When Can I Retire?

I asked for a picture based on the word “retirement” and this is what I got:

How interesting, it seems most of the rest of the world thinks retirement equals old age.

Compare this to an image sparked in my mind when I think of retirement:

The only difference between the two photos was the search term. I looked for “freedom” to find the second photo.

Even being the chipper twenty-seven year old that I am I hear people asking this question about once a month. Before awakening to the basic rules of early financial independence, I believed the advice that most people and the average finance professionals hand out: in order to be “comfortable” I was going to need roughly 75-85% of my final pay in retirement. If I had continued to follow that advice, I would need about $5.1 million dollars to retire while following the 4% rule. That is a stark difference from the required amount I calculated of $600,000. I even gave us some breathing room, a safety margin, a generous ($2,000) yearly travel budget and what seems like lavish monthly personal spending money. Why is our number so much smaller? Because we choose what is important to us, and only spend our money on those things. We are not always successful, but it seems like we are improving month over month.

Throwing some numbers into this retirement calculator, I would not be able to retire until age 52 if I planned to follow the conventional advice (while saving at my current break-neck pace). Instead, I am able to target a retirement age of 35. I would have to work an additional 17 years to accumulate the “comfortable” amount most people indicate you will “need.” I say, thanks, but no thanks. So, I am going to walk you through some of the decisions my family and I have made that allowed us to bring in our estimated retirement date by 17 years.

Knowledge is Power


First, know how much you spend. You cannot calculate your estimated retirement date, unless you know how much you spend, on average, each month. For my family, this number is about $24,000 (excluding the mortgage – we plan to pay that off before retirement). Once you have your required number, multiply it by 25 to follow the 4% rule. That number, is the nest egg you currently require to retire. The good news is that you can change this number drastically with fairly small changes. As an example, reducing your spending by $83.33 per month will reduce your nest egg size required by $25k!

What Matters Most to You?


The beauty of pursuing early financial independence is that it makes you focus on what matters most to you. Real Life Example: My wife and I really enjoy eating out. However, it is so darned expensive, that we can’t afford to eat out as often as we would like AND pursue early financial independence. We have to choose one. So, we chose to be financially independent earlier, rather than later. That single decision spurred us into cooking more at home. We do not cook together as often as we would like yet, but we have discovered that cooking together is quite the fun time. We experiment with new recipes and try new twists on regular meals. We find ourselves asking: “What would make this better?” about even the most common dishes. To be clear, we are not asking the question because the food tastes bad, but because we enjoy the challenge of making something good, even better. If we had not begun pursuit of financial independence this entire portion of our life would be different.

One more example: We used to visit the movie theater about once a month to see some new movie. We enjoyed the experience, but (at least for us) the experience is not relational in any way. We would sit in a dark room next to each other, not talking, keeping quiet, and wishing we could pause the movie when we inevitably needed to run to the bathroom. A typical cost for visiting the movie theater for us was around $21 (tickets) + $6 (Large Soda to share). Recently we sort of questioned what we could do with that money to create a awesome movie night at home instead. Here is what we ended up buying:

  • Popcorn (6 bags)
  • Candy (Nerds + Twizzlers + Ice Cream)
  • New Movie Rental ($5) – Could have used Red-Box for $1
  • 12-pack of Cream Soda

Guess what? We still spent less than the movie theater, we could pause the movie, we laughed out loud at times (literally) and we openly and loudly mocked characters choices (because, why not?). Overall, this made for a great date night. More than that, the items listed above lasted for weeks of enjoyment after the original purchase. So, next time you consider the movie theater, perhaps question why you want to go? Is it really about hanging out with friends – because if so, you would probably have more fun and MUCH more tasty food at your house than the theater. Additionally, you will probably get to know your friends better.

What Are Your Goals?


Many times I hear people discuss retirement near age 65 with a sense of euphoria and joy, as they describe how they are going to travel the world and do all the things they have been passing by in order to save up their nest egg. Sad thing is… most Americans at age 65 will not be fit enough to actually enjoy these vacations to their fullest. Would you rather go on a hike in the rain-forests of Costa Rica at the age of 35, or when you turn 65? That is a fairly biased question, but most people do not seem to see the connection. Even though my wife and I plan to retire very early, I still plan for over $2,000 per year in travel expenses. With some simple travel hacking, that $2,000 can go a long, long ways. Because I have built that goal into our yearly passive income plan that means we get to spend that money every single year.

Define some goals for your retired years. Build those goals and monies into your passive income plan, and overall nest egg amount.

Now What?


You now have a target for retirement. When can you reach it? I really like the networthify calculator for this. It will give you a quick gut-check on when you will be financially independent based on your current income, savings, and spending. If you do not like the date it spits out, you can experiment what saving just 1% more per year will do to your freedom date.

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