What is Your Magic Retirement $ Number?
I've read a number of posts on this site from young people who talk about not wanting to take the traditional path and "work 'til I'm 65;" early retirement seems to be a paramount goal for a lot of of people.
My question is, what is the nest egg you would feel retiring with? Of course there's going to be inflation, so a dollar today is gonna be worth more than it will be in 20 years. And of course your retirement number will depend on your personal situation -- will you have kids, where will you live...?
But I figure if I have 4-5 million saved up, I can probably come close to earning 10 percent a year just by investing in the S&P and make 350,000-500,000 per year... I think I can live pretty comfortable with that kind of annual income.
What's your magic retirement $ number?
What's your number?
I figure, depending on where I live, 4-5 million in the bank would set me up to make 300-500k per year. Granted, in 20 years that won't have the buying power it does today, but I would think that I could live pretty comfortably on that.
You'd be comfortable deploying that much capital in the stock market?
The comfortable rule is 4% a year, so you need 25x your expenses to retire. This allows you to have the same real (post-inflation) standard of living for the rest of your life.
It fails a few % of the time, but on average you end up with 2-3x your starting point (again, in real dollars).
Google 'FIRE.' To all those who are FIREing, allow me to say my favorite phrase - go f yourself :) -- this means congrats!
Just for future reference, fire is a pretty common word so whatever acronym you're trying to tell the forum about is likely to get covered up by the news of the current California fire.
Generally agree, but if you put 'FIRE retirement' you get a million results...
25M. Totally arbitrary, but it's a number that I have burned into my head. Realistic or not, I don't care. I live in a mindset where W2 Salary is small-time and means to an end. I've brainwashed myself to where I lead a life that would be consistent with someone who has 25M at the end of the day. It provides a perspective that holds me to extremely-high standards in all facets of career, a degree of calculated risk that MUST be taken and grand aspirations that define a lot of what I would call my personal identity. Before calling it vain, it's not about the money. It's the time spent going for it all with the time that I have on this planet.
Aiming high... I like it.
$5 million. Provides me $200K in yearly, real income. Enough to have a family and travel at will. Not enough for private planes.
Not saying I wouldn't pursue some entrepreneurial aspirations, but this would get me to 'phase 1' retirement.
$5,000,000 in the bank allows one to live off of $100,000 for 50 years. If you contiually invest that money into low-risk mutual funds or CDs, you could have even more. I think that's a good number.
You're really just gonna plop all your savings in a bank paying 1 percent? Or I guess, 2 or 3 percent if you've got a large enough CD?
More
Honestly I think its always changing. The more money you're making, the more you get accustomed to that lifestyle then start to look forward to what's "next".
Say for example you're making $500k now, and you have $12.5M saved in the bank (25x). Will you be content living off $500k per year forever? Probably not, human nature is to want "more". Which is why its very difficult to walk away.
I think in reality, when you've become too burned out and don't care for "more", that's when you've reached your number.
That's the key -- wanting more. My friend's dad is a CEO making 5 mil a year... he lives comfortably, but conservatively (no fancy cars, no outrageous vacations... and NOT in NYC)... if he makes that two years in a row and lives fairly conservatively, he can quit after those 2 years of making 5 mil/year and live the next 18 years as if he's STILL earning 500 k a year. If you save, don't waste money on $80,000 cars and $10,000 watches, you don't need 25 mil to retire comfortably. Obviously, to each his own -- people are entitled to spend their money however they want... I'm just saying, you can lead what most people would call a "nice/comfortable" life (luxury car, 2-3 family vacations a year, 3000 square foot house, eat out pretty much whenever you want... and, of course, get Sirius radio and NFL Package) on 250-350,000 a year (assuming you don't live in NYC/SF, and don't fall into debt... and I'm talking about post-kids/paying for college).
Most people who are earning $5 million per year are doing so because they are driven and passionate about what they do--they are highly industrious people who would be intellectually miserable in retirement.
For me, I would determine how likely it is for me to continue to earn $xx million next year and the year after and into perpetuity. If I felt like it was highly likely--like, I had a system where I could say the n-word on Twitter and still make $5 million next year--then I'd live like I made $5 million/year. If it was one of those things where I was a salaried CEO living and dying on quarterly earnings then, yeah, I'd live like I made a fraction of $5 million.
Relevant article -- kinda clickbaity, but you get it:
https://www.businessinsider.com/how-to-invest-early-retire-a-millionair…
2 Wendy's 4 for $4s a day for 20 years, $58400. Give me that and I'm golden
by the time you're ready to retire they may be $6-7...
Probably a good retirement plan. I keep hearing how one of the biggest issues with retirement planning today is living well past your expected plan and there is no way you will live for more than 20 years eating 2 of those a day.
More.
The goal is to be able to pull $1M a year passively from portfolio companies. Ideally just the odd board meeting here and there so I can focus on building a biotech company. Most of that is for the biotech co though not me. I'm a simple boy.
