How to reach retirement sooner?

2개월 전


Often the advice you hear from people who give advice on how to retire they talk about saving more and investing more in 401k or so sort of asset. Well I would like to piggy back of this concept with the idea of what minimalists do. To spend less money to live and enjoy life one can achieve the status of retirement sooner.

Think about what your daily expenditures are and try to reduce your spending. Figure out what is your necessities and what you can live without allow you to know how much you need to spend if you never had to work again. The approach is spend less and live within your means.

For example I make $50k a year and my take home after taxes is a little over $35k. I can save around $15k a year so my expenditure for a year is approximately $20k. Without taking inflation and and no pay raises to simplify the math, using a 25x multiplier I would need $500k to retire. $20k x 25 = $500k. (The 25 multiplier comes from a 4% yearly expenditures used based on the trinity study.)

So to save $500k it would take me 33.33 years to save at $15k/year. But what if I was able to reduce my yearly expenditure from $20k to $10k. This will result in $250k required for me to retire on, which comes out to 16.66 years. Just like that cutting the time to reach retirement in half! The drawback would be that I would need to spend less, but then again is it really a bad thing if one gets to retire soon.

There are a lot of factors that I excluded here that comes into play and needs to be taken into consideration. Things like inflation, type of investments you do with the money you are saving, lost of job, or some health issues. Overall though if you look at it in the way where you lower your expenditures it makes it somehow feels better to know that retirement is feasible. This may help motivate you to think about retirement when it is easier to achieve.

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