best I can here & I seriously don’t believe I could spend much less. That being said, what’s a more realistic plan for REAL average Janes like me??? That’s what I want to know. I should also point out that I have a child & am seeing your chart almost 15 years late. I know I’m not retiring in 5 years & that’s fine, but retiring at 50 is still better than 65.

    1. One of the things you having for is a low cost of living. It’s all tied to average incomes so saving 20% is great. Try inching it up by 1% every month. I’m sure you will be able to get to 30-35% savings rate in a year’s time. You will surprise yourself. Trust me! But you got to try!


  64. As a young reader (18 months in the workforce) I save ~45-50% of my after tax income. Making 25% contribution to a Roth 401k with a 6% match. The other chunk is cash. I have an interest in building passive income streams but dividends, CDs, and real estate require a large amount of money to be able to live off of. (5.5% to equate $2800/month is ~$611k)

    Not to be intrusive but what % of your net worth came from book sales and stock market unicorns?

    1. Hi Nathan,

      That’s a good savings rate. To answer your question, maybe 0.001% from book sales and you can read about my stock market unicorn here where I made $155,000 at age 22. It is less than 5% of my NW, but it gave me the foundation to buy property and build it.

      I started this site after achieving financial independence. Here’s another article on my passive income streams

  65. Wow, it must be nice to be an “average Jane” and receive $5-10 thousand dollar raises each year.

    1. BART workers in SF are on strike. Many dont have college degrees. Average income is $80-100k and they all have pensions where they don’t need to contribute. You were saying?

  66. Editorial comment: Average Jane, 3rd paragraph, you wrote, “… only spending about $32,000 a month after taxes …” I think you meant to write $32k per year.

    Anyway, great post, as several examples to show how saving consistently over a long enough time period can amount to serious bank!

  67. Sam are you honestly saying you can discount inflation? Are you honestly advocating in today’s environment with the FED, ECB, Japan CB etc printing billions per month inflation will not be a problem?

    1. Yes. Look at the 10-year yield. We’re at 2.75% on 1/24/2014. The 10-year yield has gone down for 35 years in a row. I can see it going to 4%, but not much higher. The markets are very efficient now and policy is becoming more effective.

      1. I understand your the tour and according to this I already have 20 years if free living
        My problem is I’m only 45. So clearly I will live longer than 65
        So am I missing something ? Won’t I be broke at 65?

      2. That’s a dangerous assumption. If we were having this conversation 35 yrs ago, you’d be saying “look, rates have been going up for 35yrs, you have to plan for that!” Trends don’t last forever.
        You also need to consider cost of living increases in the above example. “So long as she doesn’t increase her cost of living during retirement” is not realistic. The 30k per year at age 40 is only going to buy 15k a year in today’s value by age 60, and 7k a year in today’s dollars by age 80 (assuming 2-3% inflation). You’re safe distribution values are correct, they just won’t buy the same lifestyle over their lifetimes.
        Another reader commented on health care costs. Yes, there is affordable insurance out there, that’s not the problem. The problem are the healthcare costs NOT covered by insurance that could destroy a meager budget.
        Jane is going to be awfully unhappy with her finances during her later years.

  68. Is not the hinterlands much cheaper to live in than NYC? If so, then perhaps $40,000 there is equivalent to $75,000 in NYC and you don’t need to save as much.

    We all have different skills, and I’m pretty sure we can figure out some way to make a side income with the skills we have. We just have to make the effort.

  69. I’ll let you into my little retirement plan.
    I’m 32, have four properties, one which my Wife and I live in and are paying off. We plan on selling one investment property within 5 years, paying down (or off) our mortgage, then we’re home and dusted (although can choose to work for a better retirement if we’d like) The equasion looks like tis in 5 years time: Home worth around $900,000 (all in Aussie dollars) 2x investment properties worth (combined) $900,000 and a debt of $700,000 (total LVR of 40%)but rents more than covering the loan repayments and expenses. We then use a line of credit on an investment property but never spend any more than 5% of the total value. If we make more than 5% capital on the investment over a one year period, we’ve made our money back, plus a little extra, if not we consider going back to work (heaven forbid!) but in reality we’d probably work anyway out of boredom. We’d like to purchase more property for a better retirement along the way, the more the better and lets face it: Who wouldn’t like to buy a multi million dollar home? I think it’s really a toss up of: live modestly, retire. Or, live like a king (& queen) work really hard, for a long time but come home to a big beautiful house. I’m torn

    1. I think the big beautiful house gets old after a while. Perhaps not old, but you get used to it and stop feeling like it’s that grand.

      I’d just be happy with what you have.

      1. Ha! Just stumbled upon this one from 3 years ago. I’d forgotten all about it! I semi retired 6 months ago now and it’s good. We didn’t go the giant house route because as we aged some more our true wants became apparent and what we really want is freedom. We enjoy travelling when we can (our dogs make it difficult to travel but we love em like kids so it’s all good) and we have a great place on acerage with plenty to do. In order to do this I think you need to be a different kind of person. I service my own vehicles. Do all our own handy work and this saves us thousands every year. We don’t buy new cars and only pay cash for anything. We’re pretty good at finding cheap flights and accommodation. We have to think differently than most other people because we’re not wage jockeys anymore. All in all just being frugal makes the biggest difference in order to be free of swapping time for money. We think differently.

  70. I like this article and although I haven’t read it in full I see a couple of errors.

    1. What about a home? With no paid out mortgage rents are going to soar and you will miss out on paying a reasonable price for a home and having that behind you.

    2. You won’t have much 401k because it wasn’t leveraged and just 18 years of work will put bugger all into it.

    3. The person in the equasion/scenario has failed to hedge against inflation or invest into growth assets, meaning they never leveraged their wealth and it’s just running out

    4. NEVER trust the age pension.. (Unless you really couldn’t give a rats)

    5. There are probably loads more but I can’t be stuffed

  71. Since savings @ 55% doesnt include 401k (has been said many times). I would like to see your chart for average jane including 401k contributions. Honestly, I dont think it works you would have to assume something like 10% annual growth in the 401k. More importantly it leaves little disposable income (if 10-20% was moved to the 401k). Average jane would have to rent a small house with 10 people for the rest of her life. Or maybe just just marry FELICITY :)

  72. A few major misses – health insurance costs (increasing far beyond inflation); plain old ability to procure health insurance if not working – difficult and expensive; reduce skills to rejoin the work force if there is a problem during that 20+ year retirement before social security; and social security assumptions are wrong – minimum retirement age is increasing so you need to cover more years than you calculate; and finally this is targeted to a small population that earns enough money that they can live easily on half – at my salary – $140K – no biggie – if I made $30K – not a chance in hell.

    1. Spruby, are you that unhealthy that you can’t get private health insurance for under $1,000 a month? Sounds like you want out from your $140K a year job.

      If one is making only $30,000 for their rest of their lives, you are right. Unfortunately early retirement is not going to happen. A healthy traditional retirement can with aggressive savings.

    2. slautterback

      Nice, you are so right.
      Not everyone had the luxury of tuition for college and a good income.

  73. Processing Gateway

    This is a very interesting post. I hope I had to work 75+ hours right after college. Unfortunately on my case, it happened a little late (late 20’s) with additional heap of debts. While my desire to save is huge at this moment, paying debts is I think more important now. What works for me is the “Snowball Debt Plan” by Dave Ramsey.

    I’ll be following your blog.

    Best regards,

    1. Belinda Correction

      Hi Belinda,

      The Snowball Debt Plan is a poor plan. You should pay off the debts with the highest interest first (consider compounding interest too).

      The Correction

      1. Call it what you will, but many humans are driven to some degree by emotion. I’d say you’re flat out totally right if we were discussing robots and computational algorithms. But emotion is a HUGE driving force for many. When folks that have been in debt for a long time see that first credit card disappear, a mental snowball effect begins to take course. Same pattern applies with quitting a number of things (smoking, eating healthy, going to the gym, starting a business). Gradual /short goals & rewards vs. long/difficult goals. The all or nothing/long goals you tackle hard and ferociously (new years resolution anyone?) and then crash just as hard and as quickly.

