23 year old wanting to retire before 50

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bigguy8437
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23 year old wanting to retire before 50

Post by bigguy8437 »

Below is a copied and pasted excel sheet I made showing my Roth IRA and inheritance expected values with a 6% growth rate. I know there isn't very good spacing on the table, but try and do your best to see. All numbers line up to the column header above it. I hope that 6% is not too optimistic, if it is speak up and say what you think it should be.

My Roth IRA was started when I was 18 (I just turned 23), and I accounted for $5500 maximum contribution each year until I'm 50, where I made it the $6,500 maximum contribution. I know these numbers will change, but for simplistic reasons, I kept it as to the rules what it is today. I plan to contribute to the max every year I work, and my Roth follows Vanguard Retirement 2060 Fund. The inheritance has 50% invested to VTSMX (vanguard total stock market), and the rest is following mutual funds that have had roughly the same growth or a little more than the market each year. Hence, I used 6% for the growth rate on the inheritance as well. The inheritance is not accounting for any additional investments each year, even though I might invest salary savings/bonuses in it.

What I'm trying to figure out is where I should put money I receive from work starting in the fall. I plan to make 50K, which should turn out to 40k after taxes. I will max out the roth IRA, and then make the 18K contribution to my 401K. After that is where I'm trying to figure it out. I will have put in 23.5K between my roth and 401k, leaving with with about 12K extra to invest (I gave myself 5k to spend). Should I just park the 12k into the VTSMX (vanguard total stock fund) where my inheritance money is?

Also, I know this is hard to predict without knowing my expenses annually, but is it reasonable for me to think that I can retire around 45? As of now, if I don't do anything with this roth IRA (besides contributing to the max every year, which is accounted for below) and my inheritance, my net worth will be 1.267 million. I will also have money from my work salary, which isn't even accounted for below. My job has salary increases every year, and is a very stable job. It also has very good exit opportunities, so I can have the potential for a large salary raise in 3-4 years. I know it will be nice to be able to retire before 50, and I'm trying my best to see a realistic scenario for myself to retire early. I also have no loans, or any kind of debt on my hands.


Roth IRA Inheritance
Age 6% Growth 6% Growth Total Net Worth
23 25,122.00 256,520.00 281,642.00
24 32,459.32 271,911.20 304,370.52
25 40,236.88 288,225.87 328,462.75
26 48,481.09 305,519.42 354,000.52
27 57,219.96 323,850.59 381,070.55
28 66,483.15 343,281.63 409,764.78
29 76,302.14 363,878.52 440,180.67
30 86,710.27 385,711.23 472,421.51
31 97,742.89 408,853.91 506,596.80
32 109,437.46 433,385.14 542,822.61
33 121,833.71 459,388.25 581,221.96
34 134,973.73 486,951.55 621,925.28
35 148,902.16 516,168.64 665,070.80
36 163,666.29 547,138.76 710,805.04
37 179,316.26 579,967.08 759,283.35
38 195,905.24 614,765.11 810,670.35
39 213,489.55 651,651.01 865,140.57
40 232,128.93 690,750.08 922,879.00
41 251,886.66 732,195.08 984,081.74
42 272,829.86 776,126.78 1,048,956.65
43 295,029.65 822,694.39 1,117,724.05
44 318,561.43 872,056.05 1,190,617.49
45 343,505.12 924,379.42 1,267,884.54
46 369,945.43 979,842.18 1,349,787.61
47 397,972.15 1,038,632.71 1,436,604.87
48 427,680.48 1,100,950.68 1,528,631.16
49 459,171.31 1,167,007.72 1,626,179.03
50 493,611.59 1,237,028.18 1,730,639.77
51 530,118.28 1,311,249.87 1,841,368.16
52 568,815.38 1,389,924.86 1,958,740.24
53 609,834.30 1,473,320.36 2,083,154.66
54 653,314.36 1,561,719.58 2,215,033.94
55 699,403.22 1,655,422.75 2,354,825.98
56 748,257.42 1,754,748.12 2,503,005.53
57 800,042.86 1,860,033.00 2,660,075.87
58 854,935.43 1,971,634.98 2,826,570.42
59 913,121.56 2,089,933.08 3,003,054.64
60 974,798.85 2,215,329.07 3,190,127.92
Braje
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Re: 23 year old wanting to retire before 50

Post by Braje »

What I'm trying to figure out is where I should put money I receive from work starting in the fall. I plan to make 50K
Are you currently employed, how do you know you will make 50K/yr?
(I gave myself 5k to spend)
Even if you are living rent free 5,000/per is not much money. Do you not have any expenses. eg car insurance, cell phone, food....
Braje
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Re: 23 year old wanting to retire before 50

Post by Braje »

Roth IRA Inheritance
Age 6% Growth 6% Growth Total Net Worth
23 25,122.00 256,520.00 281,642.00

Also I'm not understanding your number what is the 25,122 and what is the 256,520?
Are RMD required on Inheritance IRA ( I don't know just asking)?
joebh
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Re: 23 year old wanting to retire before 50

Post by joebh »

bigguy8437 wrote:Also, I know this is hard to predict without knowing my expenses annually, but is it reasonable for me to think that I can retire around 45? As of now, if I don't do anything with this roth IRA (besides contributing to the max every year, which is accounted for below) and my inheritance, my net worth will be 1.267 million.
Without hesitation, it's easy to see that you can retire at 45 if you want to.

