Can we retire in 7 years?
September 9, 2015
Seeing our net worth climb a little, even after a few months of reduced income, I got really optimistic about possibly hitting some of our goals, like a milestone net worth and maybe being able to target retirement in oh, say, 7 years? I totally pulled that out of thin air, because why not?
This here spreadsheet will tell you why not!
I don’t like what Version 1 tells me, maybe I should go to Version 2!
I played around with J.Money’s early retirement spreadsheet, the simple one, because I just wanted a quick snapshot without messing around with all the detail of version 2.
There’s a lot to be said for reducing your annual expenses. There’s more to be said for putting away more money, though, as I notice reducing our annual expenses by 10,000/year didn’t produce any drop in retirement age, whereas increasing our investments by $5,000/year dropped it by a year.
The assumptions
Income produced: Originally J used an 8% return rate, while I’d rather be more conservative and assume a 7% return.
Annual expenses: If you’re thinking “you need HOW much per year???” Yes, our expenses are high. We pay for the living expenses of 4 adults, 1 child, 1 Seamus, save cash (saving to spend) and save for retirement. Should I drop the expected expenses? I say no. Because even if our own personal expenses drop any substantial amount, we have huge variables: raising LB, or Dad’s eventual failing health, my crappy health. These could cause huge spikes in expenses even should we drop them a good amount. Heck, they could put us over the $90K mark, who knows!
Annual investments: I’m committing us to maxing out a 401(k) and an IRA every year but now that I look at the numbers, I want to add an IRA for PiC too.
Age now: I took an average of our ages. Maybe not the best idea, maybe I should just take one age and go with that.
This doesn’t take into account our rental property but since that income isn’t disposable income yet, that’s fine.
Looks to me like I’m going to have to get creative (or strike it rich through a solid business plan) to hit all our spending and saving and early retirement goals.
ER’s a fantasy in the world I came from where even retirement isn’t certain but it’s a luxury I’m happy to aim for. While I enjoy working, my health is always kicking me in the shins. I want to be around for LB for a long time and am finally conceding that my health improves when less stress and less work sucks up the lion’s share of my energy. So why not make that a goal?
We’re nowhere near retirement according to that spreadsheet either. Of course, we’re not really aiming to retire any time soon.
I think it’s always been a way back in the back of my mind goal I kick around. It’s less that I want to retire and more that I don’t want to have to work for income, I want to work for good causes and have my income taking care of itself.
At least you ran the numbers! I am always hesitant to commit to what our retirement number is or what we need to cover in annual expenses. Who knows really? We say $40K but maybe we could be happy at $25K or maybe it will be $50K that we need to cover in annual spending. Life is constantly changing and evolving. The stock market is not consistent. You could have amazing returns or it could tank.
I like running the numbers though for a ballpark. It reminds me that we just need to hit it and hard as we can and we’ll see where the cards fall in the future years.
Honestly, I don’t know that our retirement number is realistic but as you say, why not have a ballpark? And yes, I want a really diverse portfolio because the stock market is not the end-all be-all.
I’m normally not much of an early retirement fan, but if you think a lower stress lifestyle would help you manage your health better, its worth considering a “pre-tirement” to see if that would help you to drop expenses, improve health, etc.
I made one significant career change already and it’s made a big difference. I don’t know if retirement would have as big a difference but I suspect it would if all my ducks were aligned.