10 ms·
Assuming 50% after-tax, you will need about 25 years to retire. To retire in 7-10 years you need to save around 70-80% of your income. In both of these cases, I
by uiri 10y ago
Assuming 50% after-tax, you will need about 25 years to retire. To retire in 7-10 years you need to save around 70-80% of your income. In both of these cases, I assume that you spend the other 20-30% and ignore investment gains over the period where you are working which might shave off a few years in the 50% scenario but for the 7-10 year time frame your savings rate will dominate.
- kobeya 10y agoThat's not how the calculation works at all. If you're saving 50% then your expenses are half of your income, so you need half your salary in retirement. Ignoring investment gains is ignore the entire point of this exercise.
- uiri 10y agoTreating investment gains over a time period of under 10 years as negligible is a perfectly prudent thing to do when planning a retirement which is going to span multiple decades. I do agree it is somewhat less prudent at a time scale of 20-30 years or beyond. Your retirement goal is 25 * 12 * x. If you save 50% then each month you spend x and put x in the bank. At that rate, it will take you 25 * 12 months (25 years) to get to your goal. Counting 1/3 of 1% returns each month, it would take you 208 months (17 years is 204 months). So returns would shave 7-8 years or ~30% off your working life. If you save 75% then each month you spend x and put 3x in the bank. At that rate, it will take you 25 * 4 months (8 years is 96 months) to get to your goal. Counting 1/3 of 1% returns each month, it would take you 87 months (7 years is 84 months). So returns would shave off ~1 year or 13%.