How much is enough to retire in your 40s?

General
1

I’ve been crunching some numbers and wanted to see if this makes sense to everyone else. Originally, I thought you’d need around $2.8 million to retire comfortably. But it seems like with $1.8 million invested in the S&P 500 and a 7% return rate (hypothetically), you could pull out $10k a month and sustain it.

I know the math here sounds a little weird, but I’m factoring in a 10% return and 3% inflation, meaning a 7% net return. So, you’d be taking out an inflation-adjusted $10k every month.

Living on $100k a year after taxes (about $80k after tax) seems doable if the house is paid off and you’re in a low-cost area like the Midwest. Plus, in your 40s, you could always pick up some consulting work here and there.

Anyone want to check my math or share their own retirement target? What’s your “magic number” to retire early?

2

7% withdrawal rate is pretty high. If you retire during a bull market, maybe it works out, but if you hit a bear market or a flat period right when you retire, it’s a different story. You might start cutting into your principal, and that’s tough to recover from.

The ‘safe withdrawal rate’ is about 4% in most situations, and if you’re retiring young, maybe closer to 3.5%. Your original $2.8 million target is more in line with that.

3

@Teal
Good point. I was thinking it’d just even out over time, but yeah, it does look rough if you start in a down market. Thanks!

4

You should post this in the FIRE forum—people there will probably break down every angle on how you’re both right and wrong!

5

Denny said:
You should post this in the FIRE forum—people there will probably break down every angle on how you’re both right and wrong!

:joy:

6

Wendell said:

Denny said:
You should post this in the FIRE forum—people there will probably break down every angle on how you’re both right and wrong!

:joy:

This is the calculator I’m using. Planning to ‘retire’ at 46, though it’s more like shifting to less work and lower income.

Early Retirement Calculator

7

Jo said:
You’re not factoring in sequence of returns risk. That 10% isn’t consistent every year; it’s more like an average over a very long period.

Thanks for the heads-up! Never thought about sequence of returns risk. I’ll look into it.

8

The standard safe withdrawal rate is 4%. It’s low enough to cover historical downturns without depleting your main investment.

Personally, I’m staying aggressive in retirement and planning to keep 80%+ in the S&P 500. Bull years tend to outweigh the drops.

9

There are plenty of places in the U.S. where you could live on way less than $100k a year. If you’re not tied down by family, think about moving to a low-cost-of-living area in retirement.

10

Torrin said:
There are plenty of places in the U.S. where you could live on way less than $100k a year. If you’re not tied down by family, think about moving to a low-cost-of-living area in retirement.

Haha, good point! There are lots of cheaper areas, but moving isn’t in the cards for me right now.

11

Consider taking a year off to try living self-funded. It’ll show you how your budget holds up and if you really enjoy the lifestyle.

You might find you want to work more than expected or that your math is off. Or maybe you’ll love it and see it’s sustainable.

12

@Zhen
Good idea! Though my goal isn’t to fully stop working—I just want to work on projects I like instead of needing a paycheck. So technically, I’ll have outside income, but I’m planning around not needing it, just to be safe.

13

@Wendell
Smart move. Some friends of mine ‘retired’ recently, but they define it as not needing to work for money. They still pick up work here and there.

14

Retiring in your 40s? Might as well win the lottery!

15

Roux said:
Retiring in your 40s? Might as well win the lottery!

Well, anything’s possible, but let’s be real—saving that much is like winning the lottery anyway!

16

Bay said:

Roux said:
Retiring in your 40s? Might as well win the lottery!

Well, anything’s possible, but let’s be real—saving that much is like winning the lottery anyway!

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17

You’d be better off assuming less than a 7% return.