But at 23 years old, you have a lot of life in front of you. Things change. Your life isn't predictable. People will come into your life. Unexpected events will happen. Your goals will change.

Be financially smart. But live some of your life first, before deciding that retiring at 45 is such an important goal.
dsmil
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Re: 23 year old wanting to retire before 50

Post by dsmil »

For most people, your projected portfolio size would be large enough for some type of early retirement, but it's all about controlling your expenses. Retiring at 45 might mean living off of $30k per year for the next 45 years. Retiring at 60 might give you $100k for 30 years. Keep investing and keep your expenses low, and you'll be in great shape.
flyingbison
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Re: 23 year old wanting to retire before 50

Post by flyingbison »

If you are 23 and already thinking about how early you can retire, I would suggest finding a different line of work that would be more satisfying to you.
Crow Hunter
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Re: 23 year old wanting to retire before 50

Post by Crow Hunter »

I have more than what you are projecting at age 42 and I live in a very LCOL rural area and I lead a predominantly low cost life.

I do not feel I have enough, nor am I ready to retire.

I wouldn't try to make specific plans that far in advance though. When I was your age, I planned on being retired right now sailing around the Caribbean writing fantasy novels.

I am now married, don't care anything about sailing around the Caribbean and I don't even read fantasy novels anymore.

I am not even sure that my retirement plans from just 5 years ago are really what I want to do anymore. Since my Mother passed away, I don't know that I really want to build a house down the road from her home on family land and live there for the rest of my life. I am leaning more towards living somewhere else entirely.

Stick with saving early and often but leave the rest of your options open.
livesoft
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Re: 23 year old wanting to retire before 50

Post by livesoft »

bigguy8437 wrote:[…]
Should I just park the 12k into the VTSMX (vanguard total stock fund) where my inheritance money is?

Also, I know this is hard to predict without knowing my expenses annually, but is it reasonable for me to think that I can retire around 45?
When I was in my twenties I also figured out some numbers, so this is great that you are doing this.

In your taxable account you can invest your money in VTSMX. That will be just fine.
I think it is reasonable for you to think you can retire around 45. You won't know until you try it, so there is no reason not to aim for that goal.

Who knows though? Maybe you marry a worker bee at age 25 and retire then while your spouse keeps working? There are lots of possibilities.
Last edited by livesoft on Wed Nov 25, 2015 8:34 am, edited 1 time in total.
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warner25
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Re: 23 year old wanting to retire before 50

Post by warner25 »

When I was 23 (even before that, really), I too was interested in establishing a path to early retirement / financial independence. Now I'm 29 and my desires have not changed in that respect, so take that for what it's worth alongside the other comments so far.

A couple critical thoughts:

1. 6% nominal or real? If that's nominal, you must understand that $1M will not be the same 20-30 years from now. If real, you need to understand that your expectations might be unrealistic. Of the world's "developed" nations, only the US, Australia, New Zealand, and South Africa have had historical stock returns of 6% real. Everyone else saw lower returns, and the difference between 3, 4, 5, or 6% is huge. And if you use a target retirement fund, you'll move away from stocks over time, making 6% even more unrealistic.

2. For this kind of planning, who cares about IRA or 401k contribution limits? Your focus needs to be on how much you can save, not how much you can shelter from taxes. The overflow just goes in a taxable investment account. Think about the bigger picture.
anil686
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Re: 23 year old wanting to retire before 50

Post by anil686 »

Great that you are thinking this way. I know in my life I have had various goals and dreams that people told me were kind of unrealistic when I gave lots of data and evidence to support it. As Livesoft said above, the only way you will know is to try it. Make it priority to "win" every day by doing the things that you can control and follow where it leads. Over time, assuming you keep coming back to your spreadsheets/returns/ideas, you will have a better and better idea of where you have been, how you got here, and where you will be going. What seems to be a "treasure map" now will change in front of your eyes to something tangible and realistic. Just remember that goals are not built on actuarial tables and sometimes it will feel farther away than it is and sometimes so close that you can touch them - but really farther away than you would like. Don't give up hope and continue to push - JMO and hope it helps...
Beth*
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Re: 23 year old wanting to retire before 50

Post by Beth* »