  74. Sam,

    Your numbers in the last chart are wrong. If you save 50%, then yes you save 1 year of expenses. If you save 66%, you save 2 years of expenses (You’re spending 33% a year, providing twice that in savings). If you save 90%, then you’re saving 9 years of expenses. I think your numbers are wrong because you’re assuming the same fixed expenses regardless of how much percentage you’re saving. Jacob from ERE made this point nicely in one of his posts.

    1. What is wrong and what is right?

      I don’t want to live in a trailer like Jacob did, and I’m sure the majority of people don’t either. I assume a fixed operating nut that is good enough to keep one living reasonably well. That is open to determination, but I can say that unless you make a million+, saving 90% of your after tax income is bad living.

      You can save 90% for a little bit, but I’m sure lifestyle and desires will change. People have to be realistic.

      1. I’m saying your math is wrong. Saving 70% of your income is not saving 1.4 years of expenses. It’s saving over two years.

      2. I feel like I missed something. If I save 55% of my income for 18 years then I will have enough to last me 20 years. What about after 20 years? You mentioned that then at 60 I can withdraw from my tax deferred retirement savings. Where did this savings come from? In your model the 55% saved is being used in the 20 years so I would not have additional savings. If I am also putting money aside for after 60 then it skews the numbers. Please help me understand

        1. Same question. Also, your social security will be derailed without 35 years of paying into the system.

        2. Whatever you are saving every year, you’ll be saving in a tax deferred retirement account like 409 / IRA, RRSP (Canada) (and the rest in investments) and those increase in value through interests and dividends to cover the remaining years!

  75. This is great! Now, all I need is a time machine to get back to age 22.

    Cynicism aside, What would you recommend for a guy who’s 42, married, 2 kids, lives in the midwest, no debt aside from mortgage, married income of 90k/yr, and approx. 150k in roth/401k’s? disposable ~1-2k/month being put into a MM savings acct.

    1. The good thing, as a new dad, you can get your child to read this post very early on!!

      Sounds like you are doing great. MidWest ic cheap, and a 90K/yr income should be enough yeah? I’d max out 17K in 401K for sure first though… then go from there.

      1. Why do you need a college degree. There are plenty of jobs where you make 90k without one….

  76. Lifestyle design based on budget is a great concept. The real boogie man is health care and health insurance. A high deductible health insurance policy, for someone in there 50’s, is about 10k per year. That’s going to chew up a big piece of your savings pie.
    Social Security payout is the other big unknown. Since it’s based on your earnings, and adjusted for inflation accordingly, it will be a lot lower if you haven’t worked in your 40s and 50’s than if you did.
    I’m finding with most successful people, who would actually save a high percentage of their cash flow, they see retirement as a “myth”. They design careers they enjoy, and after becoming financially independent, often keep at it for other reasons.

  77. Thank you Sam for your calculation. I have a better picture now.

    I like to learn from you. I want to make it happen, but I don’t know where my maths goes wrong. That’s why I turn to you by writing you a comment, instead of walking away.
    That’s why you are a financial blogger, with hundreds of readers.
    Thank you for pointing out what I have missed- 401(k) contributions are tax-deferred.

    The followings I want to point out, but no, I don’t plan to start another argument with you.
    $100,000 gross
    -$17,000 in pretax savings in your 401K
    = $83,000 taxable income
    20% effective tax rate
    $66,400 left after tax
    Save 55% of after tax = $33,625 —>>>should be $36,520
    $66,400-$36,520: $29,880
    $29,880 – $13,000 (your suggestion of post-tax savings for retirement):
    $16,880 = ~$1,400 monthly expenses
    It sounds very realistic.

    Happy Blogging~

    1. Nicole: Does your 20% effective tax rate include social security, medicare and state taxes?

      Here are figures from a somewhat recent tax return (after pre-tax deductions into my SEP IRA) (all numbers rounded off to nearest $500 for simplicity purposes):
      – Adjusted Gross Income: $82,000
      – Federal Tax: $14,500
      – Social Taxes: $6,000
      – State Tax: $5,000

      Total Taxes: $25,500
      Total Net: $56,500

      My effective tax rate for this year was ($25.5/$82=) 31%.
      Subtracting the target 55% of $56.5k, can you really live on a grand total of $25,425?

      1. I know I can, b/c I did. Just the fact that I am socking away tens of thousands of dollars in my bank account and 401K makes me happy! Living off $25,425/year is a PEACE OF CAKE for one person imo.

    2. Nicole – You’re saving more than this article recommends, but that’s fine.

      1) You saved $17,000 pre-tax in the 401K.
      2) You saved 55% of your after tax income of $66,400, which equals $36,520. This is the 55% I recommend in this article.
      3) With $29,880, this is what you are left to live on for the year.
      4) You are WELCOME to save another $13,000 of the $29,880… but you don’t have to as you’ve already saved #1 and #2 above.

      Thanks for no longer attacking. Just believe in yourself, and you will become.


      1. Good answer sam. I was wondering what Nicole was smoking. Clearly you can live off $100,000 gross a year and save a lot!

  78. Hi all,
    I am interested in this topic, for reasons of my own. It is kind of a long story but I have been working steadily toward “break-even” point where monthly basic expenses are covered.

    But, there is one variable people here are forgetting:

    Health insurance is expensive. In the states for a freelancer, a bare-bones plan is $450/month for somebody in their mid-30’s. This cost only goes up with age and inflation.

    I also do think it a valid question to ask, what happens when a person reaches 60. If you spend until 40 making money, and then another 20 years living similarly bare-bones, and the tank is empty at 60…….. then what?

    Then there ARE life issues. Children, world travel, hobbies, romance… life has to have something involved, to be worth living! It does not need to be overly pricey. But, you only live once!

    Lastly, are there any actual case studies of people who have successfully pulled this off? This is all well and good on paper… but… all of the Florida Condo underwater mortgages started off with numbers that looked good on paper.

    1. …by case study I mean the actual stories, with actual numbers, not a similar percentage-ratio of differing income levels. How old are each of these people, and what do their lives look like?

    2. I’ve shown someone how, now it’s up to someone to make it happen for themselves. I can’t.

      Even though I assume someone doesn’t work a day after 40, we should all realize that I’m sure many of us will do something before we start withdrawing from our 401ks and collecting from social security that will last for the rest of our lives.

      1. It was the cheapest I could find. Does not include the good hospitals or doctors-of-the-year. For a top tier plan, expect to pay $850/month for one person.

        6% of a passive income gross is not bad. But remember that “gross” deductions don’t count for much until you pass your standard deduction–which if you are amortizing real estate then you probably are, so never mind this point. :)

  79. First Gen American

    That first job was indeed a blessing on so many levels. I saved the absolute biggest percentage of my salary when I was working all the time. When you have zero free time, you don’t have a lot of time to spend money either.

    I’m in a dual career situation and we do have a lot more disposable income than most because we’re conservative with spending. I guess I’ve had the blessing of us both working at a very volatile company where layoffs every 18 months were common. We never felt entitled to our salary and felt that it could be taken away at any moment, so we were always careful with how much fixed debt we took on.

  80. I think your guideline is unrealistic, for the average Jane at least.
    I understand you are suggesting saving 55% for the early retirement, and save on top of that for the actual retirement. I have read “How To Save More For Retirement If You Don’t Make Much Money”, and it still doesn’t make a sense to me.

    at age 23, Jane earned $35k, after tax and 55% saving rate, left with $13,388.
    You suggest saving 10% for 35k salary, so: $3,500 to contribute 401(k) at work.
    $13,388-$3,500: $9,888. How could a person live with $9,888 a year??? with $824 a month, how could Jane pay for her rent, food, and transportation??? Assume she spends $600/ month for rent + utilities (splitting with a room mate)A month access to NYC subways is $104. She left with $120 for food. Average: $4 a day. Not to mention, to buy new clothes for work from time to time.
    9 years later, Jane earn $75k at age 31, with disposable income of $27,000.
    you suggest to contribute 25% pre-tax or maximum to 401(k): $17,500. She still left with less than $10,000 a year. You also suggest to save outside 401(k) too, between $750 to $5000 for that income range.

    I hardly can understand how people live with $10,000 a year. Please help me out by breaking down the expenditure for average June. Please clarify. Thanks!

