4% Rule Explained: The SIMPLE Math Behind Early Retirement

[@ccwebs]

"I'm living extremely frugally." This. This is the key variable for financial security.

[@RunningonFIRE]

Absolutely! It's possible to spend any amount of money, and most people aren't going to make huge incomes anyway. I want to help regular people reach financial freedom, and there's no better way than frugality!

[@befree9579]

My Fire number is $280k which is around $800 a month. Half there atm, net worth is $145k

[@RunningonFIRE]

Woah, you're close! I'm sure that will fly by. Where do you live to retire on $280k?

[@befree9579]

@@RunningonFIRE 2 countries. UK for 6 months at my mums, where i only pay $200 rent when i am there. When its cold in UK i go Kenya rent is $300 for 2 bed. I still will work once i attain those numbers but will let that nest egg grow. I wont save anymore outside of this.

[@wildfoodietours]

Gotta admit, when you said your fire number is "just" $500k, you piqued my interest! I appreciate how you live on less despite living in a high cost of living city, similar to me in San Diego.

[@RunningonFIRE]

Frugality is definitely the EASIEST way to reach financial independence. Most people in this area would need to be multi millionaires to retire with their lifestyle! I'll do a full expenses breakdown soon. It's tough to pull off in this area, but if I do retire early I would probably move somewhere cheaper. Hope you're saving lots of money in Cali!

[@Tialian]

Medical is definitely the main barrier to early retirement. We would be fine on an income of 40k a year (before taxes, 30k once our house is paid off), but that also doesn't take into account what inflation looks like over the next three or four decades. Looking at one calculator, a dollar 40 years ago has only one third its value today, so if I wanted to retire today (at age 42) I would probably want to have about 1.5 million (4% would be 60k a year, so extra saved on the front end would help on the tail end, but my math may not be perfect but works for a rough guess). My goal at this point is have a little extra security by working about 15 more years to lock in a full pension. It may end up being overkill, but I live by the mantra that two is one and one is none, that is to say, have backups for your backups.

[@RunningonFIRE]

The 4% rule takes into account inflation, so I'm less worried about that. Medical is big though. Less risk is great, but so is being able to live a life of freedom!

[@Tialian]

@@RunningonFIRE I think part of that freedom though includes being worry free that you've saved enough, and not stress that it run out sooner rather than later. Retiring early when you're 30 sounds good, and may work out for the first decade or two, or life could happen and financial needs could increase, especially in later years when medical needs tend to increase outside of your control.

[@RunningonFIRE]

@@Tialian you're right. I will probably both 1) overshoot my target and 2) do something with my time (even if it's just this youtube channel and financial coaching on the side) Or, if I really don't want to do that, I'd move somewhere SUPER cheap where I don't have to worry :) I might make a video on the specifics of my plan if there's interest

[@Tialian]

@@RunningonFIRE the fact you are making good income early on really helps, so you have more to invest earlier. We didn't start making 100k as a couple until 2018, so having a good partner definitely helps especially from a tax perspective. We maxed our 401k's last year and this year I'll finally break 100k just with my income. So at this point it's mostly hyper accumulation, other than a mortgage balance of 47k.

[@RunningonFIRE]

@@Tialian definitely... just about everything has to go right to be financially free by 30. But that's a super extreme goal; 40 or 50 is super reasonable for a lot of people. Sounds like yall are definitely on the right track now and building a lot of wealth!

[@RunningonFIRE]

I help people retire early with my weekly F I.R.E. Friday newsletter. You can get it (for free!) here: running-on-fire.com

[@djdynieldaniel1395]

Early retirement. 1. Be wealthy.

[@RunningonFIRE]

Lol well yes... I think there's a few steps to becoming wealthy though 😅