Early Retirement Scenario – $500 Monthly Expenses

Using the early retirement calculator at Networthify I crunched the numbers for early retirement with an expense level of $500 a month.  This was mostly an academic exercise since I can’t currently live on that low of an amount and that probably won’t change.  The calculator lets you input a number of variables and it is interesting to see how the numbers change depending on which variables are changed.

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?

4 thoughts on “Early Retirement Scenario – $500 Monthly Expenses”

  1. 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.

  2. 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.


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