How much do I need to retire? A path to FIRE (financial independence retire early) and a recent early retiree’s thoughts...

 

Beaufort Waterfront, North Carolina 

My wife and I are recent early retirees at ages 51 and 48.  We’ve been slow traveling with our traveling companion Toby, a 13 pound Pomeranian dog since our early retirement last August.  We’ve spent a month or longer in various destinations on the east coast of the United States and we plan on continuing our travel schedule in the foreseeable future.

The question “how much to retire?” is something I asked myself for years before my own retirement.  I must have spent hours searching online for this same question.  If you also asked this question, then I know why.  

It might be because you’re tired of the rat race, where you’re going through your life like an automaton each week, except you can’t seem to get out of this rut.  You don’t enjoy your job, or you’re no longer happy doing the same thing different day...

It might be because you want to travel more.  It might be because you think there’s more to life than working, paying the bills, taking your one week vacation, then repeat.

It might be any number of reasons, but in the end you’re just lost and want to find out what else is out there.... I can relate to all of that because that was me up until I discovered the FIRE (financial independence retire early) movement.  

In the simplest terms, the FIRE movement is reducing your yearly expenses so you can save up any and all available money towards your retirement.  

This concept, this idea, is what allowed us to retire early.  We took to heart the mantra to ‘spend less’, and to ‘save more’ towards retirement with full gusto.

To refocus on the question of “how much to retire?”, we must answer the most important question:

How much do I need to live on yearly?  Or put it another way, what’s my yearly expense?

Once you get this answer, then the answer to the original question is easy:  

Save up 25 times this yearly expense in an appreciating asset like real estate, stocks, bonds, etc.

What does it mean?  Well, to put these into numbers...

If you spend $25,000 per year, then you’ll need to save up $625,000.

If you spend $30,000 per year, then you’ll need to save up $750,000.

If you spend $40,000 per year, then you’ll need to save up $1,000,000.  

***In each scenario, multiply the yearly expense by 25.  

That’s it!  It’s such a simple concept to understand yet so hard to actually do.  Why?  It requires a behavioral change to truly be successful at it.  To be successful at this, you have to sacrifice your wants now to save up for later.  

Let’s do a quick test.  Here are the two options:

I can give you one chocolate right now or I’ll give you two chocolates in three hours.  

What would you do?

If you answered right now, then you would probably have a hard time saving up for the future.  If you answered wait for the two chocolates, then you’ll probably have an easier time saving up for the future.

This concept is from the famous ‘Marshmallow Study’ done by Stanford in 1972.  It followed children years after the initial study and found out those that waited, did better in many facets of their lives, like aptitude tests.

This is also the dilemma facing most people when faced with the decision to enjoy life now (spend now) or to save for the future (save for retirement).  

In my opinion, most of us can train/practice to get better at this.  It’s similar to eating right and exercising in that both require discipline and the ability to sacrifice now for the future.  If you already do these things, then saving up for the future should be easy for you.  

No one was born with discipline.  It was taught or you made the decision to get better at it.  To visualize the future is how you were able to sacrifice the now.  This requires telling yourself over and over that this is going to happen and you need to set a goal that you can follow and periodically check.

In conclusion:

  • Figuring out your yearly expense is the most important thing to know so you have a plan in motion. Budgeting is the key to figuring out how much money you have coming in vs going out.  *See my previous post about budgeting here.
  • When you reduce your spending via budgeting, you can then figure out how much you can save each month.  It’s always a good idea to pay yourself first.  This means when you get paid, either move money towards your retirement accounts automatically (as in 401k in which case your company will do that) or do it manually (as in IRA, unless you already set up automatic deposit).  
  • Saving for retirement requires constant affirmation and making sure your goals are being achieved.  By understanding whatever retirement number it is that you want to get to, you’ll have an easier time saving that figure.
  • Keep reminding yourself you can reach this retirement goal, and encourage yourself along the way.  It’s a long way to get there, but it can be done.  Think about any skill you acquired along the way.  You weren’t good in the beginning.  You practiced with discipline, and set your personal goals to get better at it. Same thing for saving up for retirement!
  • What helped me in my journey was when I would monitor my retirement account periodically.  This encouraged me to push further...I hope you do the same.
Good luck on your journey towards financial independence and to retire early.  Thank you all for reading!


Jake

Wandering Money Pig 



If you missed the post ‘What’s it like to hand in your resignation...’, please click here.

If you missed the post ‘How to retire early...’, please click here.

If you missed the post ‘We sold our home during the pandemic...’, please click here.

If you missed the post ‘What is the FIRE (financial independence retire early) movement...’, please click here.

If you missed the post ‘Magic of compounding interest...’, please click here.

If you missed the post ‘Our minimalist update…’, please click here.

If you missed the post ‘Dangers of entitlement on your path to happiness…’, please click here.

If you missed the post ‘Get rid of debt to reach your goal of financial independence…’, please click here.

If you missed the post ‘Thinking of moving to Pennsylvania…’, please click here.

