How much money would you need saved up to retire early?

[ringmastery]

That's my dream: to retire early and "do nothing" and maybe travel. Financial independence.

I guess to live that lifestyle, assuming you owned your house outright and had no debt or other big expenses, around $1 million saved up would be needed. That should give you at least $50,000 a year in income to live off of if you invest in investment grade bonds and stocks with decent dividends.

[gyopsy]

1. I will retire around 2040 or so

And by then, I'm sure social security will be gone forever. Damn, if I want to retire at all I guess I better start saving up NOW huh? :scared:

[Wickerman]

5. You should start saving now

SS or not. Compund interest is a wonderful thing. Money invested in your 20's has so much more potential than money invested in your 40's. Plus, you get in the habit earlier. If your employer has tax-deferred savigns opportunities take full advantage of them. Invest in IRA's,e tc. You wind up with more of your money, less gets taken in by taxes. I am not against taxes at all, but you should use the rules to your advantage to have something in the future.

Wish I would've in my younger years... :(

[T Roosevelt]

2. Don't forget inflation

At 3-4% a year that $50k would need to be $100k after about 20 years. So you're looking at more than a million...

[ringmastery]

3. yeah that's why it can't all be bonds

there would have to be some stock component where you can make returns much greater than 5-7% a year.

Maybe 70% bonds, 30% stocks.

[democratreformed]

4. a bunch

I have always operated on the theory that I will NEVER retire. It's a nice thought though.

[ProudGerman]

6. Same here

Unless I strike it rich, or somehow make 6 figures for at least a decade, I'm gonna be a slave wage till I croke.

[NC_Nurse]

7. People live a lot longer now too

so lots of folks , like my parents may outlive their savings. It's a good idea to get long term care insurance too, once you've got a nest egg to protect.

[amazona]

8. no where near that much

If you think about it, $1 million dollars is more than most people who are retired now ever earned in their entire career. My dad said he never earned a total of $600,000 and he was an engineer who always worked for the same firm and never had any period of unemployment in his life. And he retired early. You just need some sort of career where it happens that you get a pension after 20 to 30 years. Actually his pension came because his company was bought out and they paid people off to retire early. But there are careers like cop, military, etc. where it is actually practical to plan to retire early and you don't have to rely on a 1980s wave of buy-outs.

Of course, if you really think you need $50,000 a year to live on, then I would not expect you to ever be able to retire. This is way more than most people's entire after-tax income when they are working, isn't it?

You can travel in many countries on an income of $10,000 a year. Have you ever visited Rita Gelman's website or read her book? I will try to get a link. I think she was downsized as a housewife at 47, and because her own income (writer) was only around $10,000 to $15,000 a year, she took to the road, traveling first in Mexico, then Nicarauga, then many other countries. It beats hoping and praying that somehow you can find a passive investment that can generate enough income to live on. With these low interest rates, people who relied on passive investments like CDs, bonds, Treasury notes, etc. have been totally screwed. My passive investments generate all of around $100 or so a month, and some of that is dividends from risky investments like stocks.

My income is lower than Gelman's and I am retired pretty much involuntarily (I am also a writer) and I have been able to stay debt-free but I live in a cheap area. And yes, you are very right about getting your house paid off. If you have to pay rent or a house note, I don't know how you could possibly retire. You need to get rid of as many recurring expenses as you can. Hey. It's easier than getting a million dollars in one place, at least if you're not a criminal or a developer (tree killer) in my humble opinion!

On Edit: Here's Gelman's website to get you started but her book tells a lot more so be sure to ask at your library -- ours had it on the shelf:

http://www.ritagoldengelman.com/

[Deja Q]

9. Well, by 2034 I'll be 62...

Probable:
No jobs will remain, apart from the CEO jobs, that make liveable wage money.

I'll have lost my job due to outsourcing or obseletion.

I'll have gone mad because of fascist management.

Unavoidable:
Social security will be gone.

Peak oil will be long since gone, making the cost of living utterly impossible.

Given the numbness I get in my neck, arms, and legs, I'll likely be a vegetable, if alive at all...


5-10 years tops for me. I'm just lucky to have had it good while it lasted.

[DancingBear]

10. My wife is a financial planner

and does calculations like this ("how much will I need when I retire") for clients all the time.

Hate to be the bearer of bad news, but when all factors (inflation, etc.) are factored in, I think the figures come out at around 2.5-3 million, assuming a lifestyle of around 75K per year (adjusted dollars). Nothing extravagant, either, BTW, just a "normal" retirement, taking into account what retirees normally do (travel a bit more than before, etc.).

It shocked the s*%t out of me when I first saw the numbers - I had guessed around $1,000,000 as well.

[amazona]

12. the industry says $2 to 4 million but that's ridiculous

With all due respect to your wife, the financial industry has a vested interest in telling people to give all their money to the financial industry.

Most people cannot hope to earn tax free $2 to 4 million much less to save that much! It's a silly goal. Most people don't have $75K coming in when they're working, for heaven's sake.