If I were you, I would continue to save and continue to live below my means, but I would put my intellectual and emotional energy into figuring out how to have a fulfilling life right now. Who knows what you will want when you are 45 or 50? I can tell you that what I wanted from life when I was 23 changed over the years. I think it is important to plan for financial independence in the future but also to live fully in the present. If you don't like your current job, what do you want to do? How can you make that happen? What would make your life more fulfilling right now?
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DonCamillo
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Re: 23 year old wanting to retire before 50

Post by DonCamillo »

warner25 wrote: 1. 6% nominal or real? If that's nominal, you must understand that $1M will not be the same 20-30 years from now. If real, you need to understand that your expectations might be unrealistic. Of the world's "developed" nations, only the US, Australia, New Zealand, and South Africa have had historical stock returns of 6% real. Everyone else saw lower returns, and the difference between 3, 4, 5, or 6% is huge. And if you use a target retirement fund, you'll move away from stocks over time, making 6% even more unrealistic.
You really need to consider inflation. In 1967, when we got married, I was making $550 a month as a sergeant in the army and my wife was making the same as an elementary school teacher. Back then, a Hershey bar in a vending machine was 5 cents. Our monthly income was equal to 22,000 Hershey bars. Today a Hershey bar in a vending machine is usually $1. Our monthly income does not come close to $22,000 a month.

Old folks (geezers like me) tend to think of money using its purchasing power at some time in the past, and we tend to be shocked whenever we buy a new car or new furniture, or any infrequent purchase. :shock:
Les vieillards aiment à donner de bons préceptes, pour se consoler de n'être plus en état de donner de mauvais exemples. | (François, duc de La Rochefoucauld, maxim 93)
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JDCarpenter
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Re: 23 year old wanting to retire before 50

Post by JDCarpenter »

DonCamillo wrote:...
You really need to consider inflation. In 1967, when we got married, I was making $550 a month as a sergeant in the army and my wife was making the same as an elementary school teacher. Back then, a Hershey bar in a vending machine was 5 cents. Our monthly income was equal to 22,000 Hershey bars. Today a Hershey bar in a vending machine is usually $1. Our monthly income does not come close to $22,000 a month.

...
I like this measurement standard! Much better than highly fluctuating commodities (gasoline, etc.) and quite easy to grasp. Going to file it away for future use with my age appropriate starting point. :beer

OP--I'll join the crowd here. We also started long-term planning retirement in our 20s, when we got our first real jobs. Due to life, our retirement has been delayed about 5 years, and our desired spending in retirement has gone up. Bottom line, however, if we hadn't started squirreling money away on the basis of the first tentative planning, we would not be in the position that we are in now. As frequently stated around here, "stay the course" that you've set on saving, and be flexible in implementation; if so, you'll do well. (And don't forget to have some fun along the way--even if, as in our case, it arguably delays retirement a bit.)
Our personal blog (no ads) of why we saved/invested: https://www.lisajtravels.com/
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bigguy8437
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Re: 23 year old wanting to retire before 50

Post by bigguy8437 »

Braje wrote:
What I'm trying to figure out is where I should put money I receive from work starting in the fall. I plan to make 50K
Are you currently employed, how do you know you will make 50K/yr?
(I gave myself 5k to spend)
Even if you are living rent free 5,000/per is not much money. Do you not have any expenses. eg car insurance, cell phone, food....
my contract starts next fall, they stated that salary in the contract. i only have car insurance. my food and cell phone are paid with for my job
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bigguy8437
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Re: 23 year old wanting to retire before 50

Post by bigguy8437 »

flyingbison wrote:If you are 23 and already thinking about how early you can retire, I would suggest finding a different line of work that would be more satisfying to you.
I respectfully disagree. I like my job, its just I can see myself making a lot of money and being able to retire early. I've spoken to people who have owned their own business, made enough money that they realized they could retire early, and they did it. And now they say they are loving life because they are doing new things they have never been able to do before. So while your comment may come off as me hating my job and wanting to get out early, its not the case. I like my job, but I like the prospect of being free to choose to do whatever I want for the next 20 years (after age 45 or so) a lot better.
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bigguy8437
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Re: 23 year old wanting to retire before 50

Post by bigguy8437 »

warner25 wrote:When I was 23 (even before that, really), I too was interested in establishing a path to early retirement / financial independence. Now I'm 29 and my desires have not changed in that respect, so take that for what it's worth alongside the other comments so far.

A couple critical thoughts:

1. 6% nominal or real? If that's nominal, you must understand that $1M will not be the same 20-30 years from now. If real, you need to understand that your expectations might be unrealistic. Of the world's "developed" nations, only the US, Australia, New Zealand, and South Africa have had historical stock returns of 6% real. Everyone else saw lower returns, and the difference between 3, 4, 5, or 6% is huge. And if you use a target retirement fund, you'll move away from stocks over time, making 6% even more unrealistic.