Cool. Yeah I hope to build companies as well at some point.
What kind of biotech are you thinking about? What kind of focus?
You guys are funny. If you wait for retirement, sure you'll have (more) money.
But your joints will ache. Your skin will sag. Your stamina will be subpar.
The whole society is backwards, in that one's lifetime earnings is (nearly) entirely rear-loaded.
Rationally, it's ideal. But then you realize that humans are organisms that age, and it's sad.
I agree - the power of compound interest / exponential growth is pretty wild, but I'm also trying to front-load travel in any way possible (between jobs, etc)
I have ~20 years until kids are out of college (undergrad at least - I'm not responsible for grad school). My plan/goal is to not work fulltime too much longer than that. There are some on and off type consulting gigs that I could see myself settling into. There are a few places that specialize in temp CFO type roles that might be interesting.
At that point I intend to have some passive income coming in as well, so something that is flexible, keeps me stimulated and brings in a few $ would be ideal. I'm not too familiar with smaller or non-public boards (yet), but that could certainly be an attractive option as well.
I will personally be completely fine walking away from a 9-5 in my late 50s/early 60s, but it is different as a dad. My kids will not be spoiled growing up, but it'll be hard to pass up a year of working at 60 for $XXX and more equity vesting when they're right out of school and probably a little tight on cash.
It's amusing to read the assumptions of the younger posters (assuming they'll earn 10%, assuming you'll be tired and saggy at 60 etc.) I get it. You have your life in front of you. You also have no experience or perspective on reality. There's this thing called "Life Happens". Regardless of what you do or how much you make, there will be market crashes, wars, weather based catastrophies, illness, family emergencies, etc. Not trying to be a bummer, but these things will and do happen and they alter your plans.
Also a thing I've noticed over time is that focusing on income (even to reach a certain number) isn't enough rocket fuel to actually get you there. You really need to focus on the work, with the income being a byproduct. Otherwise you'll get comfortable along the way and not be wiling to continue pushing for that extra something to get you there. Hard to believe but at some point, money can't be the motivator.
exactly, once you have the money, if the work doesnt motivate you, you could end up depressed.
Agreed. Humans need purpose. Money is not purpose, it's simply a resource. Resource to do what is the question. Some will be quite happy making a clean break, playing golf 3 days a week, volunteering somewhere (I like that combo), others will need to stay in the game because they love the game.
Personally, in a few yrs, (I'm 54), I see myself enjoying a hobby (golf, hiking, etc), volunteering, travel, AND staying in the game at a level I choose. Working with the right clients that keep me engaged and generate additional revenue. It won't be steady, everyday work. More like when it's necessary. I won't NEED to do that from a financial standpoint, but I'll WANT to do that because that part of the game is fun. If it's fun, why would I want to stop?
I find it funny that the older people get, the more worried they become about such events. I don't know if we get fragile as we age, or just find what we want in life and don't want to lose it.
I used to get excited at the thought of major things that stirred the pot. It's easier to rise in chaos if you know what you're doing.
It may be because I don't see retirement as slowly withering away, and trying to avoid pain or inconvenience. That probably does show that I still have a young person mindset. I know a lot of people making more now in "retirement" than they did most of their working lives, and they're be in a better place to adapt to major catastrophes.
Banking on being able to adapt and change later may be stupid, but I think waiting on retirement because I'm not 100% covered is a fool's game.
Poignant response
$10,000,000-Gives a high risk free income forever. No thoughts about spending habits... at least for a normal reasonable spender.
Don't have a magic retirement number as I feel anyone who actually gets to that point would just grow accustomed to that wealth and keep going.
But I have a minimum # in my head of $3m which would provide me a huge sense of safety as it's enough (assuming 5% returns after taxes/fees) for a decent upper middle class lifestyle for a wife and two kids if everything goes to sh**.
I want to work forever. Ideally with breaks at times. Playing golf and laying on the beach is suicide.
Enough money to not have to worry about money is nice. But ideally a few mini retirements in life and then back to work. Life is meant to be lived. Not retired. And that’s a mix of experiences and contributing to society.
Yeah, by "retirement" I didn't necessarily mean stop working -- but stop working a job that you don't enjoy. I hear you regarding always doing something... but if you've got enough cash saved up, hopefully that something can be a pursuit of passion.
I might be legit the only person here who can say its billion(s) or bust.
Believe me, after the some of the flak you got during your Q&A, I am so rooting for you to hit the billions. If WSO is still here you have to come rub it in.
Eh I don't give a shit about random people on the internet.
Say I was born rich and will inherit 50m at 25, how do I turn that into billions?
I still have money in the stock market but I have a 20 year loan on properties that pay me 57k a year. Given my age, 26, I'll have those properties paid off by 46. Assuming nothing bad happens and taking inflation into account, they may be paying me 80-90k a year. I'll keep investing in real estate and can use the cash thrown off from these paid off investments to put down payments on more properties, creating a snowball. My goal is $100,000 a month free and clear by 65.
