For the $500 monthly expense scenario, I put in an income of $25,000 and yearly expenses of $6000 and a current portfolio value of $30,000. The calculator uses a 5% annual return on investment and a 4% safe withdrawal rate by default, although these variables can also be changed. I chose to leave them unchanged. The results for this scenario state that I could retire in 5.3 years and I’d have a 76% savings rate. If I reduce the savings rate down to 50% it would take me 14.3 years to retire. Even if I changed my annual return on investment from 5% to 10% it would take me 10.9 years to retire with a 50% savings rate. At the 76% savings rate changing the annual rate of return on investment from 5% to 10% it would take me 4.6 years to retire. Doubling my annual rate of return on investment would only let me retire a few months earlier based on a 76% savings rate. These calculations make it clear that your savings rate is much more important than your annual return on investment when you are saving a large percentage of your income.
If I were to increase my income to $50,000 a year (which is a much more plausible scenario than reducing my expenses to $6000 a year) I would be able to retire in just 2.5 years based on $6000 of annual expenses. Using a more realistic expenses level of $12,500 a year I would be able to retire in just 6.6 years at that income level. Increasing my income from $25,000 to $50,000 would allow me to retire almost 8 years sooner.
Using the early retirement calculator shows that I shouldn’t be overly concerned about my annual return on investment. What I need to focus on is keeping my expenses low and increasing my income.
Has anyone else used an early retirement calculator to see when they could retire?
When I retired early (38 y.o.), I used my own estimate of income and expenses. Sometime ago, I used the Fidelity calculator too. Now I take a different approach of multiple income streams and controlling my expenses.
Multiple income streams are nice to have. I like having multiple streams of income even though none of them are very large.
Well, you should get some return on investment with your money, and try not to lose it 😉
I was wondering, when are you going to be 62 ( to draw on Social Security)?
I see you need $1000/month. But you seem to be earning $300/month from blog stuff, leaving you $700/month. If you dont plan on SS, you need $8,400 in investment income annually, or a nest egg of $210K ( 4% rule). If you are 50 at retirement, and plan on taking social security, you might need something like $100K. ( if you draw it down gradually over the 12 years, but can maintain purchasing power of nest egg during that time).
I’m 46 now so I have a ways to go to 62. I’m not currently including SS in my retirement plans although I do think I’ll receive it. I might change my plan though since including SS would allow me to retire a little sooner.