If you’re not a nerd, as long as you know those two numbers, you’ll easily be able to determine how long it will take to reach your early retirement goals. You might be surprised (and depressed) that at the Dave Ramsey baby step 4 rate of 15% of your income going to retirement savings, you’ll be working 43 years until retirement. Depending on when you get to baby step 4, and are doing this retire early math, that can be very discouraging. We hit baby step 4 in 2007, so we would be on track for working 43 years, saving 15%, until a retirement in 2050 (30 years from now, after a 55-year working career, at the age of 75!). And it includes “building wealth.” And to us that also meant bumping up our savings rate substantially. And without a mortgage payment, you can bump up that savings rate pretty dramatically. This is the beauty of the shockingly simple math. There are only two numbers to be concerned about. You can drastically affect the time to early retirement by adjusting those two (how much you make and how much you save). If you are able to reduce your spending by being frugal, getting out of debt, etc), you can increase the amount you save. If you get a raise, start a side hustle, etc, you can increase the amount you make.
Both of these shorten your time to early retirement. In our case, it took our time to retire from 2050 (30 more years in a cubicle) to 2022 (2 more years in a cubicle). If you’re like us and want to play around even more, I suggest trying one of these calculators. The underlying math behind these calculators is the “4% Rule” which is based on the Trinity Study. It used complicated mathematical models called Monte Carlo simulations to predict, even with crazy events like the Great Depression, how likely it would be that you would outlive your retirement nest egg vs. The 4% rule says that you can withdraw 4% of the total of your retirement accounts each year and never run out of money. This is equivalent to the 25x rule, which is just a different way of stating this. The 25x rule means that if you have 25 times your annual expenses saved, then you can continue to spend at that rate forever and not outlive your money.Īlthough the idea is simple, the process of getting there is not easy. That’s why you don’t see more people doing it. Here’s an example: “What a salad taught me about early retirement.”įorgive me for taking a moment to step up onto my soapbox. Here’s a story from last weekend: I was at a restaurant with friends. The waitress described the specials, one being a delicious sounding salad with fresh caught Steelhead, caramelized walnuts, apples, and Gorgonzola. That sounded healthy and delicious, so I ordered it.
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