So you take on leverage to invest in the same asset class with a geographical concentration and a ton of idiosyncratic risk. Sounds sooo smart
I dont own any rental property (although is certainly could become a part of my passive income at some point), but I feel that the risk is relatively low. Could his rental income and real estate value drop? Certainly. However if his $57k/year falls to $45k/year and the market value goes from $400k (made up) to $300k he's not belly up. Actually, given his long term holding strategy he'd still probably end up ok.
The other side of this near worst case scenario is that interest rates rise and the trend of increasing rental demand continues. What does that look like in 15 years? Maybe $80k/year of revenue and a $400k asset. That's a very good outcome and not even close to a best case scenario.
The risk/reward seems justified to me as long as he never allows the properties to fall into disrepair and they're at least in a decent area.
$5,000,000 in the bank with a 5-10% return
I don't need alot, 3-4M withdrawing 3% a year. If the kids are through college and the house is paid off, which should be the case, I think this is attainable by 50. Then travel the world and relax.
Same but less (no house paid off, pre-college costs) -- hoping to also attain by 50, or to "coast' earlier and let $1M snowball into more
$1mm.
Though I see retirement as quitting a bs job to pursue passion projects with the intent of making money and having fun. My lifestyle will definitely inflate after awhile (won't stay a bachelor eating ramen, chicken, and rice my whole life), but then I'll have to work to provide for that. The $1mm is basically a safe coverage of the necessities. Shit apartment, food, some travel money, insurance, etc.
The one thing that many of you are missing is healthcare. If there isn't some fix, healthcare costs (insurance, deductibles, etc) for you and a spouse might very well be $50k/year by the time you young guys retire. I'm not looking to start a debate on this topic, but it certainly has the potential to alter a lot of plans.
10% is crazy. Even the "4%" rule is shockingly aggressive for someone who is young. We're going to have a lot of bankrupt retirees at this rate.
The 10 year market trend we have experience will almost definitely not continue indefinitely. I'm not a bear, I am not in cash, I believe in investing throughout market cycles. But these rules of thumb leave a few important points on the table.
These are hiccups that someone of retirement age can potentially weather, they don't need their money to last forever. But if you're under 40 (really, under 60) it is very very difficult to make this up over time. It takes an incredible willingness to be extremely frugal proactively, to mitigate the future risks that will definitely occur.
Working sucks. Not working sounds fun. I get sick to my stomach, however, when I hear about 35-40 year olds retiring with $750k or even a few million but with six figure lifestyles. It's really hard to reenter the work force late in life with a good job if you've been in retirement for 10 years.
Good response. Answers in bold below: [quote="BreakingOutOfPWM"] 10% is crazy. Even the "4%" rule is shockingly aggressive for someone who is young. We're going to have a lot of bankrupt retirees at this rate.
The 10 year market trend we have experience will almost definitely not continue indefinitely. I'm not a bear, I am not in cash, I believe in investing throughout market cycles. But these rules of thumb leave a few important points on the table.
I'm not saying that the match doesn't work out on paper. My point is - I've managed hundreds of investment portfolios, in an upward trending market environment, and see these plans fall through all the time. The folks who tend to succeed with early retirement plans spend well below their needs. 2-2.5% per annum from the portfolio before taxes, and own their one home. Otherwise, the small shifts catch up eventually. It might work 60-80% of the time. But if you're in the 20-40% who over spend (easier than it sounds) or inappropriately invest (also easier than it sounds), this is a lifelong hit that you can't recover well from. The job market moves on.
20,012,023,012.23 Zimbabwean dollars
$5M should work - no parents to take care of, and no plans for starting a family and fairly certain things will remain that way. My annual expenses are super low -and predictable- even when I factor in my fancy vacations. 3-4% a year on $5M would be more than enough.
Though I doubt I'll ever retire outright. It's the having a boss part that sucks when you think about it. So I'll probably do something that gives me a decent amount of autonomy/minimal time commitment to keep some pocket change on hand.
Can retire @ 2.65mn
Would retire @ 6.5mn
Didn't bother to read through the thread as there are far too many posts. I am semi-retired at 50. My magic number was 25x my annual spend. Interestingly enough, this equates to approximately the 4% withdrawal rule (for those who are familiar). There is no magic number. The number is a function of the quality of life you choose to live, how you choose to live, what your financial obligations consist of, how important is a constant income stream versus lump-sum that you distribute to yourself throughout the year, etc. etc. etc.
I first left the workforce at 45, took off for about 3.5 years and then returned for a few more to add some buffer to my retirement accounts. Little did I realize at the time how much the market would run while I was back in the workforce, allowing my accounts to grow unabated. Now I'm fortunate to be completely debt-free, both kids' college paid-in-full and my boys are close to being completely off the dole. Now it's time for the bride and me to enjoy the fruits of our labor.
Answer: not applicable.
I plan to never retire, or to at least work as long as my mind/body allows.
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