    1. 1) Not everybody can make this happen
      2) Not everybody lives in NYC, the most expensive place in the world
      3) If you make this little from the beginning, I suggest living at home or having multiple roommates

      How much disposable income did you spend while you were in college? Did you have a lot of fun still?

      1. I know you will go after my NYC metro card examples.

        Please show me some numbers that how average Jane lives with $10,000 a year by breaking down her expenditures.

        I did the calculation for average Jane at her 40 years old.
        Earning $100,000, She has $33,750 disposable income.
        $33,750- $17,000(your suggestion of pre tax contribution to 401(k)) – $13,000(your suggestion of post tax savings for actual retirement)= $3,750 per year. Really??
        Things are getting worse when you earn more and being old, if I totally follow your guideline to retire early and to save more for retirement.

        I try hard to put your two articles together, but I can’t quite follow.
        I show you my calculation. Please do the same. Proof yourself with NUMBERS, and stop BS-ing that “not everyone to do it”.

        1. Nicole, I just don’t think with your attitude you can do it.

          Your math right there is wrong in your example. Seriously Nicole, do you not know how 401K contribution works? It’s offensive that you’re trying to make an argument if you do not understand the basics. All was fine until you said BS, and now you are really wasting my time.

          $100,000 gross
          -$17,000 in pretax savings in your 401K
          = $83,000 taxable income
          20% effective tax rate
          $66,400 left after tax
          Save 55% of after tax = $33,625
          You’re left with $32,775 to spend on whatever you want. Can you not live on $32,775 after tax income a year?

          Please, PLEASE try to understand this basic concept! Please talk to your friends who might be in the business, or who’ve saved, or whatever. This is so BASIC, that it concerns me we are arguing about this.

    2. Nicole, I’m sorry, but are you stupid? I think it’s obvious Average Jane is a stretch for you! Can’t believe Sam actually has the patience to respond to you.

      1. Locust, I admit I am average Jane. So What???
        Why not Sam shows more statistics on his belief???

  81. So I’ve read every single comment and still no-one has decided to answer, with numbers, what someone who follows this plan will spend when they hit 60. Is it 20k a year? 40k a year? Is this spending the interest + principle? How long do you expect it to last? If it’s 20 years, what happens if you live till 90? 20-40k in 40 years will be a very low amount of money by then, what are you going to do when a big mac costs you $15?

    TFB is correct on many fronts, including the issue of inflation. It’s naive to think that inflation will always be lower than the risk free rate. In addition, if you are still pulling out the same nominal amount for 20 years, your purchasing power would be greatly diminished by the time you are 60. Inflation is not under 2% at the moment anyway, calculate inflation using personal experience at the cash register, not what the govt. puts out. They tend to lie.

    This plan sounds absolutely terrible:
    – Live like a dog for 18 years, with no wife, no kids and no house.
    – Live like a dog for the next 20 years “retired” with no wife, no kids and no house.
    – Scrape by and hope you don’t have to live on the street, have no money and no wife, no kids and no house.

    AS TFB has said, this is like living on a pension your whole life. You spend your best party and fun years scraping by saving every penny, then you spend your strongest working years (40-60) doing nothing (and not even doing it rich). Then when you reach the age where no-one will hire you, you run out of money. Completely inefficient.

    The smarter plan would be to just live a nice normal comfortable life until you’re 50, have enough saved so that you can live off the interest in your investments indefinitely. You can also keep up with inflation in your twilight years by increasing what you take out because you aren’t spending your principle. You’ll also be able to leave some for the kids that you’ll most likely have because girls won’t think you’re a scrooge and you’ll actually have a chance to procreate.

    You also mentioned keeping money in something that rises with inflation, such as gold right? So will you keep a couple of hundred ounces under the bed and cash them in once a month? What if the value of gold declines for the next 20 years? Gold is not risk free. It also doesn’t generate any sort of income so once you use some of it, it’s gone.

    Saving 55% is extremely unrealistic unless you are earning way above the average or you are a couple (but this is a post about a single person right? And is this a blog for the top 5% or the masses?). The average person can live a decent life on a 60/20/20 plan, but changing that to something like 45/55 (no entertainment expense??) is just pure stingy.


    1. Hi Henry,

      Thanks for reading and sharing. Have you read this article on saving for retirement, and 401K as well? If not, please do so, as it will help illustrate how to save.

      My article shows you HOW to retire early. It doesn’t show you how to retire early, live on a lot of money, and make no sacrifices. Of course not everybody has the capability of retiring early, since not everyone makes enough or has enough discipline or desire. This article shows you how.

      I’ve saved 50-75% of my after tax income every year, and am at the upper end of what I think I should have in my 401K for someone my age. I take two international vacations a year, and 3-4 more weeks of domestic vacations a year as well. I do not feel deprived of anything, “scraping by” or “living like a dog” as you say.

      I realize it’s easier to make excuses, and that’s your choice. Sure, working to 50 makes the math even easier, and that’s great too. Just know that you have a choice. Even if I only have $500,000 in my 401K at 60 to withdraw from based on todays prices, that’s still 5-10 years of good savings. Add on social security, and actually NOT spending ALL your money from 40-60, and you’ve got enough.


      1. Hi Sam,

        Sorry I should probably mention I’m from Australia – I think in America it’s possible to save 50-75% of your income, but probably not so much here. The cost of food and housing here is way higher than over there in the states (and our taxes are almost double yours).

        It’s obviously possible to save 50-75, heck, even 90%, but that only works if you have a relatively high income.

        For example, in Australia, for a single person to survive with a tiny amount of entertainment, is about 25-27k. If someone is earning 40k after tax (so about 60k in Aus, which is about average), the most they can save is is about 32%. Now if this person gets a pay rise with a new job and earns 80k but keeps their expenses the same, they save an extra 14k (57k earn after tax), which takes them to 53%.

        I think rather than telling people to save 50-75% straight up and survive on dog biscuits, you should point out that the individual should figure out his expenses and keep this number constant (or pegged to inflation) and let pay rises push them in to the 50-75% range.

        You can easily flatten the curve in this way – when your wage pushes you up to the 80-90% range, this wil make up for the loss when you are only saving 30%.


    2. The Financial Blogger


      you could have save you a lot of trouble working out those chart by simply moving to Canada. At the age of 18 (not 40), you can put yourself on welfare and make roughly the same type of lifestyle illustrated in your chart. Then, instead of going to college, work your ass off for 18 years and retire poorly, you can start chilling at the at of 18 and still make about the same amount of money ;-)

  82. My University Money

    I try to explain this to people Sam. Instead, I get blank looks and told that the government should support us all in retirement. Oh, and they should support us to whatever standard of living we want because they get their money from some magical pot of gold (I guess the USA/Canadian governments finally found the end of the rainbow). Any idea when the whole house of cards comes down on this government-supported retirement?

  83. A Student Investor

    I wish the idea of retiring could come early as possible for me but as a student and in university, that’s not happening. I’m still young to worry about real retirement advice but I enjoy reading your personal Financial advices. Please keep it up.

  84. Jai Catalano

    It’s definitely a hot topic. Kids however change more than meets the blog. Even in NYC we are lucky to not be paying EVERYTHING we make while sending 2 kids to daycare, however, it’s not a pretty figure. That being said we are making sacrifices that we hope to pay off in the future.

  85. Car Negotiation Coach

    Sam, Silly thing for me to focus on, but I like your tables….clean and clear. Did you use a plugin for them? If so, which one?

  86. Unfortunately Ashley, the answer is, you can’t unless you live with relatives or something But, you could still probably save half that 11,500 a year right, and that would equal 25%?

  87. Definitely a long post that takes time to digest. The key chart is the chart with the ORANGE title. It’s simple math that spells out exactly what one can expect.

    Glad you are living the good life, and hope you can make more in 2012!

  88. Julie @ Freedom 48

    We’ve been saving about 50% of our income (living off of 1 income), but I also think it’s important to stop – breathe – enjoy life! We could save more, but we prefer to have yearly vacations and spend a little bit more on “the extras”. If I die tomorrow I want to have no regrets. Rather than say “someday, when I’m retired and have money I’ll do xxx”. Do it now!

    I think some of your income scenarios are a little lofty though. It’s good to consider both ends of the spectrum.

