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Early Retirement: How much money will you need?

So you don’t want to work until 62, 65, or 67? Many people are interested in retiring early, but do not know where to start. It is much easier to get there once you know how much you will need.

In general, to determine how much you will need:

  • Calculate your yearly expenses in retirement.
  • Multiply by 25.
  • This is the total nest egg you will need to begin retirement.

This uses what is commonly referred to as a safe withdrawal rate of 4%. For example, a $1 million portfolio will provide $40,000 of income per year forever.

In general, this is a very simplified approach. If you’d like to more details, here are some of my favorite resources dealing with early retirement:

  • Early Retirement forums [1] discuss many topics including safe withdrawal rates.
  • Firecalc [2] is a calculator that can help you determine if you are ready for retirement and if your money will last.
  • Retire Early Home Page [3] has many articles including a great spreadsheet [4] to download detailing year by year savings.

More Retirement Topics