Most people I talk to have no clue when they’ll be able to retire, or to put it a better way: when they can stop worrying about money. People from 18 years old to 60 struggle to understand the basic concepts and put together a basic approximate plan. The reason for this is it’s not taught in schools, you have to go out on your own and do some un-sexy research. But these concepts are dead simple and the only real question that needs to be asked to find out a rough timeline for when you’ll be able to retire is this: What is your savings rate as a percentage of your take-home pay?



This may be an oversimplification, but it shows the basic potential of what can be done with managing money. There’s no real reason you have to wait until your 60 or 65 to be financially secure. If you’re like most people, you’re probably not saving very much. If you’re lucky maybe you’re saving 5% of your income. At that rate you’re looking at 45 years to retire. Further up the scale at 50% savings rate, you’ll be financially set in under 13 years.

I’m not the first person to come up with this simple table, but I think it can help with some “ah-ha” moments. If I can get my savings rates up, and find where I can cut expenses I can catapult myself into a much shorter working career if I want.

To build this table and graph I’m assuming basic investing into index funds, an average return of 8% per year, and a safe withdrawal rate of 4% per year. It assumes you start with zero debt, zero savings and an unchanging income or expenses through the years. It also assumes you get no pension or social security later in life ass well. It’s not exactly what you’ll use to figure out when you can retire, but it can start to give you a pretty good idea.

Saving’s Rate Years Until Retirement
5% 45 years
10% 35.9 years
15% 30.5 years
20% 26.6 years
25% 23.4 years
30% 20.8 years
35% 18.5 years
40% 16.4 years
45% 14.5 years
50% 12.8 years
55% 11.2 years
60% 9.7 years
65% 8.2 years
70% 6.8 years
75% 5.5 years
80% 4.1 years
85% 2.9 years
90% 1.6 years
95% 0.3 years


What I actually use to figure out my approximate retirement date isn’t too far from what I’ve shown here, it’s really just a tweaked version of the same equations that include my current investments, current savings rate, and projections of future expenses and raises. I use a spreadsheet to figure it out and it takes maybe a half hour

retirement_equationThis is pretty close to a spreadsheet I would use to roughly approximate where I should be over the years. Saving’s per year is about the only thing I’ll change as I expect expenses like student loans and mortgages to drop over the years and pay raises to come up. And if I would want $30k per year to retire today, I would add a percent or two of inflation per year to figure out what I would need when I actually plan to retire.

So you may still ask, “Why would I want to retire early?”. For most that question has an obvious answer, but for others who really love their jobs it may not be.

  • Simple financial security, you don’t actually have to retire one you hit the 4% rule in investment accounts. It sure is nice to know you can quit whenever you want though.
  • Lose your job, I’ve met people that lost their well paying job they had for decades only to be working at a bar or some other low paying job to make ends meet. Save while you can so you can get out if your career field changes.
  • Take time for yourself. Most of us are wildly different during our childhood and have a more curious and exploitative nature then we do when working the same job 40-50 hour weeks. It’s not part of growing up that changes us, it’s the repetitive and draining nature of working a job that takes up most of our lives that changes us.
  • Some people retire early so they can give more attention to their children.

There are loads of reasons to take personal finance seriously, but the main repeating line is that it opens up options in your life you’ll never have if you’re relying on that paycheck every week.


4 comments on “When can I retire

  • A nice, basic approach when looking solely at income from investment/retirement accounts. However, as you astutely note, too many people have a dismal savings rate and haven’t taken the time to assess what their savings rate should be for a given desired retirement age.

  • Don’t forget to factor inflation into your calculations. An average of 3% will really extend those years by quite a bit!

    It’s amazing how much a little extra saving can really knock off years of labor from your life. People always assume that 10% or some arbitrary number like that will suffice, but in reality its better to go with something much higher; almost until it hurts!
    My Money Design recently posted…Last Week Tonight’s John Oliver on Retirement Plans – Hilarious!My Profile

    • That’s a very fair point, I usually think of inflation as 2% or under per year and average return to be over 8% and maybe 10%+ so I considered it a bit of a wash. You made me do some quick research and I see the average inflation rate has been a massive 3.22% per year over the last 20 years and 8% return over the long run may be as good as it gets. Something to definitely consider as we’d all rather underestimate than over.

  • Good simple breakdown, interesting to see how when you bump up your savings rate the time until retirement really starts dropping. Even little changes (5% decrease in spending) across your budget can have a huge impact on how long you are working.
    Debt Hater recently posted…401k ExplainedMy Profile

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