Notes on how to retire early

Posted: October 12, 2006 in Retirement

While I’m waiting for Blogger and Blogspot to come back up I thought I would get started on writing up some notes on retiring early. I’ve been planning to do it for a while but have been so busy being retired I never go to it. So here is the first installment.

You’re ready to retire when you have:

Step 1: Saved $1 million in liquid assets.

Step 2: Become completely debt free.

Think I’m kidding? Think it’s impossible? Think that’s not enough?

Ok, $1 million might not be your magic number. If you do a little searching on the internet you might eventually find some articles on early retirement that mention 25 as the magic number. That is, 25 times your annual expenses in retirement. Once you have that banked you can retire pretty much worry free. The idea is that you can put that money into ultra-conservative low interest bonds and insured savings accounts which have historically over a long period of time paid around 4% interest. That’s lousy, but you don’t care, because your capital will never be lost and the interest income is 100% of your annual expenses in retirement. You can live indefinitely on it, never having to work again, and never running out of money.

So we can simplify steps 1 and 2 into a single step 1. You are ready to retire when you have:

Step 1: Saved 25 times your annual expenses in retirement.

Of course, the devil is in the details, like how to make enough money to bank 25X your forecasted expenses in retirement while meeting your current expenses. And then how to figure out what those forecasted expenses will be. Those are all mostly mundane details. I plan to discuss some of them. But most people will tune out because it is all about self-management, much like dieting.
There are some other issues, however, that are perhaps not so mundane and maybe unexpected that one should keep in mind. And some of them are step zero questions for yourself, like what is the purpose of work, and do you really want to retire. I’ll discuss those as well in future posts.

Ah, it looks like whatever trouble Blogger and Blogspot were experiencing has been resolved. So I’ll go back to finishing up a post on one of the blogs in my vast empire of blogs and websites.


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