4 ms·
20 years, not 10. ((((((((50*1.07+50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07*0.04 = 30,000 per year incom
by agf 5y ago
20 years, not 10.
((((((((50*1.07+50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07 + 50)*1.07*0.04 = 30,000 per year income, after saving 50,000 per year and making 7% for 10 years at a 4% withdrawal rate, which is very aggressive for a retirement longer than the standard 30 years.
((((((((((((((((((50*1.06+50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06 + 50)*1.06*0.026 = 50,000 per year income, after saving 50,000 per year and making 6% for 20 years at a 2.6% withdrawal rate, which should be relatively safe even for a very long retirement.
- ornornor 5y agoMy bad, you’re right, it’s 65% saving rate for around 10 years.
- rubicon33 5y agoHow can this be true? You're telling me that you don't have to consider HOW MUCH you're saving? 50% of a McDonalds burger flipper salary while a large percentage of their salary, is still a very small amount of money. Where does this logic of 50% for 20 years come from? Seems like a serious broad "rule of thumb" kind of thing that is only just barely realistic?
- ornornor 5y agoYes it's a rule of thumb, it's not meant to be accurate to the day. And it assumes you're investing the savings to get average index market returns. It doesn't matter your actual salary, if you can get by on 35% of it and save the other 65% then it's all that matters. After you've saved for 10-11 years, you'll get the 35% of your original salary you live on, in perpetuity, from what you saved earlier. Now of course it's much easier to save 65% when you're paid more than if you're paid minimum wage, but still. And you'll probably want some slack because these numbers are really the bare minimum, but that's the idea. Saving 65% of your income as a SE is really not that hard for a lot of us, even less so when you realize this is the ticket to being free within 10-15 years.
- PeterisP 5y agoThe idea of the percentage is based on sustaining a similar quality of life as before. If you earn ten times as much as a burger cook, then the assumption is that in retirement you expect much better (and more expensive) conditions than McDonalds employees have now.