Can I Retire NOW (2022)?
***Disclaimer – I’m not a financial advisor, just a normal guy with financial success. The information shared here is purely for educational purposes only***
This is of course a very loaded question. What are your expenses each month? How you planning to continue living the current lifestyle in retirement? How much will your income be total in retirement? How much do you have saved up? So the answer is it depends. It depends on the answer to these variables.
What are your goals in retirement?
Do you want to just have a simple life and have enough to live off of each day? In another word, living frugally, or do you want to live lavishly, being to travel the world and do whatever you want for the next 30-40 years or longer (depending on how old you are)?
The answer to these questions can mean the difference between being able to retire with monthly income of $2,000-$3,000 or needing monthly cash flow of $10,000-$15,000 or more. There are stories of young people retiring in their 30s or even late 20s because they have done a good job saving up, investing, and is also now living frugally to minimize the expenses.
You’ll also have to factor in the size of your family into this. Are you a single person, married with no kids, or married with one kid, married with multiple kids? Each scenario would also determine how much money you will need from month to month. I am married with three kids, so my expenses in a family of five would look vastly different from when I was single.
What are your expenses?
Figuring out your monthly and annual expenses is a big step in determining whether you can retire now or when you would like to retire. Finance in some simple terms is just income – expenses, so figuring out your overall expense is a big component of the equation.
Some things to consider, how much are your expenses right now? Are you planning to make any changes when you retire? Will you be spending more or less in retirement? If your income in retirement is less than what you thought you would get, are you willing to make changes to your expenses then?
What is your income in retirement?
What is your plan to pay for your expenses in retirement? Do you have an investment or retirement account you can draw from each month? Did you setup passive income? Did you set up annuity? Do you have huge amounts of cash savings?
Some people will say that you need to have about 200 times (200x) amount of whatever you want to live off of each month. For example, if you want to live off of $5,000 a month, you will need to have at least $1,000,000 in investments ($5,000 X 200 = $1,000,000). The idea is that you should be able to consistently get at least 6% of return in your money year, therefore that would be “just enough” to cover your expenses.
So you want to live off of $8,000 a month, you would want to have at least $1,600,000 in your investment or retirement account ($8,000 X 200 = $1,600,000). I would say 200X is too risky and optimistic of a calculation. What happens when the market is hitting on a down note like this year? When the market is down 17% and you continue to draw at least $5,000 or whatever your expenses is each month, it’s a double whammy to your retirement and therefore deplete it at a quicker rate.
So if you’re a risk-averse person like me, you may want to consider 400X, 500X or higher but you’re still drawing the same amount each month. So for example, if you want to live off of $5,000 a month, instead of just having $1,000,000 saved (200X), try to have $2,000,000 saved (400X), $2,5000,000 (500X), or $3,000,000 (600X) saved. This way even if the market goes and you take out $5,000, it won’t hurt your total account balance as much.
Other recommendations
Other ways you can further protect your retirement account to help it last for as long as possible is to have other passive income streams. Do you have a side business that can run on its own or with very little maintenance (like drop shipping)? Do you have a YouTube channel that generates some income for you? Do you have a website that can generate some income for you? Are you old enough to claim social security?
Another way to supply your income in retirement is to work part time. This can also help with boredom since a lot of retirees are at a loss as to what to do in retirement. So working part time could help fill some of the gaps of your time as well as supplement your income.
In Conclusion
Whether you can retire at age 30 or age 60 older or any age in between really depends on your financial situations and what you are willing to live with. If you want to retire at age 35 but have a family of four would most likely require you having more savings than if you’re 35 and single. It would also depends on your desired quality of life. For a lot of people, it’s almost impossible to live like when they were working full time simply because the income has been cut back so therefore your spending habit would also have to follow suit.
But if you have invested smartly and patiently over the years, that might not be the case , you might actually be able to spend more in retirement since the money has had time to grow. For some people who wanted to retire young and have the freedom to do the things they want to do while not having a huge amount of investment to fall back on, they are okay with simple and frugal lifestyle.
Some people don’t consider that type of lifestyle as not living at all, so they’d rather work longer and save up more before retire or not retire at all. Whatever you are shooting for, just make sure the numbers do add up or retirement will be a very stressful time for you.
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***Disclaimer – I’m not a…