    1. Indeed. No point making money if you don’t spend your money. One of the assumptions here is that we don’t die early deaths ie die in our 40s. However, by retiring early and saving so much, it is actually MORE CONSERVATIVE, b/c dying in your 60s and 70s is much likelier than dying in your 40s.

      So to retire early allows you to live life even more!

  89. I had never thought about the simple math like that before. I feel like I should just hop over to my automated savings and add an extra 5%-10% to savings. I am paying off my student loan in less than 3 months. Maybe the extra money I was spending there should go into a low risk “early retirement” account?

    1. Like maxing out the 401K, you will wake up 10 years from now after consistent 55%+ after tax savings and say, “Holy shit! I can conceivably walk away in several more years if I keep this up!”

  90. Invest It Wisely


    Pretty comprehensive post, but I don’t understand something: Are you recommending that one consume the entire capital between 40-60? I don’t really agree with that.

    I also disagree completely with your view of inflation; inflation is always a monetary phenomenon and has nothing to do with how well the economy is doing, unless you mix up cause and affect: excessive credit expansion *can* create the *illusion* of a prosperous, healthy economy. This never lasts and one must be prepared for a crash.

    In addition, because taxes do not take inflation into consideration, it is not only a tax on savings, but it is a double tax on all capital gains. I don’t agree with not worrying about it.

    However, there is another way: Go with index funds and commit to withdrawing 3% to 3.5% a year. It is very unlikely you will go broke (and if things change you can always adjust long before that happens). Combine this with a high savings rate, and $500,000 can spin off $18,000 a year. This isn’t as much as in your scenario, but this money continues to increase year after year, and most certainly gives a lot of additional freedom. Most importantly, your capital grows instead of being consumed.

    1. One can consume their entire savings capital from 40-60 if they want, and if they NEVER WANT TO WORK AGAIN.

      Of course, I would say a vast, vast majority of us are going to be doing SOMETHING from ages 40 to the age social security and tax deferred savings vehicles kick in. Some of us might start making $20,000 a year in operating profit online… just right there would allow one to hardly even touch the principal savings.

  91. The Financial Blogger

    Sam, last question, I swear!

    I’ve made my own research on the 401(k) program to understand it (it seems quite similar to what we have in Canada). So the maximum per year one can invest is 15,5K, right? So there is something I don’t get from your chart:

    Let’s take Floyd’s chart:
    If he withdraws the 45K/year from his savings until he reaches the age of 60, he gets barely nothing out of his savings at that point. Where is he taking the same 45K (+ inflation) until he passes away? Technically, he still has a good 25 years in front of him. I guess that SSB is not that generous. But if he has to also save 15,5K/year in addition to the 55% he is saving already, this means that he has to live on less than 20K per year for 9 years? can you both pay rent and eat with less than $1,000 per month in NYC?

    I thought I read that your 55% savings plan was on top of saving for the 401(k) but I don’t see this reference on this post anymore. So I’m confused: what happen to Floyd at the age of 60? where is he getting his revenue? from SSB only?

    thx for the clarification!

    1. One can now contribute 17k tax free to a 401k now.

      I removed the 401k reference because it was way too confusing to some readers and getting in the way of the overarching point which is to save aggressively if you want to retire early. Only US use 401k too.

      If one is Felicity The Talented, she should be able to max out the 401k and save 55% after tax income.

      Please read How To Save More For Retirement If You Dont Much.

      1. The Financial Blogger

        Thx for the additional info on the 401(k), pretty clear now. But I am now pretty scared for both Jane and Floyd…

        What happen if you don’t make 200K-300k like Felicity? you starve to death at the age of 60 since you only have SSB left? There is no place in your chart for additional savings in the 401(K) unless you are making way over 100K. At 100K, you are left to live with roughly 22K if you put 17K aside for 401(k) and you count the tax deduction, right? So before you make 100K, you must live at your parents house and after, I guess you don’t live an interesting life with less than 1K/month in NYC or San Francisco? Can you at least afford to eat after you paid your rent?

        I don’t call this early retirement; I call it living on welfare for the rest of your life.

        1. Just adjust the charts. When I was making $60,000 a year, I put away the max 401K contribution then, which was around $15,000 pre-tax and saved 50% given I got a roommate.

          My taxable income was $45,000, and next income was about $30,000. I saved ANOTHER $15,000 as a 22 year old living in NYC baby! I had a BLAST!

          Going from a poor college student, to suddenly living in the big city AND having $600 to spend after my $700/month rent was good enough!

  92. I agree that inflation MAY increase your salary so in the working years I am not too worried. But what about inflation spiking after you are no longer working? Would that not deplete your savings really fast when there is no way to replenish it?

    Also healthcare is a big issue. So not sure without employer sponsored insurance how high the cost would be in retirement.

      1. Invest It Wisely

        Inflation doesn’t affect people equally. There are always winners and losers, and if you’re not sitting on capital hill or on wall street, you are most likely one of the losers… and that is the whole point.

        1. Why wouldn’t you want to just put yourself in a position to let inflation positively affect you then? ie invest.

  93. Money Infant

    Now if I can double my income I will be able to save 55% of it :)
    S’ok I’m happier now than at any other time in my life so the temporary lack of savings is no big deal. As PF bloggers I think we sometimes put too much emphasis on the importance of money (versus experiences and relationships), but I like your way of thinking and I can attest that it is true what you say about getting used to a certain standard of living. I don’t miss many of the things I once thought were “necessary”. What do you think?

  94. Take the worst job out of school like you did, that is the ticket to cultivating good savings habits. I started working in the Midwest in my first job for a fairly boring but established company- I swore to myself that I will save up enough to have the option to hang it up because I couldn’t see a lifetime doing that and was saving 40% of my after tax income.

    Fast forward 16 years and continuing to practice that habit while growing my career and I am ready to retire early. But the challenge I face now is should I hang it up or stick it out and try to get up to the higher levels of running businesses. Feel bad to throw away the good opportunity of just that, I guess time will tell.


    1. Mike, thanks for sharing your story. I kinda feel bad too, but every year I work, I feel less bad leaving. There’s really a never ending climb. One method I’ve used is to just look at the life of the person one or two rungs above you. If that’s the life you want to lead, go for it. If not, then time to start planning.

  95. Why not dream a little bigger right? I think if anybody went through the 5:30am-8pm daily shift, in a high pressurized environment, and got unhealthy in the process, they too would save like a mad-man, b/c they NEVER WANT TO GO BACK!

    “Unfortunately”, life is pretty easy for the average college grad in America who get jobs. Laws are in place to prevent abuse, and everything must be carefully documented, or else. With the pain, I wouldn’t have been this disciplined.

  96. Anna @ Good Cents Savings

    Seeing these numbers is a huge incentive to save a bigger chunk of my income, but I have to say I don’t see the big draw of never working again. I have a few recently retired friends and they are B-O-R-E-D. I know it’s a choice to sit around and do nothing or to travel, find a hobby, volunteer, or whatever – but I enjoy working and I also find it’s an important part of my identity (and I felt this way when I was in jobs I loved and jobs I couldn’t stand.)

    I just think it’s important to think through how you’ll spend your days and what level of enjoyment and fulfillment you’ll get from them before taking a job a shoving it. :)

      1. Invest It Wisely

        I wasn’t patient enough to wait another year for the company to fail or whatever. ;)

      2. Anna @ Good Cents Savings

        True – but I would consider the 3-4 hrs a day of blogging still working. I think the blogging “work” would give you the fulfillment and sense of purpose (as well as some income!) that being 100% retired for decades might not.

        1. Yep. Working 3-4 hours a day online would be enough to give me the sense of fulfilment FOR SURE. I like to go play tennis and workout for 2 hours a day, go out to eat, visit friends, spend time with family, watch movies, and travel the other times, so absolutely.

  97. BE @ BusyExecutiveMoneyBlog

    This is the kind of post that I have to read a coouple of times to fully digest. That is good as it makes me think. The “extreme saver” concept is obviously going to be applicable to the majority of people vs. the “extreme investor” (leaves too much to risk) or the “extreme income” (very few can obtain it). I think if one can remain healthy and apply any of these, financial prosperity is within reach. The upside of the “extreme saver” is that all the right habits are built in to ones day-to-day operation. I am an “extreme income” that’s weaving in the philosophies of the the “extreme saver”.