Rather than give up hope, what I've found makes sense for me is to continue to be active in agitating to protect Social Security (already fully funded through 2043, by the way, so it is certainly nowhere near running out) and to learn to manage my money wisely. I realize that many areas like California are expensive but in retirement you can live anywhere and it will be more realistic to plan on moving to an inexpensive area than to hope you're somehow going to accumulate 2 million dollars in your spare time on a normal person's salary.

Maybe someone can find the statistics. I'm guessing most women don't make more than $30,000 a year even today. The fantasy of saving millions is just a fantasy. MSNBC.com and the Motley Fool website regularly run claims that if you saved $2000 a year for 5 or 10 years starting when you're 18, you'll have $1 million dollars when you're 65 or so-- but they have never been able to produce even one person who has actually done this. (I've asked and been pointedly ignored.) The assumption involves getting a 10 to 12 percent return on your investment in an IRA for 40 years; in other words, a huge rate of return that you simply aren't going to get. Most of the time, stock goes nowhere; from 1929 to 1952, the stock market had no percentage increase in its rate of return. Most of the huge increases of the 1990s occurred over a 90 day period -- and all responsible (non-financial industry related people) realize that you can't predict when or if this will ever happen again in our lifetimes. Most of the time, the stock market goes sideways -- which makes it a poor investment when you consider the volatility.

[DancingBear]

15. Sorry - but the "industry" has nothing to do with it

First, some things in your post:

1) the "$1 million dollars if you start saving when you're 18" - if you ask my wife, she will be happy to tell you that not only has this been done, but she has clients who have done it. Sorry to bust that bubble for ya - I can't do it, and you probably can't either - but it's been done.

2) the "10-12% rate of return assumption" - false - It is predicated on a 5% return, or the average 20 year ROR of the stock market ( I think - don't hold me to that yet, since I haven't asked my wife about it). Any person who claims to be a financial planner and is using 10-12% is either a phony or a fool.

3) Take the Motley Fool people with a grain of salt - I don't think they're really looked on as anything but a "funny uncle."

With regard to the industry - the program my wife uses is predicated on actuarial tables and lifestyle choices. Many things in there are things you perhaps don't find important. For example:

Long term care insurance? Do you plan on staying healthy your entire life? What happens if you need to go into a nursing home?

Children - do you plan on helping your children if the need arises? Would that be considered part of your retirement expenses?

How will you be able to pay for health insurance, now that you are no longer covered by your employer?

These are only a few of the things she asks - I know I'd want to know them - wouldn't you? You see, as a financial planner specializing in retirement planning (the first female CFP east of the Mississippi to get her Masters in Retirement Planning, BTW) she can not and would not just say to a client "have fun in retirement." It is her job (and her DUTY) to make sure clients are financially covered and that nothing that happens in their retirement is a surprise to them (within reason, of course). If you consider that as having a vested interest in the industry, well, I'd have to disagree. I'd think it was prudent planning, and I'd run out the door if a planner didn't ask these questions, and more.

As an aside - she gets many clients who either can not meet the goals she sets for them (due to lack of income), or who have a portfolio structured in such a way that the clients will do just as well managing their money on their own. In those cases, she will usually spend about two hours with them, giving them help if asked and generally making sure they're on the right path. Oh yes - she'll do that for free! Who'd a thunk it?

Finally, do you think $75,000 yearly income (for a family of four, for example) in today's climate as being not of the norm? With both parents working, that means each would bring in $37,500 as a yearly salary. That seems a reasonable assumption to me.

[SW FL Dem]

14. I agree with your wife.

Neither hubby nor I qualify for a pension other than SS. We're mid 40's. We've got a chunk in our retirement plans and a fair about of equity in our house but we have a long way to go before we can retire.

[nono]

11. Retire

We sold our house, bought a boat and traveled for 5 yrs. We had a little over $100,000. We met people who were living on less than $400. per mo. We did eat lots of fish and lobster.

[Beaker]

13. I retired early with NO savings...

I didn't have a choice- it was due to disability, due to a progressive spinal condition that went un/mis-diagnosed for at least 20 years. Had I ever gotten a proper diagnosis early on, i might have been able to plan for retirement at 38.
Because I did get to spend a couple decades in the workforce, and usually held two jobs at once, I did accrue enough SS points to get me about $1100.00/month for life, with yearly cost-of-living adjustments.
My wife works full time in a field that she enjoys, graphic design, and we have a two-flat in which we live on the 1st floor, and rent out the 2nd floor.
when we bought the place 8 years ago, our intention was to convert it to single family- and then my condition made it's official debut, i became unable to work, and things got kind of turned around. when i found out that my condition was congenital as well as incurable, i decided that having kids to pass it along to would be morally wrong, and had a vascectomy, and we decided to keep our place intact as a two-flat.
now, 8 years later, mostly due to a college-prep high-school being built in the vicinity- our house has tripled in value, to the point that we should be able to sell it this summer, pay off the rest of our mortgage, and have enough left to buy a decent house outright when we relocate from the northside of Chicago to the Madison Wisconsin area...or- If we decide to relocate to the Big Island instaed, we'll have to carry a small mortgage at first.
But we ARE selling our house and moving this year.
but we actually don't intend to buy again, or decide where, until after the november election.