2. For this kind of planning, who cares about IRA or 401k contribution limits? Your focus needs to be on how much you can save, not how much you can shelter from taxes. The overflow just goes in a taxable investment account. Think about the bigger picture.
I am referring to real. I thought I was being conservative with this 6% figure, but I guess not. And since I already have a high net worth at such a young age I am going to keep an aggressive portfolio up until I look to retire. I feel like I can afford to do this because I am not entirely depending on this money, as I will have other income from my job to live off if I desire. Now if this was the only money I was using for the rest of my life, then I would take a different AA approach to include bonds, but that is not the case.
UADM
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Re: 23 year old wanting to retire before 50

Post by UADM »

If 6% real was conservative, then I'd be able to retire today. It isn't remotely close...
Texanbybirth
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Re: 23 year old wanting to retire before 50

Post by Texanbybirth »

bigguy8437 wrote:
warner25 wrote:When I was 23 (even before that, really), I too was interested in establishing a path to early retirement / financial independence. Now I'm 29 and my desires have not changed in that respect, so take that for what it's worth alongside the other comments so far.

A couple critical thoughts:

1. 6% nominal or real? If that's nominal, you must understand that $1M will not be the same 20-30 years from now. If real, you need to understand that your expectations might be unrealistic. Of the world's "developed" nations, only the US, Australia, New Zealand, and South Africa have had historical stock returns of 6% real. Everyone else saw lower returns, and the difference between 3, 4, 5, or 6% is huge. And if you use a target retirement fund, you'll move away from stocks over time, making 6% even more unrealistic.

2. For this kind of planning, who cares about IRA or 401k contribution limits? Your focus needs to be on how much you can save, not how much you can shelter from taxes. The overflow just goes in a taxable investment account. Think about the bigger picture.
I am referring to real. I thought I was being conservative with this 6% figure, but I guess not. And since I already have a high net worth at such a young age I am going to keep an aggressive portfolio up until I look to retire. I feel like I can afford to do this because I am not entirely depending on this money, as I will have other income from my job to live off if I desire. Now if this was the only money I was using for the rest of my life, then I would take a different AA approach to include bonds, but that is not the case.
I would recommend 4% real. Your table is too difficult for me to read to comment on how that might affect your projections, but you are off to a great start. Now, if you're contributing to a 401k and Roth IRA, how do you plan to withdrawal that money at age 45 without penalties?
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
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bigguy8437
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Re: 23 year old wanting to retire before 50

Post by bigguy8437 »

the columns go from left to right with age, roth ira, and inheritance. I'm obviously not going to be able to withdraw from my roth until 59.5 and 401k then too, but I can withdraw from my inheritance. I also am going to have a job that will support me financially, so I'm hoping to live off some of that money too
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slow n steady
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Re: 23 year old wanting to retire before 50

Post by slow n steady »

I am 27 and plan on retiring around 50.

I personally use 4% real. I would make a few excel sheets showing the different ending numbers with 2, 4, and 6% real return. Any of these are very possible and it would be good to be mentally prepared for what you will do when one of them comes true.

Just keep saving until it hurts, and then ease off a little when it hurts to much. As long as you're making your plan for the future knowing that there are going to be major changes to it, you will be fine. Stay flexible. I had my life planned out at 23 and it has already changed a few times in just 4 years.

Good luck!
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bigguy8437
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Re: 23 year old wanting to retire before 50

Post by bigguy8437 »

Here are updated numbers with 4% real. The columns starting from the left are age, roth IRA, inheritance (invested in VTSMX), and total net worth (roth IRA + inheritance combined). The starting values at age 23 are the current balances of my roth and inheritance plus 4% returns, and each year I just have both values compounding by 4% real.

So if you look at age 45, my net worth is 891K. Is that enough money to think about semi-retiring or retiring fully around 45-50? Remember this is excluding any salary from my job, which is starting at 50k a year at age 23.

Sorry for sorta beating a dead horse, I just thought I would give a better picture below and ask again with 4% since that seemed what everyone suggested I go off of.