    1. It’s definitely worth studying the last chart several times, at the very least. 20 years of saving at 10% after tax income rate only lets you accumulate a lousy 4 years of living expenses. That sucks, and SHOULD ring alarm bells for readers.

      What’s your definition of a minimum level of “extreme income” BE?


  98. Sam,

    Most traditional families spend heavily in their initial years due to children. Your idea is great as long as someone stays single until 40 or get married but choose not to have children.

    For those who have children, golden age to make most money is in their 50’s. And, apparently, that’s the age for maximum savings as well.

    So, it’s a catch-22 situation for someone with children.

    1. I thought the thinking with the US economy now is that people who are in their 50’s are the ones most at risk? It’s sad, but that’s all I hear.. age discrimination, statistics for emloyment for those over 50 etc.

      There’s no reason why one can’t still save 25% or 30% of their after tax income w/ kids no?



      Children are obviously a big determinant in whether you’ll have the ability to retire early or not. But, are children really that expensive if you see plenty of couples who earn $50,000 or less have multiple children? The government provides a $1,000/year tax credit per child for middle class families as well.

      The conventional wisdom is that if you decide to have children, you should immediately slap roughly 22 years of work to your life. You want to be able to provide for their living expenses and tuition through college, just in case your child isn’t that gifted to get a scholarship, or work to support themselves.

      The good thing is that conventional wisdom is often times wrong. If two parents decide to save 55% of their after-tax income every year after college for 18 years, the “Average Janes” of the world will have $78,000 a year to retire on and provide for a family. The “Floyds” of the world will have roughly $120,000 a year to spend, and the “Felicities” of the world will have about $170,000 a year to spend. Can you make these numbers work to provide for your family? I think so, but it will obviously be much harder if you were a single parent.

      What’s even “easier” than both parents saving 55% of their after-tax income is that one parent works, while only one parent saves as aggressively. This way, the early retiree parent can simply be added on the working parent’s healthcare and all other benefits. Hey wait a minute, I think this is what happens already for stay at home moms or dads! Again, the difference is the aggressive savings plan, so study the chart above once again!

      1. Sam,
        You are absolutely right about aggressive savings. If you add time dimension to it, that’s your perfect recipe for early retirement. Einstein’s rule of 72 will do its magic to grow the nest egg.

  99. Marie at FamilyMoneyValues

    1) Low salary = spend it all on basic necessities = no way to save 55%
    2) Stagflation
    3) I wouldn’t be complete without kids and they can totally blow out your charts
    4) Congrats on being so dedicated about saving
    5) Live life – do what you enjoy and make money at it – don’t wait for retirement, early or late.

  100. I can definitely imagine it would be tough to eat into that principal savings – I know I have enough pain spending earmarked savings on their intended purpose!

    It seems to me the key is financial literacy from a young age (so that you don’t start out with lots of consumer debt or excess educational debt). And things like having a high-earning partner and choosing a lucrative career also play a big part in getting ahead. And of course, the things you can’t control, ie serious illness or other catastrophes.

  101. retirebyforty

    Great post Sam. I really admire you for saving and investing so much of your income. If I got whipped that hard during my first 2 years, I might have done the same. I saved less than you, but I got married over 10 years ago. Having two incomes helped a lot even if one career took a little while to get going.
    Working a bit after retirement is the way to go. You only need to make a little bit of money to help cover a few bills.
    You’re doing great! I’m looking forward to your “I quit” post. ;)

    1. Thx Joe! You are an inspiration as well!

      I will never write an I Quit post! Instead, I will write an I Got Laid Off Post :). Never quit! Get made redundant and collect your severance!

      1. retirebyforty

        Oh yeah, I briefly forgot about your severance pay plan. That is much better than just quitting.

  102. Very well telegraphed Sam! It’s funny how there are a lot of dissenters, when the “Simple Chart” above mathematically shows you want it takes.

    I save about 30% of my after tax income and plan to retire closer to 50, and then die at 85!

  103. retirebyforty

    @The Financial Blogger
    The raises are not that unreasonable. There are many years where the salary stayed the same. There are some big jumps due to a promotion. It’s not that difficult to get a raise when you are a top performer at the beginning of your career (IMO.) It’s much harder to get good raises when you’re established.
    I don’t think living frugally is a bad lifestyle. If you can’t do that, then you just have to work longer.

    1. The Financial Blogger

      I don’t have a problem with the fact of saving money. This definitely make sense.

      I have a problem with the math that won’t make it when you reach 40 and quit your job to retire.

      It would be impossible to expect such raise in Canada. If you are telling me it’s the norm to get 6% increase for someone who has a simple major in English and work as a sales rep (or getting a promotion giving +10k or +15K each 3 years) in USA, I can’t argue, I have no clue. I just know that I’ve never seen this in my country. I thought both countries were pretty similar but most people on this thread say that it’s easy to make 100K so I guess it’s different on my side of the border :-).

      1. Mike, I think Joe is going to prove you wrong. Just follow his blog and see.

        US is a very different model. Incomes are much higher and there is so much more productivity and innovation. Name three huge Canadian businesses out there besides RIMM? I’m sure you can name 20 from the US. It’s just different.

        1. Invest It Wisely

          Those in your government are trying very hard to stifle that innovation, whereas Canada is improving. ;)

      2. By the second year after college, I worked in LA at a finance company and made $125,000 after bonus. I was 23 years old.

    2. You’re working in the wrong province FB. Oil and gas you will see those types of wage increases and you can expect to start at 60k as ol’ Floyd the overachiever did. I have a number of friends who work in the US and they can make more, usually in bonuses. The AVERAGE wage in Calgary for O&G is 47.04/hour, roughly 100k a year.

      As for large companies, TD, CIBC, RBC, BMO, Suncor, Imperial, CNRL, Potash Corp, Transcanada, Nexen, Husky. See a trend? All of these companies outside of Potash and the banks operate primarily in Alberta, whose GDP per capita dwarfs both the US and Canadas averages. There is only one state with a higher GDP per capita. I’m not fond of the excuse that the same types of opportunities don’t exist in Canada.

  104. I am totally on board with your early retirement plan to save 55%+ of my after-tax income! I include my 401(k) contributions in my calculations and last year I saved 61% of my net income. This year, I am on track to save 57% of my net income.

    Buying a two bedroom condo is part of my long-term financial independence plan since it will eventually reduce my monthly expenses and I will definitely take a bit of a hit this year for that, but I think it will be worth it rent can be raised completely arbitrarily where I am, leaving renting to be a very unstable way to budget for your housing expenses.

    That said, I don’t have any interest in quitting my job – I love what I do. But I do want to have the flexibility provided by not relying on my salary to enjoy my life. To help in that, I max out my 401(k), my Roth IRA, bank all of my bonuses, save for my next car even though I just bought one within the last couple of years, invest in taxable investment accounts, prepare to buy a condo, and maintain 6 months of emergency reserves, while still living the life that I want to live.

  105. 50% savings of after tax income is huge. It would make for a very different life experience. Am I missing something? I spent 18+ years preparing for a career, I must hate to sacrifice almost all my earnings to get away from! If I hate what I do, I would change my career.

    I can now save 50-55% of my net income, but I no longer have to support my children or buy a home. This was not possible when I earned less (recent grad) or trying to support a family. This is savings to the extreme and is not sustainable at lower earnings.

    1. You’d think saving 55% after tax a year would crimp… but I will tell you that based on my experiences, and what I have, I do not feel crimped in the least bit. I see it as a game, and a force of discipline. Save every other paycheck, and I’m there. Save a year end bonus, and I’m saving even more.

      We have a decision to live on less income, and make due. I still pay off all my CC bills and take on average 20 days off a year for the past 5 years. After a while, it stops feeling like a sacrifice. It just feels natural!

      1. I know it can be done because I do it too. I think a lot depends on where you are in life and how much you are earning. It is a lot harder to do this when You are only earning $60K and starting out vs. $150K and you already own a house.

      2. Save until it hurts! I agree with you Sam. If you want to accomplish you dreams, you need to make sacrifices. Too many people are too soft. They care too much about their lifestyle. Thanks for the great article.

