≡ Menu

How to Retire In 10 Years

{ 66 comments }

How to Retire in 10 YearsIs it possible to retire in 10 years by working hard and saving a large percentage of your income? Yes, it is possible, but this requires a lot of sacrifice up front. Honestly, I think 99% of the working population don’t pay much attention to retirement and they just don’t know what’s possible. I certainly didn’t consider retirement when I started my first real job at 22. Luckily, I started saving and investing right away and it gave me a huge head start toward FIRE (Financial Independence, Retire Early.) By the time I realized that I had to quit the rat race before I had a heart attack in my cubicle, I had been saving and investing for 14 years. It took me just 2 more years to make the final push for early retirement. Believe me, those 2 years were hellish, but I’m glad I got through them. It took me 16 years of working full time before I could even contemplate early retirement. Let’s run some numbers and see if it was possible to do it in 10 years, a much shorter timeframe.

Actually, this is a team effort. Mrs. RB40 is still working, but she is planning to retire before 2020. She has been working full time for 14 years so the next few years will be her final push. She’s the same age as I am, but she was busy with the Peace Corps for 3 years when she graduated. She also took 2 years to get her Master’s degree. She is making more money than I do and she is our main breadwinner at this point. I think working as a team is a whole lot easier when it comes to early retirement, but we’ll look at being single as well.

Save and Invest

Saving for retirement is no fun, but the government is making it easier by giving us some nice incentives. You can defer tax by participating in the 401k plan. This is great because you will most likely be in the lower tax bracket after retirement. Overall, you would pay less tax if you take advantage of the 401k or equivalent programs. Many employers help by matching some of your 401k contribution so that will give many of us a big boost. We’ll ignore employer contribution in this post because not all employees have this benefit.

  1. Max out your 401k contribution: $18,000

Next is the Roth IRA which is even better than the 401k. You don’t defer tax with the Roth IRA, but you don’t have to pay any tax on the gain in this account. All the money in the Roth IRA is 100% yours to keep. You can’t say that about many accounts.

  1. Max out your Roth IRA: $5,500

The tax advantaged accounts are great, but you will need some funds to bridge the gap if you retire early. That’s where the taxable brokerage account comes in. Investing in the 401k and Roth IRA is a great start, but it’s not quite enough if you want to retire in 10 years.

  1. Taxable account: $26,500

Lastly, you need to save more every year. Inflation is a huge deal in retirement. You need to compensate by increasing your saving rate while you still can.

  1. Increase saving rate by at least 3% every year

I realize this is a huge amount to save especially if you’re single and just starting out. If you don’t make enough money to save this much, then save whatever you can until you earn more money. Retiring in 10 years probably won’t be possible if you can’t save this much.

Spending Budget

The other side of the equation is the cost of living. I think this is where being single could be an advantage. It’s much easier to control spending if you control everything. I assume the cost of living will remain about the same after retirement. Here is the budget. This budget is pretty low, but it is doable in many parts of the country. It’d be tough on the West Coast, though.

Retire in 10 years budget

Social Security Benefits

Retiring in 10 years is actually easier if you’re a bit older. If you’re 40 and looking to retire in 10 years, then you have many years of work behind you already. Your social security benefit is probably in a pretty good shape. So you’ll retire when you’re 50 and you’ll be able to receive an injection of income in 15 years when you become eligible for Social Security Benefit.

On the other hand if you’re 25 and looking to retire in 10 years, Social Security benefit would be much less certain. Your portfolio would have to hold up from when you’re 35 until you’re 65. That’s a long time.

For this post, let’s assume $18,000 per year in social security benefit.

Retirement Calculators

Okay, let’s see what the retirement calculators say. Here is the result for a single 40 year old guy from Personal Capital’s Retirement Planner. Things look pretty good. In the median case (light blue), our bachelor would be able to live off his retirement savings without spending them down to $0. In fact, he should be able to spend a bit more when the Social Security Benefit kicks in.

Retire in 10 years graph

The 10th percentile (dark blue) shows the level where 90% of the scenarios had a more favorable outcome.

FireCalc gives us a 76% chance of success. That’s not bad, but not great either. It’s in the same ballpark as Personal Capital.

Couple

Things look much better for the couple. This is due to the double Social Security benefit and the extra saving. FireCalc gave us 88% chance of success with the budget above. Things look better at Personal Capital as well.

