Early retirement isn’t that complex, it’s not rocket science. It’s basically answering one key question, which is “how much income do you need every month if you decided to stop working today (or are retrenched without warning)?
Table Of Contents
The three metrics then you will have to consider
- how much you can earn
- how much you can save
- how much you can invest (and how much these investments will grow/pay you in dividends)
Over a period of time, until you hit your target retirement number.
What’s this target retirement number?
Target retirement number simply means how much do you need a month to live on when you retire.
If you spend $2000/month, then this will be your target number (this means that your investments or savings need to be able to provide you $24K/year until you die).
If you choose to not invest, and just spend $24K/year, then just multiply this with the number of years you think you’d have left. Say if you retire at 60, and you think you’d live till 100, this means that you need 40 years of $24K/year = $960K saved.
If you choose to invest, then you’d need to find out how much you need invested AND at what % returns to provide that $24K/year. So give you an example, if you invest in a stock that provides 5% per year, that’d mean you’d need $24K/5% = $480K.
Did you notice that you can retire with $24K/year on a $480K budget…and not wait till you have $960K saved up – this saves you a lot of time and life.
Not hard, just tedious but necessary
People often think that
- Nigel you’re lazy cos you dont want to work by going for early retirement
- Nah, early retirement is just too far away, I’ll decide when I get there
I think these people find it hard to think about such matters, and it’s them who’s being lazy (okay fine, maybe busy) to think about this. Yes, retirement can be far for some…but if you ask me, time flies in the blink of an eye.
I dont want to be caught retrenched, old and broke.
That’d be terrible, terrible.
Also, perhaps that’s why it’s motivating me to prepare, since I am actually early and have some time. When I make time out, I dont think it’s difficult or hard at all. Yes, it’s a little tedious and sometimes I’m uncertain (simply because I dont know all the details and I’m learning and refining as I go)…but I’m confident that I’m in the right direction.
You need to plan and start funding your early retirement NOW
As I shared, time can just go by quickly.
Also, retrenchment nowadays will hit anyone at any age. Not to mention the possibility of disease or cancer lottery. Or just have a nasty accident. Who the heck knows? Only God knows.
And just like that, bam, you’re out of work. If you’re also broke/old/unemployable, you’re screwed.
So that’s why I’m so passionate about “early” retirement. I’m not like a teenager or in my 20s where I’m planning to retire at 30. No sir, I’m now 40, and with 3 young kiddos, it’s only responsible to plan for retirement as well as financial independence where I can care for them, myself and my wife.
Yes, upsides is if you’re young and have surplus, sure, you can party, travel the world, volunteer and all that shit.
That’s the nice rainbow stuff, on the surface. But if you dive deep, it’s really taking care of yourself and your loved ones in case something happens to you, be it age, retrenchment, disease or some damn accident.
I’m the founder and writer here at NigelChua.com; as well as serial entrepreneur, therapy business entrepreneur, digital entrepreneur, investor and also happy husband, father and Christian.
Started and sold off a business for 7-figures; built another 7-figure one and growing it further, plus building/investing into other businesses and investments as well as advisory works.
Nowadays I share and teach entrepreneurship, financial independence, retiring early as well as building and living a life you love.
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