The PowerBall sign said the jackpot was up to $590 million during my morning commute. After 20 seconds of daydreaming about how I would spend the millions, I was quickly brought back to reality when traffic slowed. The dream of my private helicopter would have to wait.
When I was in my 20s, I thought I would want to work forever. However, now that I am in my 30s I often daydream about how early I could retire. I know that I want to have about $80,000 a year of income when I retire. Can I retire early?
- Determine what income you want in retirement. Mine is $80,000.
- Figure out what that will be after inflation. Go to the Bureau of Labor Statistics and use their inflation calculator (See Image Below).
- Enter in the amount of money you want each year in retirement – 80,000
- Calculate how many years until you wish to retire. I am 35 and want to retire at age 55. That leaves me 20 years.
- In the first drop down box, count back the number of years for the current year. It is 2013 and I want to retire in 20 years, so my selection will be 1993.
- Click Calculate and that will show you the amount of money you will likely need in which inflation is factored. I will need just under $130,000.
- If I want to ensure I outlive my money, I can multiply my future annual amount, $130,000, by 21. This will allow me to take 5% a year and have the first 5% on day one in retirement. For me, $130,000 x 21 = $2.73 million dollars.
- Now, using the Rule of 72 with an 8% return, I know that my $150,000 in savings today will double 2.2 times in 20 years. In 9 years, my money would be worth $300,000 and in 18 years it would be worth $600,000.
Can I retire early? To retire early, I either need to start buying Lottery tickets or continue contributing to retirement accounts.
This article is part of my series on – How Do You Plan for Retirement?
- How Do You Plan For Retirement (Series): When Should I Invest in the Stock Market
- How Do You Plan For Retirement (Series): Basic Strategies in Planning For Retirement
- How Do You Plan For Retirement (Series): What to do with that 401k Rollover Check
- How Do I Set Goals: What You Can Learn From Monsters University (Part 1 of 2)
- Total Money Makeover by Dave Ramsey Review
- Rich Dad Poor Dad by Robert T. Kiyosaki Review
- Don't Be This Guy! Face the Hard Truth
- What Does My Pay Stub Mean - Pay Stub Details Part 1 of 2 – Budget Life!
- What Does My Pay Stub Mean - Pay Stub Details Part 2 of 2 – Budget Life!