How much $ to retire young?
How much $ would you want to have saved to quit your high-paid IBD job and retire young in your 20s/30s?
Requirements are to:
- Be enough to justify the opportunity cost of quitting your high paid job i.e. enough so you don't have to think "oh but if I work just one more year I'll have an extra $100k saved"
- Remain living in a big/expensive city like London/NYC/LA so you don't need to move somewhere with a lower cost of living
- Still be able to live a good life without having to be "cheap/frugal" i.e. enough so you can still go on regular holidays, nights out, and dinners etc.
- Have a nice house (paid off)
- Enough to last you the rest of your life
- You're allowed to make assumptions on investment returns from your savings and use those returns as income although be realistic with your expected returns
I understand to retire young you will need to have significantly more saved up than if you were to retire at a later stage in life e.g. $1m in cash is enough to retire at 50 but $1m in your 20s/30s to last the rest of your life seems too low to meet the above requirements unless you live a cheap life.
Interested to hear everyone's thoughts, thanks
realistically $4m
$5-10 mil
probably looking at owning a real estate portfolio that can generate you at least $200K/annum in Unlevered FCF and use it to pay for living expenses. At a 5% CAP Rate that's a real estate portfolio worth around $4MM? Assume you are at a conservative 50% LTV, you really only need a $2MM equity-stake in your $4MM commercial real estate property to do well. Oh and maybe add another $500K-1MM to own a nice personal residence (that's your equity in it, assume you mortgage it).
Really depends on expenses but that's how I look at it.
If you add debt that $200K goes away real quick. You’re also not factoring in capital expenditures. Realistically, with debt, to generate 200K per year in net cash flow, you’ll need a portfolio of about $15MM at a 5 cap with debt costing you 3% amortized over 30 years at 65% LTV. You’ll also need the same amount of your debt in cash or other assets to guarantee the loan. It’s not that simple...
Not a real estate guy. But doesn't 200k on 15m make your cap rate just above 1%. If so at that point you could drop into 10 yr treasuries and make more net cashflow.
I know it's not relevant, but what would you guys do after retiring in your 20s/30s? Like what would you fill your hours with?
Coach high school football defensive backs and angel invest
Nice. HS soccer for me. I'd also run some Model UN programs. And I'd write a book. And travel the world. And start a restaurant.
I wouldn't really be retiring, would I lol.
Golfing
Boating
Fishing
Roadtripping
Reading that stack of books I've been meaning to read for 1-5 years
Managing my stonks
Yup
buy and run several Gamestop franchises cause that shit gonna pop
Build the biggest Factorio base of all ti.e
Probably 5 million in NYC to live a decent life. Beyond that would probably be splurging
7-10m in high COL area
I've talked about this with my wife (both early 30s) and it's probably minimum $5mm for us, though less as you get older
Realistically, if I were to some how earn that much money by that age, I don't think I could walk away from whatever I was doing that enabled that.
what are you going to do with the extra money though?
I dunno man. I mean I'm a college student so I still have dreams of a 5 million dollar mansion or some shit like that. I'm sure in 10 years my priorities and expectations will have changed.
10 mill
- If you want to completely retire then $7-10mn (less $2-3mn if you're naturally born healthy (low medical expenses going forward) and don't have plans to spend too much on your children (e.g. boarding schools, private extra curricular tutors, etc.)
- If you are willing to continue to work but in a 9-5 workplace, I'd say $3-5mn (less $1-2mn if you're willing to live in smaller cities with lower CoL)
I always think it's amusing when people ask "what would you do if you retired early? Wouldn't you be bored?"
Like there is a whole world out there to see and experience. You really need an office job to be fulfilled?
As far as the question, I think the simple math is to quantify what you think you need annually to be comfortable and assume a conservative 3% annual withdrawal / return. That should back you into your investable capital target.
Aim for $6-$7 million, in excess of your home equity (people always forget that minor purchase...) and a mortgage balance of no more than ~$1.25 million. The rule of thumb that says a retiree can pull 3-4% out of his portfolio in "perpetuity" generally, in the fine print, assumes that you retire in your 60s, live into your 90s, and by the time you expire have drawn down most of your principal. So it's a different story if you're thinking about retiring in your 40s.
Other problem with retiring early is that if you have kids, and you'll want to, they won't have left the nest by then, so the other assumption about replacement income in retirement - that your expenses are lower - also assumes that you'll have fewer dependents. So $6.5 million x 3.5% yields about $225k / year, before taxes.
