Reply to This Thread Comment (required) Name (required) Email (required, always hashed, never used nor published) Website (optional) Post comment Note that comments won't appear until approved. Ive been a personal finance nerd for a while, and the idea of early retirement is really interesting. I just did a quick excel sheet, and the answer to that question that looks like around 24 years: year This video shows you how to retire early with shockingly simple math. a savings rate of 0%) how long would it take to reach a 50% savings rate if you get a 3% raise every year and save it? For instance, if your income currently equals you expenses (i.e. Money Moustaches math tells us we can retire in 17. Check out this chart:Ģ comments for The Math Behind The Shockingly Simple Math Behind Early RetirementĪt that point, I’m not sure it could be solved in a single equation, although I could see something along the lines of how long would it take you to reach a certain savings rate. The savings rate that many in the FIRE community strive for is 50. Lastly, one nice thing about this math is that it isn’t linear - it has a nice curve to it. My guess would be either he had multiple interest periods annually (versus my one) or that fact that his assumption of 5% returns included being adjusted for inflation. If we take MMM’s shockingly simple math behind early retirement and flip it around, we can see the following options emerge: Working Years Savings Rate Required 40 years: 10 savings rate. =LOG10(((1.25 * A3) / (1.05 * B3)) + 1) /LOG10(1.05)Įxcept the first row, since it will result in a divide by zero error. This early retirement calculator can determine how many years remain before you can retire, based on just your savings rate. Each row looks something like this: =A2-5 Let’s try plugging the numbers in to see if I get the same results Mr. This explains why, if you’re able to save 100% of your income, then you can retire right now: you have no expenses! ![]() Then, I came across a blog article titled The Shockingly Simple Math Behind Early Retirement which challenged that norm. Just as most high school graduates don’t question the norm of going to university, many working people don’t question the 40-year work career. ![]() 100% of your income = expense rate % + savings rate % It’s All Just Math Save 25x your expenses, invest it, and you should be able to withdraw 4 per year indefinitely Compounding is on your side Mr. Prior to that, retirement seemed so far away.
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