The Sacrifice

The sacrifice here is pretty obvious. The cost of living budget is pretty low. A single person would need to make at least $110,000 to be able to save this much. When you make that much money, it’d be very difficult to live on just $36,000 per year. You’d have to be very motivated to save such a large percentage of your income. That’s a 50% saving rate when other Americans save just 5%. Your friends and coworkers with the same salary would live a much nicer lifestyle than you.

The couple would need to make about $150,000 per year to save this much.

Keep it flexible

Of course, this is just a case study. Life is much more complicated. Your situation won’t be the same as the sample guy and couple here. If you’re in your 20s, then it’s probably better to focus on increasing your income and stretch out the retirement timeline a bit. Here are some options to make early retirement possible.

  • If you’re young, maybe plan to retire in 15 or 20 years.
  • Work part time after retirement. This will slow down the depletion of your retirement funds. Earning even just $1,000 per month would improve the chance of a successful retirement greatly.
  • Most of us already saved some money. The sample cases here start off from $0. The numbers look much better if you already have some savings.
  • Increase the saving rate as you make more income.
  • Adopt a more conservative spending model. Instead of withdrawing the same amount + inflation every year, cut back during the bear market years.
  • If the stock market is crashing when you plan to retire, then work a few years longer. A bear market at the beginning of retirement can have a huge impact on your portfolio.
  • Check the numbers annually. You might do better than the retirement calculator estimates.

It is fun to fool around with the retirement calculators, but you can’t really predict the future. The point I want to make is that it is entirely possible to retire in 10 years. You need to sacrifice upfront and start investing as early as you can. The good thing is that this effort won’t be wasted. Even if you can’t retire in 10 years, you will have a sizable portfolio to work with. From that point forward, there will be a lot more options you can take. If you don’t like your career anymore, you can start over with something else. You can take on just the assignments you like or even take a few years off. Saving more upfront is worth it.

Do you think it is possible to retire in 10 years?

Personal Capital Best Retirement CalculatorRetirement calculators can’t predict the future, but they can be very useful when you’re trying to figure out your retirement. Personal Capital uses real time data and calculates your retirement projection whenever you want. I don’t see how it can get better than that.

If you don’t have an account with them, you can sign up for free through this Personal Capital link.

 

Image by breezy421

The following two tabs change content below.
Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.

Latest posts by retirebyforty (see all)

Get update via email:
Sign up to receive new articles via email
We hate spam just as much as you
{ 66 comments… add one }
  • Greg Gee September 15, 2016, 6:30 am

    Great article. I basically am in the process of doing this very thing.

  • Mike in Vermont September 15, 2016, 5:30 am

    I probably missed this, but where did you get the figures? Specifically the $26,500 for Taxable Accounts? Was there a reason for that amount? Just curious.

    Love the blog!!

  • Mel May 17, 2016, 6:57 am

    It’s scary. I’m looking at a post it note that says almost exactly what you described. Although, I would add an HSA contribution, if folks qualify. We are a couple and we live off one paycheck. They other one goes to savings. We will be using bonuses and taxes for irregular purchases. House is already paid off. No other debt.

  • Brian - Rental Mindset April 20, 2016, 5:20 pm

    Absolutely! But it wouldn’t be fun, which makes it a “deferred life plan”. I would rather encourage people to find a job they love, or at least don’t hate, and spread it out over a slightly longer time period.

  • Dave @ Financial Slacker April 20, 2016, 5:16 pm

    For me (and most people) retirement age is all about spending. No matter what your income, if you can somehow manage to keep your spending at 50% of your pre-tax income, you will be well on your way to retire at any age.

    Spending less not only leaves more to save and invest, but it means you need less to live on when you do retire.

    Of course that’s easier said than done.

  • Michael @ Financially Alert April 19, 2016, 11:49 pm

    I think most people underestimate what they can accomplish in 10 years time. With the right plan, I think it’s quite feasible. It would be a challenge for most to commit, however, so 15 years is much more doable for the masses. Then again the masses probably won’t even get started. Nice job getting to FIRE in under 20, Joe! You’re a great example for the masses. 🙂

    • retirebyforty April 20, 2016, 10:35 am

      I think 15 years is much more doable as well. To retire in 10 years, you’d have to make a lot of sacrifice or get lucky.

  • David @ Finance Superhero April 19, 2016, 4:18 pm

    I always get quizzical looks from friends and family when I discuss with them my desires to retire early. “What will you do?!” they ask. When I explain that I see early retirement as an open canvas of sorts, that doesn’t do much to further the conversation. Perhaps I need to focus more on my plans to work part-time, as you said, and also mention my plans to volunteer.