  106. Jeff @ Sustainable Life Blog

    I think you’ve got an interesting point sam, but I would also posit that many people would find this rather difficult to do. It could be easier as a married couple (no kids) – living off of one spouse’s income and banking the other, effectively living off of 50%.
    Is the reason this is so difficult because people dont make enough, or because they have a difficult time deciding what is a “need” and what is a want?

  107. Not sure I was clear earlier, but I agree with the concept whole-heartedly. Let’s say you’re income doesn’t jump in raises the way the charts show. All that means is you should be used to living on less for a longer period of time, it doesn’t necessarily limit your savings potential. It is your responsibility to make sure that you are being properly paid for your work, and if you’re not, then it’s a choice to stay or go. People cling to the statistics that kids are going to cost a bundle, but those statistics also show that the cost of raising a child is proportionate to how much income someone has. They don’t have to spend more; they choose to. You’re plan, however, takes a significant amount of discipline and wisdom in your youth. I lacked the latter, though I’m working on the former.

    1. No problemo. I no longer think kids are expensive. If they were, I wouldn’t constantly see and read about families making $50,000 in combined income have 2-4 kids. You’re exactly right. Kids cost in accordance with your income.

  108. I wish I paid more attention to personal finance in my 20s. I started to pay attention in my mid to late 20s, but there was still so much that I didn’t know and do. I didn’t save anywhere near 55% of my income when I first started working. I saved a couple hundred bucks here and there but nothing material. I’ve been making up for that over the last few years and am happy to see my 401k growing nicely as well as my savings. Not everyone is going to be able to save 55% of their income, but if they saw these charts especially the last one, I think they’d be a lot more motivated to save more and trim their living expenses. I sure hope to retire long before I turn 65! -Sydney

    1. I hear ya. In retrospect, the kick in the balls my first two years out of high school really helped me save. I don’t like getting kicked in the nuts! :)

      We’ll do whatever we want, if we want it bad enough.

  109. The Financial Blogger

    Hey Sam,

    I went back to your post to read the children and inflation and I still don’t agree.
    First, you assume that mom and dad will meet up in their early 20’s and stick together for the rest of their life. While this is exactly my situation, it’s a bit optimistic to assume that everybody will get this, right? Then, you also have to assume that both parents have booming career (even the average Jane gets a 6% compounded salary raise over 18 years, that is AWESOME, please, I can live in the State and get that? because this is completely impossible in Canada).

    Regarding inflation, I have a lot to say but I’ll just ask you one question in regards to this line: “In other words, in a 8% inflationary environment, you might receive a 9% nominal interest rate on your yearly savings account, leaving you with a 1% real rate of interest.”

    You don’t pay taxes on investment return in the States? are all investment account are taxed free? In Canada, this situation would resume to making 9% gross, minus 3% of taxes (33%), you get 6% while inflation rate is at 8% which means that you are LOSING 2% every single year. Add to this that the fact that there is not a perfect correlation between inflation and your investment return (the US stock market has been flat from 2000 to 2010 but there was inflation for sure during this period).

    I get the point that the more you save, the better your retirement will be (I’m a financial planner after all), but telling people that they can retire at the age of 40 is asking them to drink a lot of koolaid.

    1. Mike, aren’t you around 30 and make more than Average Jane at her age, and about the same as Floyd and Felicity? Don’t you have side income? If so, are you saying you are special and not everybody is like you?

      A couple only has to stay together for 18 years, not a life-time, given that is their responsibility to the child if we are on this discussion.

      1. The Financial Blogger

        Well if I look at the stats where I live, I’m part of the 3% of the population that makes this income in my Province. I’m not saying, I’m special, I’m saying that this situation is FAR from being the norm. If I’ve found that the average income for a full time male employee in the USA is 43K, how can you dream that everybody will make 100K in 10 years?

        Some people can definitely follow those charts, but I highly doubt that it is more than 10% of the population. And even then, I’m generous.

        As another example, in Quebec, we have a provincial pension plan. This money is taken directly from your pay check. In order to receive the “full pension” you need to make over 45K (adjusted with inflation throughout years) for 35 years. Believe it or not, only 12% of the population is entitled to get the full pension. This makes me think that hoping that the “average Jane” will get 100K at the age of 35 is dreaming.

        But I’m really curious about the savings for the 401(k), who pays it? Does it have to be added to the 55% of savings? If so, you need to disclose how much it is, right? Because you are not down to save 55% of your income, you must save more than that. Am I right?

        As for inflation, I still think that you are the one who doesn’t have a firm grasp of the impact on retirement. Inflation rate in 2011 was 3% in the States. Where can you get an after tax return of 3% with a conventional savings account? Stock market? it was flat (and negative in Canada). Bonds? you need to find bonds paying roughly 5% (and not losing value) to make a 3% net…

        Sorry to be a pain, I just can’t understand where you get those numbers.
        Great discussion as always :-)

        1. The latest numbers in the US show inflation at around 2%. You can get a 2.3% risk free return on a 7yr CD at this rate if you want. Or you can be like me and have money tied up in a 7yr CD that yields 4.1% from two years ago, with 5 years remaining. I’m not speaking from conjecture. I’m speaking from looking at my own financial situation.

          BTW, the US markets are up about 7.5-10% YTD 2012 as well. Sell now, and you are 5-8% above inflation. Everything is aligned. It’s the efficient market.

          This site isn’t for the every day folk. It’s for people who believe they can do it, and want more options.

        2. The Financial Blogger

          Still don’t get why you ignore taxes in a non pension investment account. And what about the 401(k)? do you have to save for this as well or not?

          1. I guess I have not made clear that people should save 55% or more of their after tax income.

            I bold this point and highlight it again, maybe with flashiest when I get home tonight.


        3. The Financial Blogger

          I’m not talking about savings; I’m talking about ignoring the taxes to be paid on the investment return. I haven’t the ability to bold it in my comment, but I clearly wrote “non pension investment account”, I’m not about the 55%. Here’s an example:

          If you make 2% on your CD, it’s not 2% in your pocket; the tax guy will take its cut. However, the 2% inflation is real and stays as is. So you need at least a 3% CD to beat 2% inflation.

          Is the 401(k) savings as to be added to the 55%? If so, how much is it? 2% or 10% of gross income?

        4. Why are we focused on the investment return side of the equation? The investment return is the BONUS!

          Average Jane can spend $29,000 based on her savings draw down over 20 years, but will earn about $11,000 with 2% interest from her savings as well.

        5. The Financial Blogger

          I’m asking because the 29K in today’s dollar won’t worth much in 35 years where Jane will only be 75 and will have 10-15… read 20 years to live. This is why I’m so concerned about your calculation.

          I think we are just over with this; we definitely don’t see it the same way. I’ll wait to talk to someone who actually stopped working after 20 years of work and still live on that nest egg 15 years later without working. It would be awesome if you do a case study with one of your friend who actually did it. I’m curious to know how they live and how the math works throughout a real life example.

          1. I’ve kept things consistent without inflating the yearly savings for simplicity’s sake.

            If you are worried about inflation, then I can easily add in a realistic risk premium of 2% over a risk free rate of 2% to equal 4%, and compound it every year for 18 years til 40. In that case, the draw down will be well over 29K/year.

            This is with people doing nothing from 40-60. No change in lifestyle, no part-time work, nada.

        6. Invest It Wisely

          I believe that any portfolio that does not continually grow is completely irresponsible. Lifespans are going to increase dramatically, and who the heck knows what kind of social security “promises” will remain in 40 years from now. Others can bet on it, but I won’t.

  110. The Financial Blogger


    Don’t get too excited JT, those charts are completely wrong.
    Where is the money used to finance the 401(k)?
    You need to add inflation (and investment return) because compounding interest will make a huge difference at time of withdrawal
    How do you save for your kids to go to college?
    How to you pay for insurance at the age of 40 since you quit your job?
    How can you successfully get a 6% income raise for 18 years in a row?

    Sorry to tell you that but the math in this post is wrong and should not be used to plan retirement.

    1. The Financial Blogger

      I guess I thought that making 100K + a year was hard. It maybe just me but I’m definitely under the impression that most people don’t make 100K at the age of 35. If you are telling me that a service provider sales rep with a major in English can easily reach 100K in 10 years, in the State, I’ll consider moving outside Canada. Here, they will pretty much make 40-45K.

