I know all of us love to dream about our retirement, right? I like to think about retirement all the time. Yes, I realize it's forever away and it's hard to know exactly what your life or the world will be like then. You also don't know what you'll like when you're older or how you want to spend your retirement.
I'm not sure when I would want to retire, but hopefully somewhat young. 55 at the latest? I honestly have no clue. I think about retirement but it still seems so far away, and so many variables can change before I get to that age, or even just 10 years from now.
I typed in retirement calculators into Google, and a ton pop up. I set all of the variables in the chart, and I set our income replacement at 85%, even though I heard that you should set it at 95%, and some say 70%. What do you believe is best? I also set the return at a moderate 8% just to cover myself by a good percentage so that I have a good cushion.
I always love how on these retirement calculators they let you choose whether or not you want to factor in possible Social Security benefits into your retirement plan. We all know that will not exist 45 years from now.
“To provide the inflation-adjusted retirement income you desire, you may need to save 31.7% of your yearly income (less any employer match, if applicable). This year, for example, the amount would be $22,164 or $1,847 a month. The total amount needed for retirement, including amounts already saved, is $5,320,545.If you wait just one year to start saving for retirement you may need to save 34.8% of your annual income, which amounts to $24,352 in the first year.”
Wow that number seems high! 31.7% also seems like a lot, but I'm sure if I don't go to crazy with lifestyle inflation and also have good passive income, then I should be able to do this eventually in my life. That number just seems extremely high. I also don't know if I'll ever fully retire. I would like to have a source of passive income for way past when I eventually leave my career.
There are a lot of things we need to do in order to retire younger as well. Of course it would be nice to retire at 40 (but still have passive income), but that can be hard to attain. The things I am doing or want to do in order to retire before 65:
- Create passive income. This will help make our financial life more stable and secure if there's another source of income coming in.
- Cut costs. If there are things that we can cut that won't make us unhappy, then we should be doing them.
- Pay off debt. I don't want interest compounded and I want to increase my cash flow by eliminating all debt. Student loans and mortgage debt should be gone within 5 years (as long as our plan works out!) so this is good! We should be completely debt free by time we're 27 or 28.
- Not living beyond our means. Yes, there are things we buy that we probably shouldn't. I have a bursting closet full of clothes that I hate. I realize I do have a problem and I wish I didn't buy so many clothes. It's honestly my weakness. I also don't want us buying a bunch of things that we don't need. Our friend's family has 2 yachts and the yachts are over $1 million. They have a successful business, but I honestly could NEVER see myself spending that kind of money. However, we are going on a weekend trip with them in 2 months, so that will be nice! (I am not saying that I use people for their yachts, that sounds ridiculous)
- Take as many opportunities that I can. I went to college and I'm about to have my MBA. I try to say yes to any opportunities that come across my way, and to at least try new things. You never know where this will lead you! New sources of income, new networking, and so on. Maybe you'll love what you learn more than what you're doing now.