At the beginning of each month, I will post updates on my progress toward early retirement. This month being the first, there’s some groundwork to lay.
This very succinct post by Mr. Money Mustache outlines some simple math around early retirement. Basically it breaks down like this: If you can save 25 times your annual spending, you can live safely live off the interest of that wealth for… well… forever, if needed. This is assuming a 4% annual interest return on your honey pot.
There are also a couple great charts showing how percentage of income spent annually translates to the number of years required to gain the 25 times annual expenses.
So here’s the breakdown:
- My wife an I currently bring home about $139k post tax.
- Of that $139k, our family of 3 is currently saving about $79,500, or ~57%. Decent savings, but there are a myriad of ways we can cut expenses. Plenty of material to write about!
- At a 57% savings rate, and starting from ground zero (no savings, no debt), it would take ~13 years to acquire enough wealth for both of us to retire.
- We currently have $187,043.63 in assets (includes cash, stocks, Roth IRA, 401K). This does not include equity in our home.
- Subtract from that our only debt, the $71,454.94 remaining mortgage, and we have $115,588.69 in interest bearing wealth.
- That’s about a year and a half toward the total 13, making our retirement approximately 11 and a half years away. I’d be 45.
Good to know where I currently stand, but as I said, plenty of room for improvement. The focus of the next couple of months is going to be cutting costs, starting with freakin’ insurance (Spoiler: I hate it).