  • Sam @ Financial Samurai April 19, 2016, 3:23 pm

    10 years! What an eternity since God created the world in 7 days? 🙂

    The key is to just have a plan. With a plan, things happen. With no plan, nothing happens.

    And if one can negotiate a severance when the time comes, all the better!

    Sam

    • Mike April 19, 2016, 5:56 pm

      If only there was us book to tell us how to do that………:)

    • retirebyforty April 20, 2016, 10:33 am

      Yes, make a plan and start working on it ASAP. That’s the way to get the ball rolling.

  • Alan April 19, 2016, 3:20 pm

    Retiring in 10 years, or lets say at 35 or 40 or 45 sounds great, but what i don’t hear discussed much is health insurance. So say you are retired at 35, that means 30 years before you can get Medicare. I’m sure cost is less when your young, but it goes up fast. Luckily my wife was a State employee, so we can get retirement health insurance through them, but for two people at 55 the cost is $16,000 per year, and this doesn’t count deductible, copays, or dental. If you think the Affordable Care Act will help, have you looked at those plans and the deductibles? The plans are poor at best. I would have retired 10 years ago had it not been for the need to afford health insurance. And unfortunately when you see a doctor or go to the hospital, you can’t always shop for the best price.

    • retirebyforty April 20, 2016, 10:32 am

      Thanks for your comment. The ACA plans aren’t that bad. I guess it depends on where you live. Dental is a big deal, though. My mom goes to Thailand for her dental care. It’s a lot cheaper outside the US.

  • Jo April 19, 2016, 9:19 am

    Our friend Thriftygal from “The Power of Thrift” have reached FIER in just 5 years!

  • Mr. PIE April 18, 2016, 5:32 pm

    Ten years certainly requires tremendous discipline and probably sacrifice. From a young age, that can be a tough one. I know we spent (a lot) more at the beginning of our careers and pre-kids. And had tremendous fun with travel, visiting family for awesome vacations. Whilst saving reasonably well through those years. Then we had the plan (epiphany) to FIRE and are part way into a three year plan to make it happen. Our savings rate from our salaries is 50%. We could do higher but we firmly believe in living, enjoying the NOW as well as tomorrow. It’s all about balance and finding what is right for you.

    • retirebyforty April 18, 2016, 11:10 pm

      I spent a bigger % of my income when I was young and single too. Now, we don’t spend as much because we are preparing for Mrs. RB40’s retirement. I also believe in enjoying life before retirement. 🙂

  • Tawcan April 18, 2016, 4:40 pm

    It’s tough but I think it’s definitely doable. There will be lots and for sacrifices though. Also I thin to retire in 10 years you’ll need to make quite a bit of income.

    • retirebyforty April 18, 2016, 11:08 pm

      It’s much easier if you make good income. If you don’t, then you’ll have to make too much sacrifice. Your cost of living budget will be very low and you might not be able to keep that up.

  • Dividendsdownunder April 18, 2016, 4:16 pm

    Hey Joe! It’s definitely possible to do it in 10 years, I suppose it also makes a difference how much you already have, if you have debts, how much you’re earning, what life you want to live in retirement…etc etc

    What we’re aiming to achieve, is a good amount of income outside of working a 9-5 job. As soon as we can work when and how we want, to us, that is FI. We are mid 20s and our earning potential still has a huge way to go from here. If we can have our own home business in 5 years, I’d say that’s mission accomplished.

    Tristan

  • Lady Butterfly April 18, 2016, 2:48 pm

    Do you count the principal part of your mortgage payments as part of your savings? Some people with large monthly payments would not be able to reach such a high percentage.

    • retirebyforty April 18, 2016, 11:03 pm

      No, mortgage would be expense. People in high cost of living area probably will have to take longer to achieve FIRE.

  • Jason in Vancouver April 18, 2016, 2:37 pm

    As mentioned in the spend section in the post, I think location and correspondingly, real estate/housing play an important factor. In Vancouver, housing prices and rents are through the roof. We were lucky to get in before the explosion but it will be difficult for my sisters’ kids to be able to afford to buy a place and save aggressively. Our “undisciplined” core spend is about $30k/yr and we were able to buy a place and hit the magic number to support that level of spend after about 15 years with both of us making decent salaries. But the value of our home has increased about 4x in a span of just under 20 years. I cannot see us being able to replicate both home purchase and retirement savings if we shifted our start to now.