23 24,885.00 251,680.00 276,565.00
24 31,904.25 261,747.20 293,651.45
25 39,274.46 272,217.09 311,491.55
26 47,013.19 283,105.77 330,118.96
27 55,138.84 294,430.00 349,568.85
28 63,670.79 306,207.20 369,877.99
29 72,629.33 318,455.49 391,084.82
30 82,035.79 331,193.71 413,229.50
31 91,912.58 344,441.46 436,354.04
32 102,283.21 358,219.12 460,502.33
33 113,172.37 372,547.88 485,720.25
34 124,605.99 387,449.80 512,055.79
35 136,611.29 402,947.79 539,559.08
36 149,216.85 419,065.70 568,282.56
37 162,452.70 435,828.33 598,281.03
38 176,350.33 453,261.46 629,611.79
39 190,942.85 471,391.92 662,334.77
40 206,264.99 490,247.60 696,512.59
41 222,353.24 509,857.50 732,210.74
42 239,245.90 530,251.80 769,497.70
43 256,983.20 551,461.87 808,445.07
44 275,607.36 573,520.35 849,127.71
45 295,162.73 596,461.16 891,623.89
46 315,695.86 620,319.61 936,015.47
47 337,255.66 645,132.39 982,388.05
48 359,893.44 670,937.69 1,030,831.13
49 383,663.11 697,775.20 1,081,438.31
50 409,671.27 725,686.20 1,135,357.47
51 436,979.83 754,713.65 1,191,693.48
52 465,653.82 784,902.20 1,250,556.02
53 495,761.51 816,298.29 1,312,059.80
54 527,374.59 848,950.22 1,376,324.80
55 560,568.32 882,908.23 1,443,476.54
56 595,421.73 918,224.55 1,513,646.29
57 632,017.82 954,953.54 1,586,971.36
58 670,443.71 993,151.68 1,663,595.39
59 710,790.90 1,032,877.75 1,743,668.64
60 753,155.44 1,074,192.85 1,827,348.30
AlohaJoe
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Re: 23 year old wanting to retire before 50

Post by AlohaJoe »

bigguy8437 wrote:my net worth is 891K. Is that enough money to think about semi-retiring or retiring fully around 45-50
Probably not. Withdrawal rates are contentious subject, especially for early retirees. Others will say 3.5% is too high and others will say it is too conservative. But using 3.5% would give you $31,000 in spending. Not many people would be comfortable on that. But it depends on what happens in your life between now and then.
JinroSoju
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Re: 23 year old wanting to retire before 50

Post by JinroSoju »

When I was your age I had estimated my net worth too, then I entered the 2000s. I am off from my early projections. Even so, I am glad I started investing at an early age.

Your numbers look great. I hope everything goes according to plan for you.
Dandy
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Re: 23 year old wanting to retire before 50

Post by Dandy »

At 23 all you can do is contribute as much as you can in a low cost diversified portfolio, live a bit below your means and enjoy life. Don't get carried away with any one of those three. Life balance is key. The returns will be what they will be and when you get maybe 10 years from your retirement goal you will have a much better idea of if you can retire early.

You are off to a great start - good luck
jlawrence01
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Re: 23 year old wanting to retire before 50

Post by jlawrence01 »

I retired at the age of 53.

I used to sit there in front of an Excel spreadsheet with a bunch of assumptions and thinking that I would have enough to retire on by about age 58. It was almost as much fun as buying a $1 Mega Million tickets and dreaming that if one of these days....

However, life does not exactly go by financial projections. Market drops, port financial decisions, family needs and the like can really impact those numbers over time.

Also, I find it very difficult to forecast expenses over time. Medical expenses add a great deal of uncertainty to most early retirees. When I retired, I made an estimate of what medical costs would be from 2015-2024 when my wife and I are 65 and qualify for Medicare. I can tell you that those costs are probably going to be 30% higher than my estimate in May 2013.

My recommendation is one that my father and my first boss gave me. Save as much as possible for as long as you can and you will be increasing the chances of an earlier retirement.

I will say that I find it a bit depressing that early in your career that you are planning the exit strategy. I know that I never thought much about retirement until age 45 (although I had been saving for it all along). Who knows, if you really pursue a career that you are passionate about, you may not want to exit so quickly. Also, if you are passionate about your work, you tend to be more successful and more likely to achieve an early retirement.
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quantAndHold
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Re: 23 year old wanting to retire before 50

Post by quantAndHold »

When I was 30 and hated my job, my number was $1.2M.

Then I got married, got a family, got a better job, lived a few more years, some inflation happened, and the number gradually crept up to somewhere between $2.5 and $3M. Now I'm 52, I've reached that number, and I'll probably quit my full time job in mid-2017.

But then what? At 23, my 50's seemed both along way away and, well, old. Now that I'm there, I realize that I'm still active and healthy, and the likelihood is that I will still be healthy and active for another 20 years or more. I'm looking forward to being able to do some more extended traveling and have more time to workout, but the reality is that I'll probably spend the time starting a business or working a part time job. Since I will probably have an income, I could have done this ten years ago (or more) and been just fine, although I probably would have freaked out and gone back to work when my investments took a dump in 2008.

So anyway, the tl;dr version of this is that while it's a very good idea to work towards becoming financially independent, is the goal really to retire? Or is it to have the time and/or resources to do something else that you could actually do before you reach "the number?"
ursugardaddy
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Re: 23 year old wanting to retire before 50

Post by ursugardaddy »

You are right for planning for retirement at a young age but be realistic that it may not happen at 50. Family, job loss, bills will be an obstacle.