      1. Most people don’t make 100K by age 35, however, if you are in telecom sales in this example, you can easily make 100K+ after 13 years working.

        You and I know that making 100K in many professions isn’t that hard, especially after working consistently for 13-14 years after college. Many US graduates in NYC start at $65,000 base and $35,000 bonus at 22 years old!

        You should definitely come to US. Why do you think so many people want to come here? They don’t call this the land of the free and the land of opportunity for nothing!

  111. I’m glad you are excited JT, b/c at your age, this article is applicable 100000% to you! It’s up to you, from today forward whether you want this optionality or not.

    It’s great you enjoy the midwest. I have a feeling only people from the midwest would rationally enjoy the midwest, since there are places such as Hawaii to choose from!

  112. Dollar Disciple

    I definitely think it’s possible to retire early when you have a high savings rate. Mathematically, it makes sense but there’s a lot that could happen between now and then. Kids are definitely one unknown I haven’t factored into my plan but all we can do is save aggressively and stay flexible with the plan.

  113. Mrs. Money Mustache

    Great Job, FS!! I was wondering if you believed in Early Retirement and it looks like you do! :) I’m glad to see you spreading the Word.

    The point here is that it is possible and that many people are doing it already or working on it. We’ve done it and we have a kid. Our scenario probably falls between example #1 and #2, but for 2 people and the salary going up quicker near the beginning and only 10 years of work.

    I think the word “retirement” sometimes throws people off as they imagine something rather mundane that requires a lot of money, but your “retirement” can be anything you want it to be. It will likely even include fun part-time work that bring in some supplementary income. The point is that you have the flexibility to stop working and you’re not dependent on the income anymore.

    It’s unfortunate that there are so many doubters, but you’re right. If you save 55-75% of your income, then you’re set for an early retirement (regardless of how much you make). And, in fact, as income rises, if you keep your spending the same, your percentage of savings goes up every year.

    It’s actually quite liberating to free yourself of the massive consumption going on all around us and to focus on what’s more important. Even more so after you have kids.

    1. I definitely believe in it. In fact, I’ve strived for it ever since I graduated from college and went through those suppressive first two years! I just also believe there is a dark side to it.

      It’s the optionality that I appreciate the most. To get up and go whenever.

  114. I think the Jane chart is the most realistic one for the average Joe. Add in a spouse and this is definitely achievable granted you’re very disciplined. You can magnify this if you take the 55% savings and put it in passive income opportunities. I’m not a fan of just saving tons of cash. I think that will also take care of the inflation argument a lot of your readers are making.

  115. Sunil l Expedited Wealth Building through Entrepreneurship

    i agree that the scenario is difficult / unrealistic for an “average” person who 1) gets married and 2) has kids. on top of that, very few “average” folks have the opportunity to only work 13 years and make a significant amount of money to be able to execute on your scenario.

    Sam, i believe you are unmarried and don’t have kids correct? apologies if the assumption is wrong.

    1. The article is focused on the individual, to be as apples to apples as possible. Once you start mixing all the other stuff, things get complicated.

      Rely on ourselves, and if we so happen to have extra help, all the better.

    2. Being married creates economies of scale for most expenses, including housing, utilities, health insurance, and transportation. If I had a spouse/partner/roommate, my bills PER PERSON would be significantly reduced. Living alone is simply inefficient. FS’s use of individuals in the examples is actually conservative. Same with the kids. Additionally, tax credits will pay for food, clothes are cheap, and the increase in insurance from 1+1 to 1+family is marginal. One only must avoid giving their kids, and sometimes partners, credit cards.

  116. I think the only “excuse” is that some people have to pay for their education, so spend the first couple of years of working paying back their education.

    Also, I personally have worked so hard for my education that I feel like I’ll have to work in the field for awhile – I don’t know what I’d have gone through it if I knew I would be retiring in 20 years any way, therefore my earning power wouldn’t be great.

    1. I hear you on wanting to utilize your education. I don’t know how old you are, but that ideology faded for me after about 10 years of working, and 5 years after business school. Instead, the desire to work for myself has grown.

    2. Please research the concept of a sunk cost. The mental and material costs of your education have been expended and there is nothing that can be done to retrieve or “validate” them. Sunk costs have no place in determining future actions.

  117. I think your scenario is great for the examples #2 + #3, but it sounds pretty painful if you’re the average Jane. For that scenario I feel like it’s sacrificing a bit too much earlier in life for later in life. But if your main goal is simply to retire then I can see it working.

    I’m not so sure what’s realistic for myself, but I know I could be more than comfortable if I could be in a situation like #2. It’s still not an easy road, but the benefits are great if you can save that kind of money.

    1. Yeah, definitely try it for at least a full year Michelle, and see if you can keep going after. Fast forward 10 years, and you’ll be so happy you did! Freedom is priceless.

  118. The first thing that came to my mind was that one of the sacrifices that would have to be made to save that amount every year (at least for us) is having kids. Our savings will be done in reverse since we started having kids in our mid 20s (and started out with a lot of student loans). When I hit 50, our expenses will be minimal and our income should be in good shape. Not optimal money-wise, but it has been optimal for our family life.

    I think that Jane would be insane to retire at 40 with that little amount saved. What is she using for health care by the way? Plus, who wants to retire so young if you can only afford to go to the library with all your extra time?

    1. I definitely see your point. And it’s good your expenses will go way down when you hit 50. My fear is that what if I die by 50, then what? Then, nothing. There’s no retirement dream to live.

      I decided best to sacrifice younger, while still enjoying life, to have the optionality, than to wait until later.

      1. Kris @ Everyday Tips

        But if you die by 50, then you sacrificed while you were young and never had the chance to enjoy your money.

        If I die by 50, then my kids will be adults. They won’t get a huge inheritence, but that is ok.

        1. Kris @ Everyday Tips

          Going back to the part about children, we are somewhat the anomaly because of the whole private school thing. I can’t even imagine how many years earlier we could retire if we didn’t pay for private school and travel sports.

          Even though inflation has been pretty stable, we are still losing money year over year because we have not had wage increases and health care premiums have also increased. If inflation does spike though and wages do not move similarly, then we are screwed.

          1. Yeah, private school must be painfully expensive. Public school, for life! :)

            The good thing about a compression in cap/interest rates is that our real assets that produce income have SURGED. Take a $30,000 rental income stream and divide it by 2%, now yields $1.5 million in value vs just $750,000 when rates were at 4%.

  119. My wife and I are working on paying off our home first so we are diverting funds towards that at the moment. At our current rate it should be done in 22 months. If at that point we put the money that was going towards the house back towards our savings we’ll be at 60-65% savings rate.

    I don’t think we will put it all towards savings and securities because we would like to purchase some rental properties to generate multiple revenue streams.

    Additionally we are struggling with deciding how much to invest in retirement accounts vs standard brokerage accounts should we decide to exit the rat race early and want to access the funds.

    1. Awesome Matt! saving 60-65% of your after tax income is HUGE! Every year you work is 1.2-1.3 years of living expenses you’ve saved. Keep it up, and have the optionality.

      And if you want rental properties, know that it is a PITA, but will provide growing income for your lifetime.

      1. To mitigate the PITA factor we will be paying cash for all investment personal properties. That way we can reach our desired amount with fewer properties/PITAs.

        Hoping to mix in a vacation condo in Hawaii eventually to partially rent out then semi retire there when ready.

        1. “Financial Samurai Reply:
          February 21st, 2012 at 9:00 am
          I think we’re talking different PITA factors. What I’m talking about is the pain of having tenants and finding tenants.”

          We’re on the same page. I am saying the cash flow from one paid for property might equal 6-8 financed properties. Therefore we reach our desired cash flow with fewer properties and I equate fewer properties with fewer tenant related pains.

  120. The Financial Blogger


    With all respect, those charts are completely bogus.

    #1 you don’t consider inflation. So tell me how big is 29K 30 years later with a 2.25% inflation rate? the answer is not much! in fact 29K today at 2.25% only worth 15K in 30 years (roughly). so you can live with 15K a year? I bet you have a house and you can travel every 2 years with this salary, right?

