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 or 45?
You’re in luck, because I have a very simple, yet effective plan for you. 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 and I haven’t returned since.
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
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
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
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.
Study This Simple How To Retire Early Chart
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.
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. 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 2020 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?
Inflation is a beautiful thing that scares people who do not understand basic economics. To put it simply, inflation rises when the economy starts to heat up, and falls or stays flat when the economy cools.
People often ask, “What happens when inflation hits 5%? We need to invest and save more! We’ll be screwed!” We won’t be screwed. If inflation ramps from 2% currently to 5% in the future, 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 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.
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.
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.
Everybody needs to take advantage of all-time low mortgage rates and refinance now. You can check the latest rates and receive real quotes from Credible, my favorite mortgage lender. Credible has qualified lenders competing for your business so you can get the lowest mortgage rate possible.
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.
Since leaving work for good in 2012 at the age of 34, I’ve consulted part-time for financial technology startups, wrote a book on how to negotiate a severance that now brings in ~$50,000 a year in passive income, became a championship high school tennis teacher for four months out of the year, and built Financial Samurai into one of the largest independent personal finance sites on the web with over 1.5 million pageviews a month.
Further, in 2017, I decided to sell my SF house I bought in 2005 for 30X gross annual rent and reinvested the proceeds in real estate crowdfunding for less hassle, lower valuations, and higher passive returns. Building passive income is the name of the game in order to stay retired. Below is my latest snapshot.
Latest Passive Income Streams
As you can see from my latest retirement portfolio, 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. We also find alternative ways to make money in retirement thanks to the internet.
See: Ranking The Best Passive Income Investments
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 5 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. 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.
Recommendation To Build Wealth
Get a handle on your finances by signing up with 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 Personal Capital, I had to log into eight different systems to track 28 different accounts. Now, I can just log into Personal Capital 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.
Charts completely updated for 2020 and beyond.
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.
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.
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.
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.
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.
Thanks,
JK
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?
Why not start one yourself targeting your desired demographic instead of telling other people to do something?
Take action, otherwise, opportunities will pass you by.
Because that is impossible, you will work until you die on your feet.
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.
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.
Your life is not your job (at least for most people)
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?
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.
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.
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 ?
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
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.
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.
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?
It’s hard to give you advice if I don’t know your age, your alternative income streams, and so forth.
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
Thanks!
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.
https://www.financialsamurai.com/how-much-should-my-net-worth-or-savings-be-based-on-income/
Good luck!
Ok well I’m glad you concur with my assessment. Thanks very much & love the blog.
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.
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?
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!
Best,
Sam
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.
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.
It’ll definitely be tougher and more sacrifices must be made. It’s important at this stage NOT to be too proud to take any job in order to get the income rolling in and the experience developing.
See:
Spoiled Or Clueless? Try Working A Minimum Wage Job As An Adult
Housing Expense Guideline For Financial Independence
Abolish Welfare Mentality: A Janitor Makes $200,000+
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?
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.
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!
Best,
Sam
Related:
How Does It Feel To Retire Early? The Positives And Negatives
Investment Strategies For Retirement Based On Modern Portfolio Theory
The Fear Of Running Out Of Money In Retirement Is Overblown
Sam. Why do you use $18k in your model? Most people can contribute $18k of their personal income plus whatever the company match is.
To stay conservative. But your comment reminds me to update the chart with a new contribution chart with low, middle, and end amounts.
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.
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!
Jorge
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?
age 59.5 allows access to retirement accounts..
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.
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.
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.
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!
See:
Pay Down Debt Or Invest? Implement FS DAIR
Implement A Better Dollar Cost Average Strategy
AVERAGE college grad Jane makes $100k by age 36??!
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.
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.
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.
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?
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.
Hi CC, I hope you achieve your goal! The table includes room for investment return growth. It is not exact, but an estimate. I also encourage folks to not only max out their 401k, but try and save 20%+ after 401k and taxes as well. Make savings hurt, until it doesn’t hurt anymore. Then try and save some more!
Related: What Does Early Retirement Feel Like? The Positives And Negatives
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.
Dude, I live in malaysia and $2000/month does not allow you to live like a king, lol.
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!
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.
Yes. The best way is to start your own business by starting your own website.
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):
HOUSE SALE IN ELEVEN YEARS: 600,000
CURRENT SAVINGS TODAY: 300,000
FUTURE SAVINGS (4000 x 12 x 11): 528,000
Social Security @ 1888 PER MONTH x 20 YEARS: 453,000
600000
300000
528000
453000
———
1,881,000
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.
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.
I am 50 years old and have no retirement and no 401K. I have 100000. What can I do?
How much longer can you work? The key is to analyze your expenses and survive long enough until Social Security kicks in at the very least.
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.
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?
Dude, you’re 31. relax. working a couple more years is not a big deal in the grand scheme of your life.
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.
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!
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.
Woha! In the US do you really only pay 25% income tax on 100k a year?
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.
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!
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?
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.
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.
Welcome to FS! 28 is still very young to grow a tremendous amount of wealth! How did you first stumble upon my site?
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.
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!
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. (https://www.kiplinger.com/article/investing/T047-C000-S002-investing-with-nickels-and-dimes.html) Im sure he never said I cant do this because i only make $12/hr.
Thank you for your thoughts! I cannot agree more and I plan to write another post on this money mindset.
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!
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?
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.
Cheers,
Gen Y Finance Guy
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.
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!
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!
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
Cogan2@uoregon.edu
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.
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.
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!
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!
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: https://www.financialsamurai.com/a-list-of-career-limiting-moves-to-blow-up-your-life/
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 -.-
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!
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…”
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?