This is not a good way to calculate it because it ignores volatility of the investment. There are decades of publications in the topic of sequence of returns and the impact on retirement.
$25,000 is likely a little too low but $70,000 is way, way too high.
Most people who've done research agree that something like $25,000 to $35,000 a year from $1,000,000 is reasonable for someone retiring extremely young.
Yeah I guess this is fine as long as you account for it. Starting with $800k, $40k expenses, 2% inflation and 5% return, retiring at 35 you end deplete your money at 67, but starting with $1M takes you to 83.
$1,500 invested yearly, at 7% interest, generates ~60k in 20 years. So even at your inflated income estimates, this is definitely worth thinking about.
If you're relatively successful, this isn't too far off from reality. If for example you make $75k after taxes, your living expenses is $25k, and you invest the rest with a 8% return, you can retire after 10 years and have a safe withdraw rate of 3.5% (equaling 25k) in perpetuity.
I don't think a 7% interest rate is unreasonable. One of the advantages of planning on early retirement means that you can take on a lot more risk with your investments, eg. putting everything into stocks (which isn't really "gambling" -- over long periods they've only ever gone up). If the markets are totally hammered the year you want to retire, no problem -- just keep working a few more years until they recover. And saving $75k a year is also quite reasonable if you have a high income, like a doctor or well-compensated engineer. I’m only a couple years into my career and am supporting my wife and kid, but we’re on track to save a bit more than that this year.
Of course, the lifestyle choices we make aren’t for everyone, and that’s fine. But they’re also not totally crazy. We can save that much still live about as well as the median American, and a lot better than the median human.
8% is very generous, I thought 7% was the commonly used figure which gets you 800k in 40 years. When you acount for inflation that is not anything you should consider retiring on.
At a 7% return you'd still need about $1.5 mil. And that's assuming that your hopefully more conservative investments in retirement earn 7% a year and over that 20 year span there is not a crash... This includes about 3.5% per year for inflation.
Most folks don’t plan to live purely on the returns.
If the typical person works for 50 years, and you saved/invested 50% of your income for 25 years, then you’ve effectively matched both the means and the cost of living of someone making half your salary.
As a software developer, it isn’t unrealistic to plan to retire around 45, for example.
Well, given compounding interest and inflation, is this so out of the question?
At least I keep hearing I need a net worth > 1 million to retire. If one puts away 10-15k a year for just 30 years, plus interest that would get you there comfortably.
That doesn’t seem unreasonable.
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