3 ms·

This post confuses me. It reads as if one could work a SWE job for 10 years, and retire on an index fund. Yet, that cannot possibly be true? Cost of living i

This post confuses me. It reads as if one could work a SWE job for 10 years, and retire on an index fund. Yet, that cannot possibly be true? Cost of living is relative, but I can't imagine mine is very high. No kids. Own my car. $700/mo rent. Yet, 10 years is not even close to enough time to bank enough money to retire. What am I doing wrong?

rdegges 8y ago
This is true -- it's 100% about your savings rate: how much money are you saving (net) each year? And out of that, how much are you investing? This article does an excellent job of explaining it better than I ever could: https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si... In summary, however, assuming you are a W2 employee, here are some immediate steps to take: - Pay off all debts > 4% interest - Reduce spending / consumption - Max out your 401k - Max out your IRA each year - Invest the rest into low-cost index funds, I personally do VTIAX and VTSAX (international stocks and US stocks) Once your investments reach 25x your yearly expenses you are good to go =)
godot 8y ago
There are probably many factors you have to adjust along the way to achieve it -- possible, but not without effort. If you live in a place with $700/mo rent, I imagine you probably also live in an area that doesn't pay the kind of salaries San Francisco tech pays. So you might want to work in SF. But let's say you work in SF and get bay area SWE salaries; if you were to want to "retire" in SF and continue to live with $3-4k rent, that might be a hard point to reach after 10 years. If you work in SF/Bay and get bay area SWE salaries (or better yet, FAANG salaries) for 10 years, live modestly for most of it and not overspend, you can then probably afford to retire with $700/mo rent (or even buy a house with cash in an area that costs $200k~ a house) after 10 years by moving away from the bay to other states. The difference in salary and cost of living between different areas is often larger than you can imagine; and it's up to you to figure out how to adjust the knobs to make it work best to your advantage.

rdegges 8y ago

This is true -- it's 100% about your savings rate: how much money are you saving (net) each year? And out of that, how much are you investing? This article does an excellent job of explaining it better than I ever could: https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si... In summary, however, assuming you are a W2 employee, here are some immediate steps to take: - Pay off all debts > 4% interest - Reduce spending / consumption - Max out your 401k - Max out your IRA each year - Invest the rest into low-cost index funds, I personally do VTIAX and VTSAX (international stocks and US stocks) Once your investments reach 25x your yearly expenses you are good to go =)

godot 8y ago

There are probably many factors you have to adjust along the way to achieve it -- possible, but not without effort. If you live in a place with $700/mo rent, I imagine you probably also live in an area that doesn't pay the kind of salaries San Francisco tech pays. So you might want to work in SF. But let's say you work in SF and get bay area SWE salaries; if you were to want to "retire" in SF and continue to live with $3-4k rent, that might be a hard point to reach after 10 years. If you work in SF/Bay and get bay area SWE salaries (or better yet, FAANG salaries) for 10 years, live modestly for most of it and not overspend, you can then probably afford to retire with $700/mo rent (or even buy a house with cash in an area that costs $200k~ a house) after 10 years by moving away from the bay to other states. The difference in salary and cost of living between different areas is often larger than you can imagine; and it's up to you to figure out how to adjust the knobs to make it work best to your advantage.