    One other ER “issue” for us is that the missus has the now rarely seen DB pension which has very decent benefits but also has pretty strict restrictions that really handcuff her from retiring really early if she wants to come close to maximizing the benefits.

    • retirebyforty April 18, 2016, 11:01 pm

      Yes, it’s tough with the crazy real estate price. My brothers live in Silicon Valley and they have a tough time with housing. Portland real estate is getting crazy too. Many Californians are relocating up here and they are pushing the price up.
      The pension would be great. Mrs. RB40 also has a pension program, but I doubt she will make it until normal retirement age.

  • Mike April 18, 2016, 1:56 pm

    Great article!

    I really like PC’s retirement calculator/tool…the best I’ve come across so far.
    If your income isn’t as high in the example above, hopefully you’re in a lower cost of living area, and can have lower expenses.

    • retirebyforty April 18, 2016, 10:59 pm

      I think PC’s calculator is a little bit optimistic. It is still a good tool, though.
      Lower cost of living can make a huge difference.

  • EL April 18, 2016, 1:54 pm

    This was a cool exercise to show whats really possible with high savers and high earners. Making 110K is not really realistic unless the person has a specialized career field. The average pay in the US is about 55K, so maybe it will be fun to run the same example within those guidelines. Good luck to all you savers.

    • retirebyforty April 18, 2016, 10:58 pm

      Maybe I should do a follow up article with the average pay. I think 55k is doable, but it would take longer.

  • Mr. Tako @ Mr. Tako Escapes April 18, 2016, 12:41 pm

    Wow, and I thought 15 years was hard! 10 Years would be some serious savings!

    I think it’s also important to point out that you get the *same* budget after retirement. It’s not like after 10 years you start spending more.

    • retirebyforty April 18, 2016, 10:57 pm

      Right. That’s why I used $36,000/year. That seems like a reasonably frugal budget for a single person.

  • Our Next Life April 18, 2016, 11:39 am

    I’ve found it super interesting that a lot of FIRE bloggers are on timelines way faster than 10 years, but then that’s not 10 years from start of career, that’s from some later time of having the big epiphany. For us, it will be about five years total of concerted effort by the time we pull the trigger next year — but like in your case, that’s following earlier years of 401k maxing and other investing. So we didn’t start from zero. And we make incomes well above average, which I always disclose because I think it’s dishonest to suggest you can retire in five years if you make the median income. We have been helped a LOT by our six figure salaries!

    • retirebyforty April 18, 2016, 12:12 pm

      Definitely, I think most FIRE bloggers already saved for a while. Starting from a solid financial position is a huge advantage. It’s a lot tougher to retire in 10 years if you’re 22. Of course, they have a great advantage too – youth. 🙂

  • Gwen April 18, 2016, 11:23 am

    I plan to be retired by the time I’m 35, which is 10 years from now. However, I started this right out of college when I was 23, so technically it will take me 12 years to retire. I started off with about $10k which is a little bit more than zero, albeit not much. More importantly I started off with zero debt. I’ve saved roughly 45% since I started on a salary that was about $70k to start off. The next 10 yrs are impossible to anticipate ( I could get married, have kids, stay at home, etc) but at least I have a rough plan to get started!

    • retirebyforty April 18, 2016, 12:10 pm

      You are doing extremely well for 25. I think you will be in a great position by the time you’re 35. For you, I’d suggest getting mentally ready for a bear market. Convince yourself that bear markets are a really great opportunity and keep buying. Good luck!

  • Justin April 18, 2016, 10:21 am

    Is it possible to retire in 10 years? Absolutely! 🙂 I did exactly that. I started working after college at age 23 and pulled the plug at 33. A hefty savings rate of 50-70% is the magic sauce that got me to FIRE in 10 years.

    • retirebyforty April 18, 2016, 10:51 am

      Yeap! Your saving rate and cost of living expense are excellent.

  • Josh April 18, 2016, 9:45 am

    Early retirement advice is good for someone who realized they dislike their work and is looking for an exit strategy from their chosen field of work. Unless someone is just plain lazy, better advice for someone in their 20s or early 30s would be to gain skills in something they enjoy or transfer to another line of work they find more enjoyable. Everyone desires financial independence, but constantly saving and living below one’s means so they can quit in 10 years sounds like a dreadful way to live after investing in years of schooling to get a decent income.