    #2 column “disposable income” should read “55% savings” because the 55% is link there

    #3 where are coming all those “magical” raise of 10K, 15K, 20K within one year? after reading this post I have a feeling that everybody in the States can make over 100K simply by working roughly 10 years… But then I look at the average salary in the States on the internet and I see 43K for male working full time from wikipedia. You should tell wikipedia that they are completely wrong, right?

    #4 Do you consider that people will live up to 85, 90 or maybe 95 years old? where is the saving for that? for health care ?

    #5 What is the point of doing so many sacrifices so you don’t do much (don’t tell me you can buy a house with 30K, have kids and pay for college net per year with the current house price) just to stop working early? you must really hate your job (and then you will hate your life because there is nothing fun about it) to do so.

    #6 even with a salary of 100K, you will make a poor life for 18 years just to… stop working and keeping the same miserable life. with 35K in your pocket (this is 100K – 23K in taxes = 77K – 55% of it (42K) you are left with 35K according to your table). If you want a house, you will eat more than 30% of your budget! You haven’t eat, have kids, had a car, saving for college, travel, enjoyed life! I rather work longer but being able to enjoy life everyday instead of being forced to minimalist all my life!

    This is more a question than a point but who’s paying for the 401(k) in the states? this is coming from solely from the employer and it’s not part of your base salary (because I don’t see the saving related for the 401(k) in your calculation). How much can you get out of your 401(k) with only 18 years worked? I guess it’s not much, right?

    1. Denise @ The Single Saver

      Mike, I agree with your point regarding the unrealistic jumps in salary each year. Where I live, the average raise given each year is 2-4%. If you are really lucky you might get 5-6%, but that is rare. At 3%, and at a $50K annual salary (which is also rare), you only gain an extra $1500 as a raise. Yes, there are opportunities for promotion that might get you $5-$10K, but those usually only come around 2-3 times in a career. Maybe salaries are different our West, but here even Directors and VPs at large corporations are lucky if they make $150K a year.

      However, whatever your salary, I agree with the concept of saving as much of it as you can. That makes retirement easier, rather it be in your 40s or 80s.

      1. Salaries are different out west because things are more expensive here. It’s part of the reason why having a blanket federal tax rate that goes after higher income earners is so penalizing.

      2. Agreed with Mike.

        My pay: $55k
        Net: $39k or 70% (my health insurance is about $2.5k per year.)

        Expenses = $2200 for a modest life with modest vacation in an average part of the country.

        Savings: $1000/month (enough to retire in a 3 world country?)

    2. See the section on kids and inflation. I’m not sure you are fully grasping the realities of inflation and its affect on savings/investment interest rates, wage increases, and real asset price growth.

      In 10 years, will a 35 year old making $100,000 a year seem that unreasonable?

      1. In 10 years, I think it still might. You’re assuming wages will keep up with inflation, which is usually not the case. I like the principle of what you’re discussing, but I have to agree that a consistent raise of what you show is unrealistic outside of a major metropolis.

        1. A great blog post you can write can be about whether or not wages have kept up with inflation over the years, and by which education and wage segment. I think it would be a fascinating read that will bring a lot of traffic and interest!

          Let me know your results!

        2. CultOfMoney

          According to a quick look at the US census page, income in real terms has increased by ~.1% per year for those with a bachelor and ~.5% for those with a masters and ~.25% with a professional degree. However all those gains were made in the 1990’s, all educational areas have lost in real terms for the last 10-13 years.

          Thus the idea that income increases in excess of inflation is true for the 20 year period, but false for the most recent 10 year period.

    3. I think a lot of people are perfectly fine with $33,000 a year after tax, and not miserable. The chart is assuming no compound returns, which is very conservative.

      If I was just the average person making the average salary, and didn’t have to work another day in the life past 40, I would be ECSTATIC to make $33,000 a year!

      1. It makes me happy when readers understand the basics. Makes me very happy!

        That’s correct. The return on the NUT is just a bonus. I’m assuming no compound interest/investment return on the NUT to be consistent and conservative.

    4. I’m surprised that you don’t understand inflation and these charts if you truly are a financial planner?

      There’s no assumption on compound growth in the charts, which is in line with deteriorating power of inflation on wages.

      1. The Financial Blogger

        Hey Locust,

        Financial planner takes inflation in consideration everywhere. This means that if you consider that your income will continuously grow, you are taking inflation in consideration. If you do at that point, you must include an investment return and an inflation rate on everything else. This is really basic. Then, you need to include taxes everywhere too. If you are savings in a non-registered account, you will pay taxes on your benefit. Therefore, a 4% yield is not 4% in your pocket. Then again, really basic concept in financial planning that were ignored here.

        I’m surprised that nobody realized that those chart DON’T INCLUDE 401(k) savings. Therefore, at the age of 60, once you have been living on your savings for 20 years, YOU ARE LEFT WITH NOTHING BUT SSB.

        So it’s pretty easy to draw those charts with income increasing all the time and only write that you have to simply take your 401(k) at the age of 60 to continue your great lifestyle. But it’s another thing to actually show the people how much will be in that 401(k) account at the age of 60 and how much you would be able to withdraw assuming you pass away at 85. Those charts only show you that if you save 55% of your income during 18 years and you have consistently a high raise, you will be able to live off your savings for 20 years. Then, you are left with nothing but SSB… wow, that sounds like an AMAZING retirement plan! Living poor all your life!

        1. The point is, the charts are actually very realistic, and not “BS” at all as you state.

          The raises might be due to inflation, but more realistically, the raises are due to promotions and a job well done. Raises are generally 1-3% if they are due to inflation. The assumptions in this chart are bigger jumps, like step functions.

        2. The Financial Blogger

          I have asked about 6 times to know how much money will be in the 401(k) to continue your retirement at the age of 60 because the chart doesn’t include $1/year saved in the account. So tell me where in this realistic chart that you will have money in your 401(k).

          The chart shows a 55% savings that will be 100% used to live from 40 to 60. then, you are left with nothing. Realistic chart? yeah, you will save all your life, perform all the time in order to get promotions every 3 years or so to finish on welfare at the age of 60. Mind you, skip college and start you life on welfare right away, you will save 18 years of work for the same result.

          1. Mike – I don’t include the 401K contribution in the charts b/c it then gets too complicated and hairy. But, I hear what you are saying, and you’ve already read the post about what I recommend for my savings guide / 401K contribution guide.

            If I had the ability to code a nice widget for people to play with their savings and income assumptions, I would. Based on my charts and assumptions above, they are tautologies.

        3. I’ve saved about 50% of my after tax income for 10 years, make about $250,000 a year and am hardly poor as you say. Instead, I’ve seven figures in the bank and live pretty carefree!

          How much are you making? I’m assuming not as much and definitely not saving as much, otherwise you’d agree.

      2. The Financial Blogger

        if you do a complete chart representing your non-registered and 401(k) account and show the withdrawal until the age of 85 (this is a bare minimum, a realistic chart should stop at 90), you’ll see that your numbers don’t work. It’s not because it’s too complicated, it’s because the numbers you use don’t work. Or… it will translate in a whole life living like a homeless person. Look at your chart when someone makes 100K. They have left roughly 35K. If you take off 17K of this and you add back a 25% tax rebate, you get a net income of $22,250 or $1854 / month. Given the assumption that you need at least $700/month for rent (in a major city), you are left with $1,154 to live on. How can you save to enough money to build a down payment to buy a house? Remember, this is when you are already making 100K. This is not a small amount of money considering that the average income in the USA is at 43K. Take your time to build that chart and come back with your number and the result of a complete projection. You’ll see that it doesn’t work no matter how some people are enthusiastic about those charts in the comments. Who wouldn’t be enthusiastic when you tell them they can retire at the age of 40…. You can also tell them that they will marry both Angelina Jolie and Scarlett Johanson once they retire :-)

    5. I’d have to agree with the jumps in salary. I was able to do similar jumps the last three years but I look like frickin Superman to my co workers. The majority do not have those kinds of jumps. There are other factors involved as well that I think are missing. This is still a really good post. Something to stive for!!

    6. Retired at 56

      Are these “examples” made up or based on real people you know? Why not ask real people who retired early and are not working?

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