I’m 26 and wondering if it’s possible to retire before the age of 40 by saving and using investing strategies?
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Hi Ashley, it most definitely is, but there are a number of variables to consider…
- Income
- Savings Rate
- Current Cost of Living
- Projected Retirement Cost of Living
- Do you Own/Want to Own a Home?
- Investment Performance
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Welcome Ashley! To piggy back off of Dustin, let’s outline a scenario and help you get a grip on what you would need to do to “retire” by 40.
A rule of thumb is to only withdraw 4% of your investments in retirement to ensure you can live off of the money your money is making you. Let’s say your cost of living at the age of retirement is a moderate $50,000 per year. using our rule of thumb, you would need to have $1.25 million dollars in investments in order to afford that. Using this investment calculator, you would have to save $4,500 dollars per month over the next 14 years in order to hit that goal. That’s a lot!!
Some great ways to influence these numbers is to:
- Decrease your cost of living (needing less money, saving more money)
- Make more money
- Push back your retirement age
To show the power of number 3, if you change your retirement age to 45, you only would have to save $2,700 per month (more time in the market, more compound interest made, etc)
Best of luck to you!
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