    • retirebyforty April 18, 2016, 10:50 am

      Gaining meaningful employment is a much better advice. That way you can keep working on something you enjoy. It doesn’t hurt to have a retirement fund, though. Having a big nest egg will give you a lot more options when you’re older. I still think it’s worth making some early sacrifices.

  • SavvyFinancialLatina April 18, 2016, 8:49 am

    I know this is going to sound depressing, but I am starting to give up on early retirement. It doesn’t mean I will stop aggressively saving and investing. It just means I am realizing early retirement is probably not for me.
    My parents don’t have a retirement plan. My mom is only 46 and she had a long life ahead of her. She is a homemaker and always has been, and depends on my dad financially. My dad is older, in his late 50s. They had no chance as low income immigrants to build a retirement plan.
    What this means is that their retirement will fall with my brother and I. I believe my mom will live another 40 years. If they start depending on my brother and I full time in about 10 years (right about the same time my dad hits his mid 60s), I will be in my 30s. My mom at the very least will depend on me partially for the rest for her life. If she dies in her 80s, I will be in my 60s.
    Let’s just say sometimes mentally it’s better to NOT dream about early retirement, so the reality doesn’t quite hit as hard.

    • retirebyforty April 18, 2016, 10:48 am

      I wouldn’t give up on early retirement. Keep saving and investing. You never know how it is going to turn out. In your position, I would shoot for Financial Independence. That will give you a lot of options when you’re older. My mom depends on us too. She is almost 70, but she is not very expensive. Her biggest cost is healthcare, but Obamacare helped tremendously in the past 2 years.

  • freebird April 18, 2016, 8:43 am

    My net worth reached 33x of my annual expenses after nine years of work. I didn’t keep detail records but I recall my spending was about 20% of W2 gross the first few years and stayed flat as my income grew quickly back in those days (BTW my W2 base has been flat over the past decade). I don’t budget but I know roughly what I’m spending, and it’s always been less than what’s in your Retire in 10 Years Budget.

    I guess for me saving more isn’t really a sacrifice because my marginal utility curve saturates at a low level, and I don’t mind spending less than people around me. Even these days nearly two decades past the point of “FI” I still spend less than 10% of my AGI. The flipside is I can’t buy a buzz, plus that awkward feeling if I get something most people can’t afford. The silver lining from my personality disorder is that I don’t know what job stress feels like.

    I wouldn’t call quitting with a 76% chance of success “early retirement”, more like taking a gamble with your future self. That dark blue triangle shows spending down to zero just when Social Security kicks in, which to me is like starting to live paycheck to paycheck.

    As for sacrifice, it’s really pick-yer-poison, isn’t it? A high savings rate works like parole, you get time off for good behavior. Would you choose to lengthen your sentence in exchange for a window cell and cable TV? For some maybe, it all depends on how much you value your freedom vs bling. And agreed this isn’t all or none, if you’re close, or even partways, it gives you freedom at least for some years which can come in handy. It bought me control over my work assignments and work conditions when I needed it, so I think it was well worth what I put into it.

    • retirebyforty April 18, 2016, 10:45 am

      9 years! That is very impressive. Your saving rate is phenomenal. Not a lot of peole can save that much.
      You’re right about 76% chance. There are many ways to improve that chance, though. If someone sacrificed for 10 years, he’d have a lot of options. Working part time would be one way to improve the success rate.

    • Believe Fire April 19, 2016, 10:17 am

      Love your parole analogy freebird!

      RB40, I think 10 years is very possible, but as others have mentioned, having a high income makes a big difference. Cost of living also has a huge impact though. What if the single person or couple could live off 18k/yr? I know it seems extreme or too sacrificial to most people, but they would be able to retire much quicker as six figure earners or could possibly retire in 10 years with more modest earnings.

      Another option for people is to consider retiring abroad to lower cost of living areas. My wife and I are traveling the world this year to determine if this will legitimately work for us. We spent 7 weeks in Ecuador and loved it and we’re currently in Portugal and already loving it too. You can definitely retire off of less if you’re open-minded, and from what we’ve seen so far, you can have an amazing life for less than you think.

      • retirebyforty April 20, 2016, 10:31 am

        Thanks for your input. Yes, I think there are ways to live more frugally. $18k/year isn’t too bad especially if the house is paid off. I think that’s a pretty comfortable living in many areas of the country.

