Money recently on early retirement. Within it, they listed a chart titled "What it takes to retire."
The chart lists the lump sum needed to retire at various ages and desired incomes. Here's a summary of that chart:
Desired annual income of $50,000
-- Retire at age 45: $1.9 million
-- Retire at age 55: $1.7 million
-- Retire at age 65: $1.3 million
Desired annual income of $75,000
-- Retire at age 45: $2.9 million
-- Retire at age 55: $2.5 million
-- Retire at age 65: $2.0 million
Desired annual income of $100,000
-- Retire at age 45: $3.8 million
-- Retire at age 55: $3.3 million
-- Retire at age 65: $2.6 million
A few thoughts on these:
- Obviously, the higher amount you want to earn in retirement as well as the younger you retire, the more you need saved.
- The results are based on a portfolio invested 60% in stocks and 40% in bonds. That seems a bit conservative to me. 80/20 seems a better split for those wanting to retire early.
- Hidden within these numbers is the assumption that you're not earning income from any of these investments (you're simply withdrawing from them). This means you need to save a boatload of money because the return rate is so low.
- If you could earn a higher return on at least part of your portfolio (say with ) you could dramatically reduce the amount you'd have to save.
- For instance, if you want to make $100k per year, let's say you put $500,000 into real estate earning 8%. That gets you to $40,000 all by itself. Then if you had other assets of $1.5 million withdrawn at 4% per year, that's the other $60k you need. Together you only need $2 million to retire, not $2.6 to $3.8 million.
- I retired closest to 55 (at 52) and we wanted annual income just short of $100k. Real estate got us about 60% of the way there for about $600k invested. As such, we didn't need $3.3 million to retire.
- The numbers above assume that you don't earn a penny from part-time work, side businesses, etc. If you do, the amounts needed to retire would be much lower.
Those are my thoughts on the numbers. Anything to add?