Retiring Early?!

On 7/27/2020 you posted on Instagram, “The bigger percent you can crank that “investing” portion to, the faster you will build wealth. If you can invest a huge 55% of your income, it will take only about 12 years for you to never work again.”

Someone commented asking, “How much income are you referring to when you say 55%?” Someone else responded, “Income doesn’t matter. If you only spend 45% of what you make and invest the other 55%, in 12 years your investments will make enough money to earn you the same amount of the 45% you spend each year.”

My question for you is: 55% of net or gross pay?

Can you do an example breakdown of someone earning $40,000 - $50,000 in the 22% tax bracket contributing to a Roth IRA, SIMPLE IRA, HSA, etc. and explain how it grows over time and what would happen when that person stopped contributing and started taking from the investments to continue spending the 45% that they were before?

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Hey @trjagger!

So, the math is based on net pay (since everyone’s tax rate is different). But taxes are tricky because there are some contributions (like Traditional IRA/401k) that are tax deferred, and Roth contributions are of course tax free after contribution. Plus, the 55% example obviously isn’t gospel, since we don’t know for sure the outcome of the market over the next 12 years, rather just a ballpark number to help teach the idea “the more you save and invest, the earlier you’ll be financially independent”

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