Have you consider a career within the military?After completion of 20yrs you could retire with full pension and benefits plus you will be 43yrs old..

Anything is possible but you have to get on the correct path to reach your goals.

Best of luck
The only way to get your parachute to open is to jump off of that cliff! You have to take that plunge towards your dream, whatever that dream is! You have to simply, JUMP. Lock in on your dreams
Stonebr
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Re: 23 year old wanting to retire before 50

Post by Stonebr »

bigguy8437 wrote: Also, I know this is hard to predict without
To be perfectly blunt, this is about the only sensible thing you've said in your post. At 23, spreadsheets, plans, and questions like this are for your own private amusement and fantasy.
"have more than thou showest, | speak less than thou knowest" -- The Fool in King Lear
stoptothink
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Re: 23 year old wanting to retire before 50

Post by stoptothink »

bigguy8437 wrote:
flyingbison wrote:If you are 23 and already thinking about how early you can retire, I would suggest finding a different line of work that would be more satisfying to you.
I respectfully disagree. I like my job, its just I can see myself making a lot of money and being able to retire early. I've spoken to people who have owned their own business, made enough money that they realized they could retire early, and they did it. And now they say they are loving life because they are doing new things they have never been able to do before. So while your comment may come off as me hating my job and wanting to get out early, its not the case. I like my job, but I like the prospect of being free to choose to do whatever I want for the next 20 years (after age 45 or so) a lot better.
So, do you actually have a job? The initial post makes it sound like you don't, but that you were expecting to have one "in the fall" which would result in an income of $50k/yr.
bl2410s
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Re: 23 year old wanting to retire before 50

Post by bl2410s »

I'm confused. You have a ~250k inheritance. You will make 50k and invest roughly 35k. You plan on 10k in taxes, which is too high imo, then you will live off the remaining 5k. Is that correct?

Either you can retire now given the 4% rule and 5k annual spending. Or does the inheritance have rmd that you are not taking into account which makes all your numbers useless. Or please tell me the key to living off of 5k a year for the next 25 years.
ponyboy
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Re: 23 year old wanting to retire before 50

Post by ponyboy »

Im surprised on the amount of blow back on someone wanting to retire early.

I wasnt quite as young as you but I was around 26 or 27 when I became serious about retiring early (around 50.) Im only 32 but have maxed both 401s and Roth accounts since I was 26. My wife went to grad school, shes 31...so shes only been maxing her account for 3 years. Just in our retirements alone we have north of $400k. Ive never made more than $62k/year and I have no trouble maxing my accounts. I dont feel like I ever go without "stuff." When I want something I can buy it. We take a couple nice vacations a year without worries. Life is good.

OP stay the course if you want to retire early. Dont get caught up in what people say. If you're someone who doesnt require shiny fancy objects you should have no problem saving a lot of money for the next 27 years. When you really want something...buy it! Just live below your means and do not keep up with your friends/family/coworkers/etc. They're probably all in debt anyway.
letsgobobby
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Re: 23 year old wanting to retire before 50

Post by letsgobobby »

I also agree that planning early is great. Studies consistently show that writing down a plan greatly increases the odds of succeeding at said task. This is specifically true for financial goal-setting but a good general behavioral rule as well.

I have been making spreadsheets since my early 20s. Twenty years later it's fun to look back and see how close I was. In general I'm tracking far ahead but that is because my income is much more than I ever anticipated it would be. So much else has changed... marriage and kids, interests and hobbies, health, etc... I encourage you to make plans and check your progess about annually. Don't be overly dogmatic about your goals, remember to live your life, too.

6% real is too high. I use 4% real for stocks and 1% real for bonds.
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dbCooperAir
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Re: 23 year old wanting to retire before 50

Post by dbCooperAir »

As a side note, I prefer to work in todays dollars, as you get older it looks better :wink:

I know what I have now, I know todays SS benefit by entering 0 in the SS calculator (if I quit today), I know todays pension value (if I quit today), I know what I spend today. I save as much as I can, check the numbers first of the year and keep on living/plugging away.

I do commend you for looking at it now, its never to early to have a plan. Plans change, goals change and life just happens as long as you get that you are good to go.

When you start running out the numbers the difference between 3%-4% SWR combined with if you believe in Constant Spending or Ty Bernicke's Reality Retirement Planning the numbers are all over the map.