No the 3-4% is without touching capital since average market return is 7% and you'd keep portfolio 100% equity. There are issues you can run into regarding risk of ruin, but given you're withdrawing less than the gains each year, as long as you don't retire right before a recession you should be fine.
Disagree. That 7% is a notional, not real return, and even if the treasury wasn't printing money like it's going out of style, a real return on a 100% equity weighted portfolio is going to be closer to 3 or 4%. Assuming 2-3% reinvested to maintain the value of your principal against inflation, that's going to leave you with a cushion of at most 2%.
And that's on a 100% equity portfolio. No sane person on earth keeps their $ in all equities *in retirement.* Why? Because equities correct sharply every once in a while, and if you retire young, you're likely to have to ride out 2-3 such crashes. For you and me, who cares - live off your income and pile into equities during the trough years - but in retirement that portfolio isn't just a bunch of numbers on a screen but your sole source of income, for things like, you know, food, shelter, healthcare, etc...
That's the thing about retirement: It might be mildly annoying to be on your deathbed with millions of dollars that you could have enjoyed earlier in your life, but compare that to being out of money at 75 or 80. Much, much bigger problem.
Depends on how many kids you want. Those things are expensive
Expensive, but worth it. Two other things that happen when kids come along: a) you don't really want to be in the house with them all day, and b) the list of things you can realistically expect to do in your glorious retirement (travel, hang around your house with *any* expectation of peace and quiet, etc. etc.) is much shorter than it would be if your nest was empty. If you're making a decent living and don't detest what you do, you're almost certainly going to conclude that you might as well keep working. Wall Street is packed with people who could easily retire but don't.
The issue here is if you're getting up to, say, $5mm, you're probably several years into MD, and at that point, each incremental year you're probably pulling high 6 figures or low 7 figures, so it's pretty hard to justify walking
$5m with house / car(s) paid off. Would likely supplement income with something new other than banking... can only hit the links and drop lines in the water so many times.
I wouldnt worry about this question until you figure out your own personal lifestyle / spending choices, ambition, and are gushing with cash to save. You will answer this question on your own after
For example: if you are someone that wants to buy a big house, do multiple vacations a year, send your kids to private school etc then even $5mm might be low. Another example is if you love your job or want to move up the ladder and have institutional power
Your number is *your* number. You'll figure it out
I think the number is probably $5M+ as others have alluded to. These days with the risk-free rate close to 0% (adjusted for inflation) it is much more difficult to find 'safe' 4-5% yield like some of the retirement advice suggests.
I don't really see a path towards achieving this in your 20's in IB through traditional saving & investing (unless you did some crazy Doge/GameStop type investing). Maybe towards mid/late 30's but would take some very solid saving and strong investing decisions to achieve.
Personally, I don't see myself ever retiring. I think people like us who are so used to grinding it out in college to get to IB/PE/VC/HF, and then grinding 80 hour weeks after college, forget that most of the rest of the world works 9-5. You could get some great gigs at 40 hours/week that easily pay 6 figures after a career of top notch firms and experience under your belt. Both my Uncles work in the public sector, and the total comp/hour is actually absurd after you account for all the days off + pension.
Part of me is also like: What am I going to do if I'm not generating income/interest? Play golf 5 hours a day? No chance. Love the game and it will love you back - the game doesn't have to be 80 hour work weeks.
Most top-notch wealthy people on this forum I think would feel the same as me. My friend's Dad used to be a Merrill MD, tried the retirement thing, and was so bored he went out and raised his own credit fund. Once you're in it, it's not just that you can't stop, you really don't want to if you love what you do and are good at it.
If/when I have $1+ mm in liquid net worth (emphasis liquid, not including home equity etc.), and I really wanted to say F it, I could see myself transitioning to a lower-intensity job and becoming an angel investor or doing some real estate/LMM PE/early-stage VC (maybe raise a small fund?). But whatever I'd do, I'd want to crush it.
Most of the world does not work only 40 hours...
I can't speak for most of the world, but in the US the average is less than 40 hours.
Around 38 average hours for 16+ years of education (bachelors degree+) all the way down to 22 hours on average for high school dropouts.
I'll cede it's an exaggeration, but seriously, talk to people who work "normal" jobs and see how much they work on average after taking into account PTO/holidays/etc. Can't average more than 50 hours/week.
You can realistically travel the rest of your life and even then not see everything the world offers but of course that's not for everybody.
I gotta say i dont think working hard early to relax later is worth it.
I think better to have fun in your 20s / 30s vs. being able to retire early and enjoy that $$ in your 50s.
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