Once again we are assuming the $200,000 will only throw off $8,000 per year under the 4% rule. Not so. Once you give up on the rat race you can join a race you really enjoy! If you’re 35 you need something to fill your time. First, you are likely to move to a lower cost area if you don’t already live in one. (My low living expenses are partly a product of geography. New Your City or most of the West Coast would force me to talk out of the other side of my mouth.)
Second, you’re 35 years old!!! There is only so much travel or golf a guy can handle. It gets old fast, becoming the new rat race you want out of. Then reality sets in and your interests bubble to the top. A side hustle you always wanted to try is now a viable option. It doesn’t have to pay tremendous amounts of money. Your cost of living will decline unless you engage stupid spending habits. If you have said habit it is unlikely you’ve read this far. (For the rest of you, this way.)
Using the assumptions above, the $200,000 amortized over 32 years will throw off a bit more than $11,000. Still not enough to retire.
But if you spot a 35 year old $11,000 per year and she only needs $25,000 per year to live you have a helluva start!
If you can swing $1,200 per month with a side hustle you can retire at 35! Yes, Social Security might be pretty small, but your side hustle will add to your account when calculating benefits. At full retirement a husband/wife team should realize around $2,000 a month even with the low earnings assumed here! Retiring at 35 with $200k is doable if you have any interest at all in any activity with potential to throw off an income stream.
Crybabies this Way
The information above has the tendency to bring out the crybabies. “I can’t do that! Waaaa!” “It’s impossible! Waaaa!” “I want my mommy! Waaaa!”
Your mommy isn’t here so pull up your shorts and listen. $200,000 is a bit light to retire on at 35, but not bad for someone a certain accountant’s age. Amortized over a shorter period means you will have enough until pensions and Social Security kick in.
At 35 you will be required to still earn some coin. Notice I didn’t say work. Please don’t break out in a rash.
A seasonal or part-time job can provide enough money to enjoy a very joyful and full life. The first ingredient is cutting out all the stupid spending! The more you spend annually, the more you will need at the start to make it to the finish line!
If you live in a high-cost area it many require a move. If you stay put you need to adjust my numbers. Younger people need to calculate on their age, not mine! If you have a higher lifestyle than mine you’ll need more to start unless you plan on spending more time on your side hustle.
Until your health gives out or you die, you will bring in more income than you realize. Just doing the stuff you enjoy doing has a tendency to become an income source. Even small income sources do wonders to your investment account. Using your favorite accountant as an example, the lower spending habits of summer means money is left to earn more before it is spent. Every nickel earned on the side is one nickel less needed to appreciate the awesome retired life you’re living.
You probably worry as much as my clients about how much you need to retire. Financial advisors always scare you with big numbers. It’s good for them when they get more of your money. The truth is you don’t need as much as you think to have a comfortable retirement with spare change for some travel and entertainment.
Related: Charlie Munger: The Psychology of Human Misjudgement
And for God’s sake, please don’t be that guy who has $200,000 in cash, a $25,000 annual spending budget and is 65 with Social Security checks for him and his wife totaling over $3,000. Just don’t be that guy. You’re never going to run out. Now go and enjoy your life.
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