  • Harrison April 18, 2016, 8:12 am

    My question is what are you going to do with yourself for the rest of your life? Obviously you wouldn’t have enough money to live extravagently if you retired after 10 years

    • retirebyforty April 18, 2016, 10:42 am

      Whatever you want! 🙂 I’d recommend finding something that you like to do and try to get paid doing it. Starting a small business is a one really good option.

    • Gwen April 18, 2016, 11:05 am

      I plan on either getting into working at a camp for the summer in some capacity, and then maybe being a ski bum and working a resort during the winters. Who knows though, the sky is the limit!

  • Jim @ Route To Retire April 18, 2016, 7:52 am

    I’ve always had it in my mind that I would retire early and I have always been a good saver. However, that was about it – I never did the math, toyed with the calculators, did anything to improve cash flow, etc.

    It’s only taken me 40 years to get it figured out. Your number is dead on for me as I’ll be retiring before I’m 50, but that’s with keeping our current lifestyle (and with a 5-year old).

    If I had really focused on this back in the heyday, I might have had to try to outbid you for your domain name! 😉

    I definitely agree with flexibility needing to be part of the equation as $%^ does happen.

    — Jim

    • retirebyforty April 18, 2016, 10:41 am

      It’s much easier to go through the calculation. The retirement calculators are a great resource. Good luck! 50 is still young. 🙂

  • Dividend Growth Investor April 18, 2016, 7:48 am

    I plan on being financially independent sometime around 2018. I started saving and investing in 2007. Right now my dividend income covers between 62% and 83% of expenses

    It is definitely possible to retire in a decade if you save a large portion of income, and invest it wisely. As you mentioned in the article, there are plenty of trade-offs involved to achieve this as well. And it is much easier to achieve early retirement if you are a couple, due to synergies that produce cost savings.

    • retirebyforty April 18, 2016, 10:40 am

      I love the dividend income strategy. Looks like you’re in your final push too. Good luck!

  • Mike H. April 18, 2016, 7:44 am

    I’m in a somewhat similar boat as Beth above. It’s difficult to save enough when you don’t make $100k+, live in an expensive big city, and are single [side note: I bet a FIRE dating service would be a hit…but you’d have to make it free 😉 ].

    My calculations for myself indicate that 10 years is not likely. I’m looking at more of a 13-15 year timeframe before I’m in the ballpark. And that’s IF the market cooperates. And I would bet that I save more than anyone I know – this is why there is a serious retirement crisis brewing in America.

    • retirebyforty April 18, 2016, 10:39 am

      The FIRE dating site sounds really awesome. That’s a business idea right there. Might not make much money because it is so niche, but still a great idea.
      13-15 years is more realistic for someone young. 10 years is more realistic if you already have some saving.

      • Mike H. April 18, 2016, 11:34 am

        I’m not really that young any more, and I do have a good start going. Just not good enough. When I first started saving, early retirement wasn’t really on my mind. And I’ve made some lifestyle choices: I spend a lot of time at home, so I want my home to be nice. That leads to extremely high rents here in Chicago.

        If all goes well, I’m most likely to get the capability to retire early in my early 40s. Whether I actually do…we’ll see. But I do want the option available.

  • Ty @ Get Rich Quickish April 18, 2016, 7:02 am

    10 years?!?!? Now that’s getting rich quickish!

    Couldn’t agree more, Joe. It all boils down to that savings rate. If you can’t save much because you need to buy stuff, then it will take you longer to retire.

    10 years is absolutely possible if you can (1) spend less than you earn, (2) invest the difference, and (3) eliminate/avoid debt.

  • Getting To One Million April 18, 2016, 6:15 am

    I’m a 48yr. old single woman with no kids living in Los Angeles. I make $71,000/yr. before taxes and live on 47% of my pre-tax income. Here is how I save:
    – Max out traditional 401k–$18,000 + $2130 employer match
    – Max out traditional IRA–$5500
    – Save extra paycheck money after maxing out retirement accounts–$4885
    – Save tax refund–$2670 (I have 0 allowances withheld on W-4 to get a larger refund. Another way to pay myself first)
    – Since I’ll be 50 next year I’ll start adding catch-up contributions to my 401k and IRA and save the larger tax refund also

    My salary got frozen 3 years ago (meaning I won’t get any more raises) after my company got a new investor so I do miss saving the extra income. I like living a quiet lifestyle so I’ve never wanted a roommate. I would like to have $1 million by the time I’m 62 to be able to still live comfortably in Los Angeles on $36,000/yr. after taxes and I plan on taking social security at age 62 also with social security paying me only 75% of what I was guaranteed to get. My parents own 3 different 1 acre lots in Virginia and they said I could move there and have free
    land but I would die of boredom. Even though I like a quiet lifestyle I still like the options Los Angeles provides of having different places to go to when I do want to go out.