If you missed the post ‘Learn to say enough to be happy on your path to financial independence and to retire early…’, please click here.

If you missed the post ‘Why is downsizing/minimalism so difficult…’, please click here.

If you missed the post ‘Is America still a land of opportunity…’, please click here.

If you missed the post ‘Learn a skill that pays you well to retire early…’, please click here.

If you missed the post ‘Invest and not save for retirement…’, please click here.

If you missed the post ‘Learn to enjoy the moment for life and for FIRE…’, please click here.

If you missed the post ‘The correlation between consumerism and early retirement…’, please click here.

If you missed the post ‘Retire on $200,000 (200k)…’, please click here.

If you missed the post ‘Adapting to change for life and for FIRE…’, please click here.

If you missed the post ‘Thinking of moving to Hawaii…’, please click here.

If you missed the post ‘Tough childhood leads to success in later life…’, please click here.

If you missed the post ‘Thinking of moving to New York City…’, please click here.

If you missed the post ‘Importance of finding purpose in early retirement…’, please click here.

If you missed the post ‘What is the rule of 72…’, please click here.

If you missed the post ‘Retire on $100,000 (100k)…’, please click here.

If you missed the post ‘The importance of a significant other’s role in your path to FIRE…’, please click here.

If you missed the post ‘Save for retirement or pay off debt…’, please click here.

If you missed the post ‘How much do I need to retire…’, please click here.

If you missed the post ‘Early Retirement Manifesto…’, please click here.

If you missed the post ‘Pros and cons of early retirement…’, please click here.

If you missed the post ‘How to save money when traveling…’, please click here.

If you missed the post ‘What is the average 401k balance…’, please click here.

If you missed the post ‘Doing a garage sale during the pandemic…’, please click here.

If you missed the post ‘First few months after early retirement…’, please click here.

If you missed the post ‘Not caring too much equals happiness…’, please click here.

Please check out our YouTube channel ‘Wandering Money Pig’ showcasing our travels and our Pomeranian dog! https://www.youtube.com/channel/UC3kl9f4W9sfNG5h1l-x6nHw




Popular posts from this blog

AirBNB horror story: How we got a refund from AirBNB due to a noisy neighbor…

Image
  Letchworth State Park, NY My wife and I (and our Pomeranian Toby) have been slow traveling since our early retirement last August.  We rely on AirBnB or Vrbo when we travel, and this past April was no exception. We chose a monthly rental via AirBNB in the month of April, in a town called Claysburg, Pennsylvania.  The rental was a studio unit that has a bed, a futon, full kitchen and a private bath. On the day of our arrival (April 1st), we were greeted by snow falling at the condo.  It was a beautiful sight to behold! We checked in with no problems and slowly settled in.  The next three days were uneventful.  We did our usual unpacking, then we went shopping for food from a nearby supermarket the following day.  We enjoyed the sights nearby and were having a good time at a new location. By Monday of the following week, our luck had changed for the worse.  The neighbor upstairs did what sounded like to us, either deep cleaning and renovating! We ...
Read more

Review of Fiore Suite and classic room at the Borgata, Atlantic City, NJ (New Jersey)

Image
  Classic Room at the Borgata, Atlantic City My wife and I have been going to the Borgata hotel and casino since its opening 18 years ago thanks to my dad.  My dad had a loyalty/player’s card which allowed free hotel stays (comped rooms).  We couldn’t resist free hotel rooms when my dad asked if we wanted to go! Fast forward to now. I now have a loyalty/player’s card that I use to take my parents to the same hotel for free.  Funny how roles switch...My dad used to treat us to free rooms, so now I’m treating him...Favor returned! Borgata Hotel & Casino was built in 2003 to huge fanfare when it opened.  Costing then $1.1 billion, it rivaled the best hotels in Las Vegas and New York City.  It features 2000 rooms, outdoor / indoor pools, a spa, a buffet, 3000+ slot machines, and many high end restaurants. Since its opening, it added the Water Club (a boutique hotel) in 2008 at a cost of $400 million, which added another 800 rooms to the available room capa...
Read more

Review of Falls Lake Dam Recreation Area, Wake Forest, North Carolina

Image
  Falls Lake Dam Recreation Area, Wake Forest, NC After my wife and I sold our home at the end of August 2020, we headed down to Wake Forest, North Carolina.  This would mark the beginning of our early retirement.  We wanted to spend time with my brother in law and his family, who we haven’t seen in over a year.  It was during this visit that we discovered this fantastic recreation area. Falls Lake Dam Recreation Area is a man made reservoir located in the upper portion of the Neuse River Basin, nestled near North Carolina’s bustling Triangle Area.  The reservoir covers nearly 12,500 acres of water and is surrounded by 25,500 acres of public land.   The lake stretches 22 miles upstream to the confluence of three rivers: Eno, Flat, and Little Rivers. Falls Lake Dam Recreation Area boasts hiking trails, fishing, water sports, biking, wildlife viewing, etc. See my notes below when visiting the Recreation Area: The main entrance to the Recreation Area is access...
Read more