For Reference: Ty Bernicke's Reality Retirement Planning
http://www.firecalc.com/
Ty Bernicke's Reality Retirement Planning: A New Paradigm for an Old Science describes extensive research showing that most people see significant reductions in spending with age (not related to reduced assets or income). If selected, this option will reduce your inflation-adjusted yearly spending by 2-3% per year starting at age 56, and then stabilizing at age 76 to keep up with inflation. You should read his article for details if you plan to use this option.
Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him. | -Dwight D. Eisenhower-
cjcerny
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Re: 23 year old wanting to retire before 50

Post by cjcerny »

Doesn't sound like there is any room for a wife or children in your plan, which is fine, but uncommon. You'll need to make financial concessions to have those things in your life.
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bigguy8437
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Re: 23 year old wanting to retire before 50

Post by bigguy8437 »

quantAndHold wrote:
So anyway, the tl;dr version of this is that while it's a very good idea to work towards becoming financially independent, is the goal really to retire? Or is it to have the time and/or resources to do something else that you could actually do before you reach "the number?"
It is to have the time and/or resources to do something else in my life that is meaningful and that I probably wouldn't get the chance to do if i was working full-time. Like traveling the world, seeing different places, spending time with family/kids, etc.
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bigguy8437
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Re: 23 year old wanting to retire before 50

Post by bigguy8437 »

stoptothink wrote:
bigguy8437 wrote:
flyingbison wrote:If you are 23 and already thinking about how early you can retire, I would suggest finding a different line of work that would be more satisfying to you.
I respectfully disagree. I like my job, its just I can see myself making a lot of money and being able to retire early. I've spoken to people who have owned their own business, made enough money that they realized they could retire early, and they did it. And now they say they are loving life because they are doing new things they have never been able to do before. So while your comment may come off as me hating my job and wanting to get out early, its not the case. I like my job, but I like the prospect of being free to choose to do whatever I want for the next 20 years (after age 45 or so) a lot better.
So, do you actually have a job? The initial post makes it sound like you don't, but that you were expecting to have one "in the fall" which would result in an income of $50k/yr.
Yes I do have a job in the finance industry, starting October 1 with that salary.
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bigguy8437
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Re: 23 year old wanting to retire before 50

Post by bigguy8437 »

cjcerny wrote:Doesn't sound like there is any room for a wife or children in your plan, which is fine, but uncommon. You'll need to make financial concessions to have those things in your life.
I just didn't include them for now because I'm 23 and don't know exactly if I want either yet. If I do have kids, my family has promised me an inheritance to pay for all of their college expenses so they can go to whatever school they want. So I'm lucky on that end.
PVW
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Re: 23 year old wanting to retire before 50

Post by PVW »

DonCamillo wrote: You really need to consider inflation. In 1967, when we got married, I was making $550 a month as a sergeant in the army and my wife was making the same as an elementary school teacher. Back then, a Hershey bar in a vending machine was 5 cents. Our monthly income was equal to 22,000 Hershey bars. Today a Hershey bar in a vending machine is usually $1. Our monthly income does not come close to $22,000 a month.

Old folks (geezers like me) tend to think of money using its purchasing power at some time in the past, and we tend to be shocked whenever we buy a new car or new furniture, or any infrequent purchase. :shock:
Back in my college days, my social group converted the price of goods into an equivalent number of Coors quarts. Probably not the healthiest habit, but it did make us equate money with the value of things you can buy (yes, drinking too much beer in college taught me the value of money). For some reason, my desire for Coors quarts has shown to be inversely proportional to my financial ability to buy them.
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greg24
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Re: 23 year old wanting to retire before 50

Post by greg24 »

It is great that you have a goal of early retirement. You are doing a fine job of saving so far, keep it up!

But it is a fools errand to plug in 27 years of future contributions into a spreadsheet, pull a flat 6% return rate, and calculate networth numbers for the rest of your life.

All your numbers will be off, your contributions off, your rate of return off, your life plans off.

Focus on saving as much as you can, limiting your investment expenses, and go out and live life.
flyingbison
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Re: 23 year old wanting to retire before 50

Post by flyingbison »

bigguy8437 wrote:
stoptothink wrote:
bigguy8437 wrote:
flyingbison wrote:If you are 23 and already thinking about how early you can retire, I would suggest finding a different line of work that would be more satisfying to you.
I respectfully disagree. I like my job, its just I can see myself making a lot of money and being able to retire early. I've spoken to people who have owned their own business, made enough money that they realized they could retire early, and they did it. And now they say they are loving life because they are doing new things they have never been able to do before. So while your comment may come off as me hating my job and wanting to get out early, its not the case. I like my job, but I like the prospect of being free to choose to do whatever I want for the next 20 years (after age 45 or so) a lot better.
So, do you actually have a job? The initial post makes it sound like you don't, but that you were expecting to have one "in the fall" which would result in an income of $50k/yr.
Yes I do have a job in the finance industry, starting October 1 with that salary.
So you "like" the job you won't be starting for 10 more months? :confused
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bigguy8437
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Re: 23 year old wanting to retire before 50

