How Do You Plan For Retirement (Series): Can I Retire Early?

Can I retire early?

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?

  1. Determine what income you want in retirement.  Mine is $80,000.
  2. Figure out what that will be after inflation.  Go to the Bureau of Labor Statistics and use their inflation calculator (See Image Below).  
    1. Enter in the amount of money you want each year in retirement  – 80,000
    2. Calculate how many years until you wish to retire.  I am 35 and want to retire at age 55.  That leaves me 20 years.
    3. 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.
    4. 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.
  3. How can I Retire EarlyIf 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.
  4. 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.
Rule of 72 - Can I Retire Early?

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?

 

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