When I speak with my friends about 10 Years For Retirement plan I recognized three main groups.
First group is very interested by early retirement idea and they actively asking for more details and examples about it (I like this attitude very much).
Second group is interested as well, but they believe it is not possible for them to save 60% or more of their income (many times they are just wrong about it).
The last group is as you can imagine bunch of people who find problems in everything. Here are some examples of their points and my answers.
10 years are too long.
And what about 40 years working for some company? This is not long?
4% rule is not so much.
But it is the safest way which will help you to fight with inflation, stock crisis etc. 4% was also proved as worst case sample of all time. Means most of the time you can take more than 4% with no big risk.
This plan is not 100% sure.
Ohh it is sure and safe enough. Just notice that I never considered you can have any other income. So we literally calculate with $0 income during next 30-40 years except of your retirement plan. I don’t know as you, but I anytime plan to have same part-time job. For example some job what I always dreamed about.
What if another crisis will come?
So it means you can buy cheap stocks/reality. As I don’t recommend to invest everything only to one source you should have some spare money and use them during stock/reality crisis.
And many other problems (they don’t care that you have answers for those questions, they will come with another reason why this is bad idea). Let’s leave problems of third group to them self so they can enjoy whole life in work (you just can’t help everybody).
Today I would like to focus about second group.
I have some friends who would like to retire earlier as well, but they have some reasonable answer why they can’t/don’t want reduce their expense anymore. My today’s example is young family with two small kids (6 and 8).
They are able to save 60% of income, but they “invest” money to their kids and wish do the same in future. They spend for language schools, traveling, sports and many other activities so their children will have good time now and in future. On the other hand they would appreciate if they can spend less time in work after 10 years and enjoy life much more.
They are willing to save 40% of income (which is not so bad) and if possible they would like to have part-time job in future and some passive income from investment. This is our 40% retirement income – 60% part-time job income plan.
At first look at their input data.
Income total $3,500
Retire income plan 40% (this is first key parameter in out calculation)
Investment return 10%
Saving rate 40% (this is second key parameter in out calculation)
Other money now $35,000
By calculation we can see that they have to save $420,000 to be able have 40% of their current income as retirement income. They will reach $420,000 in 10.7 years. From this time they can take part-time job and spend more time with family and by doing their hobbies.
You can download calculation excel sheet here and check those results. Or make you own calculation with your input data.
Just for example – let’s think they would be willing to save 60%. They are able to save $840,000 in 13.5 years and have 80% of their income for retirement. This is 3 years difference and they can retire completely, but as I already said they prefer to save “just” 40% and “invest” money to their children.
Honestly speaking I can somehow understand their thinking way, so who cares if they don’t follow our 10 Years For Retirement plan exactly. If they can enjoy their life now and with part-time job in future I have no problem with this and I was happy to help them.
Hope this article help you as well.
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