Post by bigguy8437 »

flyingbison wrote:
bigguy8437 wrote:
stoptothink wrote:
bigguy8437 wrote:
flyingbison wrote:If you are 23 and already thinking about how early you can retire, I would suggest finding a different line of work that would be more satisfying to you.
I respectfully disagree. I like my job, its just I can see myself making a lot of money and being able to retire early. I've spoken to people who have owned their own business, made enough money that they realized they could retire early, and they did it. And now they say they are loving life because they are doing new things they have never been able to do before. So while your comment may come off as me hating my job and wanting to get out early, its not the case. I like my job, but I like the prospect of being free to choose to do whatever I want for the next 20 years (after age 45 or so) a lot better.
So, do you actually have a job? The initial post makes it sound like you don't, but that you were expecting to have one "in the fall" which would result in an income of $50k/yr.
Yes I do have a job in the finance industry, starting October 1 with that salary.
So you "like" the job you won't be starting for 10 more months? :confused
Im currently in grad school (masters program). I graduate in May. I start full-time in October, because they give us the summer to study for the CPA.
flyingbison
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Re: 23 year old wanting to retire before 50

Post by flyingbison »

bigguy8437 wrote:
flyingbison wrote:
bigguy8437 wrote:
stoptothink wrote:
bigguy8437 wrote:
I respectfully disagree. I like my job, its just I can see myself making a lot of money and being able to retire early. I've spoken to people who have owned their own business, made enough money that they realized they could retire early, and they did it. And now they say they are loving life because they are doing new things they have never been able to do before. So while your comment may come off as me hating my job and wanting to get out early, its not the case. I like my job, but I like the prospect of being free to choose to do whatever I want for the next 20 years (after age 45 or so) a lot better.
So, do you actually have a job? The initial post makes it sound like you don't, but that you were expecting to have one "in the fall" which would result in an income of $50k/yr.
Yes I do have a job in the finance industry, starting October 1 with that salary.
So you "like" the job you won't be starting for 10 more months? :confused
Im currently in grad school (masters program). I graduate in May. I start full-time in October, because they give us the summer to study for the CPA.
I understand the timeline. I just don't understand how you can make assertions about liking a job you haven't started yet.
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bigguy8437
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Re: 23 year old wanting to retire before 50

Post by bigguy8437 »

flyingbison wrote:
bigguy8437 wrote:
flyingbison wrote:
bigguy8437 wrote:
stoptothink wrote:
So, do you actually have a job? The initial post makes it sound like you don't, but that you were expecting to have one "in the fall" which would result in an income of $50k/yr.
Yes I do have a job in the finance industry, starting October 1 with that salary.
So you "like" the job you won't be starting for 10 more months? :confused
Im currently in grad school (masters program). I graduate in May. I start full-time in October, because they give us the summer to study for the CPA.
I understand the timeline. I just don't understand how you can make assertions about liking a job you haven't started yet.
I had a 4 month internship with the job last spring. My duties were the same exact as a first year associate. The program that I'm in is set up so that you intern before you start the grad program, and if you perform well they offer you a full-time job. Then you go to grad school for 1 year, and then start full-time after that
PVW
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Re: 23 year old wanting to retire before 50

Post by PVW »

bigguy8437,

You seem to be getting a lot of skepticism (to put it nicely), in the responses. I'm guessing the reason is that most people on this board know your predictions are wrong. It's not that you've done anything wrong, it's just that almost nothing ever turns out like you imagine it - especially your financial plans. There are a lot of big financial changes to come in your life and trying to figure out how that will affect a retirement date is not possible. So projecting your savings is just entertainment (it helps if you laugh maniacally when you see the total).

Just the fact that you are concerned about saving for retirement and keeping track of your finances indicates that you will probably be successful, even if it doesn't work out like you imagine it right now. Keep up the planning and tracking and when your projections don't come true, adjust the plan.

PVW
kaudrey
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Re: 23 year old wanting to retire before 50

Post by kaudrey »

bigguy - it is great that you are saving and projecting and planning. As others have said - that is probably 90% of the battle.

But I agree that I wouldn't put much stock in the numbers that show up 25 years from now. They will likely be nothing like what actually happens. Will you have enough? Likely, if you save consistently every year. That is a great focus for now, and the spreadsheets can be adjusted over time.

I am a spreadsheet person too. I did my first one when I was about 25 or so. At the time, I was single, sharing an apartment with a roommate, and maxed my 401(k) every year (of course, the max back then was about $4K).

Over the last 20 years, my spreadsheets have morphed and expanded and changed with the times: changing jobs, getting married, buying a home, moving (selling said home and buying another) getting divorced, getting re-married, helping my DH start his own business, buying a cabin in the woods. I don't have kids, but you could add that, plus helping support other family members, an unexpected illness, or any number of other "life" events that will make any numbers you start with pretty meaningless.

My point is not to discourage - rather, it is to say that even though the numbers will change, even just HAVING the numbers will help ensure you reach your goals, no matter how they morph over time. Best of luck.
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