Roughly 20 something times your annual expenses.
There is a whole movement on the Internet called FIRE (financial independence, retire early) if you want to go down that rabbit hole
I’ve heard 25x
You’re probably right, it checks out with the 4% rule. My number was pulled out of the murky depths of my memory.
Heh, I’ve also heard 33x for a 3% rule, but that really starts to get into “well, how cautious ARE you?”
Your question is too vague. It all depends on what you consider an acceptable lifestyle and also what area of the world plays a huge part.
As others have mentioned, the common guidance is to figure out your annual expenses, i.e how much you need to live off of, and divide that by safe withdrawal rate (typically ~4% based on the Trinity study) to come up with a total amount needed to retire early. So for example, if you determine you need $60k/year, the formula would suggest saving $1.5M (60,000 ÷ 0.04 = 1.5M).
The basic idea is save a big enough nest egg so that you can live solely off interest, meaning you never touch the principal and your account grows in perpetuity.
The hard part is two-fold IMO:
- Estimating your average annual expenses is difficult due to lots of variables, e.g.
-
Health care costs vary greatly (if you don’t have access to public healthcare depending on your country) and tend to increase with age
-
Housing costs are situational and can either decrease (if you own your own home and payoff your mortgage) or increase if you rent or have to move/refinance/etc.
-
Your family size may change. Kids can greatly throw off projections. Taking care of elderly parents. Having a partner start or stop working. All these things can impact your assumptions. Therefore, it’s usually good to add some buffer.
-
Inflation should also be accounted for. This can be difficult to project for the remainder of your life, so some tend to just look at historical inflation, but there’s no guarantee the future will follow the same trend. Same for lifestyle creep, but that’s (usually) more controllable.
- How to choose what investments will allow you to earn a return in excess of your withdrawal rate. For example, if you’re withdrawing 4%, you need your investments to earn a higher rate than that to avoid having to dip into your principal.
-
The common guidance (from say Buffet, Bolgeheads, etc.) for most people is to invest in low-cost index funds (availability depends on your country). I emphasize “low-cost” because there was another study that showed the only sure-fire predictor of alpha (performance above a certain benchmark, like the S&P 500 if you’re in the US) is the having low management fees. Historically, this should return anywhere from 5-10% but again past performance is not indicative of future returns.
-
While you’re young and have more time in the market, you genreally want to invest in higher risk/higher reward type investments. Idea being you benefit from higher returns while having more time to weather downturns. Then as you age, you can shift towards lower risk/lower reward investments, like bonds, so you’re not as exposed to market fluctuations.
One last thought, there are also variations of FIRE, like Barista FiRE, Coast FIRE, where you don’t have to completely stop working but are financially independent so you can choose where/how hard to work.
Good luck,
deleted by creator
Onless you will die in a few years growth should be where most of your retire early money comes from. As you get older you need less growth though.
Desperately
You could make an argument that’s a big gamble if you’re expecting to use up the principal at all. So, 10x what you use in a typical year would be an absolute minimum, and that would involve an aggressive portfolio that you run down when the market is bad and earn back later. 20x or 30x would be more comfortable, especially if there’s a chance you’re going to spend more than you did when working.
A bit of a hack people do make work is moving to a poor country where costs of living are lower. Then the question is how much lower can you actually get it, which is both about your personality and interests and how poor a place you’re willing to consider. Obviously, you can make $2 a day work, if you eat only corn and squat all day under a piece of aluminum. On the other hand, if you want to live the exact same way as at home down to brands, far afield can end up more expensive.
It really depends on the lifestyle you want and what “retirement” means to you. Do you want to never work again or work part time? So you want to live in a home with no mortgage and minimal bills or travel the world for 6 months of every year. Your best bet is to talk to a financial advisor.
A financial advisor you pay is working for you
One who is “free” is a salesperson.
There’s good and bad advisors on both sides, but it’s important to know. There’s people out there paying over 5% management fees.
One million invested to the stock market gives you roughly
70k40k returns yearly and you get to keep the million.No. Simply no. The rule is 4% or a little more. Not 7%.
That depends - 3% is a safe withdrawal rate gowing your income with inflation and not running out. However you won’t live forever and so can touch some principal and so can go higher - how much is the question.
I stand corrected. I imagined that 10% average growth on the S&P500 would make 7% a safe rate.
For more information check out Bill Bengen (he discovered the rule) or the Trinity study!
One !chronicillness@lemmy.world is enough to retire early. Woohoo!
Use your favorite search engine to look for the trinity study and safe withdrawal rates. as a rough number: your yearly spending x 24.
All depends on how long you’ll live, your health, and your lifestyle. Big big variables.
It’s not generally possible any more
Generally it never was.
(Or even late or never, globally. The ancient system involves your kids paying for your way)
Figure out how much you need to live yearly. Multiply by 25. Voila, your number.
Depending on where you intend to retire and your intended expenses during retirement, anywhere from 0 to billions.
For me, I think the number is around USD5 million. The number will go down over time.