    • retirebyforty April 18, 2016, 10:37 am

      Thank you for sharing! You are in the perfect position to retire in less than 10 years. Your saving rate is very good and I’m sure you will reach your goal of $36,000/yr. I tried your info on FireCalc and you get 100% if you retire in 2026. Really great job.

  • Tracy @ financial nirvana mama April 18, 2016, 5:41 am

    Thanks for this post and the calculator firecalc, I can’t wait to check it out.

    Ten years is ambitious, but achievable if you really really wanted it.

    Based on my experience and from people I closely know, a great way is buying a rental property that you can live in with the tenant paying off the mortgage. this reduces your cost of living and gives you a boost in cashflow to invest in more like real estate or other investments. This could accelerate retirement:). A large con to this is sacrificing space.

    • retirebyforty April 18, 2016, 7:50 am

      Rental properties is the way to go if you can do it. It’s a proven way to become wealthy.

      • Smart Money MD April 18, 2016, 7:15 pm

        Joe, would you consider adding additional rental properties to your portfolio in the future to increase cash flow? One thing that I’ve noticed with people who have multiple properties is that they either are still working in a primary job to generate enough savings for a down payment for the properties. Trickier scenario if you’ve already reached FI and have non-traditional income sources.

        • retirebyforty April 18, 2016, 11:12 pm

          No, I don’t want another rental property. It’s too much work. 🙂
          Good thing too. I doubt we could get another mortgage with our income. Once Mrs. RB40 quits, it’d be practically impossible to get a big loan.

  • The Green Swan April 18, 2016, 4:57 am

    Retiring in 10 years is obviously tough. Most people will graduate college with a much smaller income than $110K, but as they work to advance their career, salary should increase at a pretty good rate. Very important to maintain a low cost of living as your salary increases to fuel your retirement accounts. It is interesting to play around with those retirement calculators though which can be helpful to give you a sense of direction and a goal to shoot for. Thanks Joe.

    The Green Swan

    • retirebyforty April 18, 2016, 7:49 am

      Yes, I didn’t make $110k right out of college. It took me many years to get there. It’s really difficult to retire in 10 years if you’re just starting out. This is much easier if you’ve been in the work force for a while. This post works better for someone in their late 20s and early 30s.

  • beth April 18, 2016, 4:31 am

    As a single person who will gross $55k this year it looks like it will be hard to get to retirement any time soon.

    I am not looking for pity here. I bet a portion of your readers will never make $110k per year so how about some numbers on how us lower income earners can get there faster too. My current budget is 30% savings, 30% debt and 40% for everything else.

    • Ndy April 18, 2016, 6:33 am

      At your current savings rate of 30% for your current income of $55K, you will have over $800K in 2 0 years, assuming 8% annual return. That would guarantee you a $32K annual income assuming the 4% rule (you are currently spending about $22K yearly). Mind you this did not take into consideration any matching from your employer and no increases in your income (both of which are unlikely). So yes, you could do this in 15 years if after paying off all your debt, you put all the extra money into saving for retirement, in addition to adding most of your future raises too. So you’re already winning the race. Congratulations! Your savings rate is great! Keep it up!

    • retirebyforty April 18, 2016, 7:47 am

      Yes, it will be very difficult to retire in 10 years if you don’t make at least $110k. Early retirement is still possible, but it will most likely take more than 10 years.
      Your saving rate is very good, though. Let me run the numbers and update the main article later today.
      Your main priority should be increasing your income. Also, having a partner would help a lot. It’s much easier to work on this as a team.

    • Stockbeard April 18, 2016, 1:29 pm

      Lots of personal finance bloggers have recognized the value of having a “low” salary to be aware of what’s required to save. 30% in savings with 55K is pretty good.
      If you find a significant other with similar level of income, you suddenly become a 6 figure couple, making way more than the average household. Not bad at all.
      My household made less than 6 figures for the major part of our life, yet we’re on good track for early retirement.

      Good luck!

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.