“How do I calculate the earliest possible date I can retire — my “take this job and shove it!” date — beyond which working is my choice and earnings are gravy?” –Jason, New York
Like Jason, many of us are counting down to the day we can say “shove it!” to a job we hate and pursue our own interests. But most people wrongly assume that day won’t come until our 60s or 70s. Lots of people are taking the concept of “early retirement” to new extremes by becoming financially independent in their 50s, 40s, or even 30s.
While the concept of “retirement” may sound boring to some people, early retirement guru Brandon of the Mad Fientist blog prefers to call it “freedom.”
“Retirement makes you think of [old people] moving to Florida,” he says. “But really, retirement is freedom. Freedom to do what you want to do with your time, freedom from jobs you don’t like, freedom from bosses you don’t like.”
Brandon, who only uses his first name for privacy reasons, is part of an online movement of early retirement enthusiasts who preach that retirement is attainable for anyone at almost any age. It’s just a matter of calculating how much it costs for you to live, and saving up enough to support yourself for the rest of your life.
First, understand the math
There are many schools of thought on how to calculate your number, depending on your spending and age.
“Traditional late-retirement advice aims to maximize lifetime consumption and what people therefore look at is either saving a million dollars or saving 10-15% of all income over some 40 years on the job,” explains Jacob Lund Fisker, author of the book and website Early Retirement Extreme.
But for those who want to retire much sooner than age 65, he says, that conventional advice does not apply.
“The goal [for early retirement] is to save 25-35 times one’s annual expenses. Once this goal is reached, one is financially independent and working is a choice.”
The early retirement rule is simple: For every $1,000 you spend a year, you need to invest $25,000 to $35,000.
The more money you save, the more you’d have to spend. Similarly, and key to many young retirees,…