So How Much Money Do I Really Need To Retire?

This is a question I wish I would have known to ask myself in my late teens / early twenties. But who at that age is thinking about something so far in the future? If you are, you’re one of the lucky ones who has this amazing opportunity to live life on your terms sooner rather than later.

First, you have to determine your estimated yearly expenses in retirement. Say your annual expenses total $40,000/yr annually. Considering the “4% rule of thumb”, you multiply your estimated annual expenses in retirement by 25 to get your retirement number. In this case, that number is $1 million. You will need $1,000,000 invested smartly to retire. The faster you get to that $1,000,000 invested, the sooner you can become financially independent and retire.

The earlier you start, the sooner you can get to your retirement number, also known as your FI number. And the more you invest per month, the sooner you can get to your retirement number. Given these two factors, you can see how starting early and starting aggressively, before you’ve had the opportunity to build a life of car loans, mortgages and kids, can really set you up for early retirement.

*Caution! If your plan is to reach financial independence and retire before having kids or paying off your home, I would strongly suggest you double and triple check your FI number. The costs associated with kids and home ownership could easily be more than anticipated.

So, what’s the magical number needed to save monthly? The Money Guy has an amazing post here that shows how much to put away per month by age to accumulate $1,000,000 by age 65. A quick review of their chart shows the following:

At 20 years old, if you invest $95 monthly, you will accumulate $1,000,000 by age 65

At 30 years old, if you invest $263 monthly, you will accumulate $1,000,000 by age 65

At 40 years old, if you invest $754 monthly, you will accumulate $1,000,000 by age 65

Now, imagine if you’d invested aggressively starting at 20 years old? A common goal in the FIRE (Financial Independence, Retire Early) community is to save and invest 50% – 70% of their income for a short number of years to retire. That’s right, save at least half of your gross income.

Saving at least half of your gross income takes discipline and consistency. You’ll need to change your entire mind set to one of delayed gratification. When you see your friends going out to eat and buying new cars, you must keep in mind your goals for your life. Decide if weekly happy hour and a $500 car payment is worth delaying your financial independence for decades.

This is why I found it so helpful to submerge myself in the FIRE community. I listened to podcasts daily around retirement, financial independence and investing. Podcasts such as The Money Guy, Chris Hogan 360, Dave Ramsey, His and Her Money, Choose FI, Our Rich Journey, Bigger Pockets Money. I listen to all of these on YouTube and Spotify because they were provided on the free version of those platforms, but most are available on other platforms as well. These have been integral in my journey to reach financial independence.

Decide carefully what your ultimate goals are and make the necessary steps to achieving this goal. You got this!