![]() This leaves Joe with $85,000 in equity in his home. The current value of the house is $400,000 and he has a mortgage of $315,000.Joe lives alone in a 3-bedroom, detached house.Currently, he owes $12,000 on a car loan which is approximately equal to the current value of the car. Every 4 years Joe buys a brand new car.Until recently, Joe had a conventional attitude towards money, meaning he did not value it. Joe is single, 48 years old and makes $84,000 per year. While it is true, that it is easier to achieve a high savings rate if you have a high income, anyone can increase their savings rate by pulling one of the two levers of Financial Independence.Īnyone can reach Financial Independence if they are willing to pull both levers as hard as they possibly can. The most important variable when it comes to Financial Independence is your savings rate. One of the most common responses I get when I write about Financial Independence is that it is only possible for those with multiple six-figure salaries. How to retire in 10 years with a five-figure income Anyone retiring before 50 would need to pick a more conservative withdrawal rate such as 3%. So if you are retiring before 50 and expect to live well past 80, the 4% rule does not apply. If you had $1 million saved, you could assume to be able to withdraw $40,000 in your first year of retirement.Īnyone who is considering early retirement should be aware that the 4% rule was originally based on an assumption of a 30-year retirement. The 4% rule states that in the first year of retirement you can safely withdraw 4% of your portfolio. The second assumption is the one I take issue with. Honestly, that is probably too high a number for me to be comfortable with but it is not completely unreasonable.Īssumption 2: You can live off the 4% safe withdrawal rate during retirement. It’s hard to predict whether a 5% return net of inflation is realistic. ![]() There are a few assumptions in the math behind Financial Independence, that you need to be aware of.Īssumption 1: Your investments earn 5% above inflation. Money Moustache Assumptions in the shockingly simple math Reading the table below you can see if you save and invest at least 65% of your take-home pay, you would reach Financial Independence in just over 10 years. Money Mustache’s shockingly simple math that provides a direct relationship between your savings rate and how many years until you have reached Financial Independence and can choose to retire. In the original post, I did a simple reading of Mr. In this article, I’m going to dive deeper into this question and tell you how to retire in 10 years while making less than $100,000 per year. Given the amount of traffic this article continues to get, it is certainly a compelling headline. I don’t consider it my best work, not by a long shot. The most popular article I’ve ever written was titled “ Want to retire in 10 years? Here is what you need to do”.
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