Are you on track to retire by 40, 50, or 60?

Let’s wrap up this week with one last article about net worth. I hope I’m not boring you too much by talking about the same subject this whole week. It is fun to track your net worth if you are doing well and see it increase year after year.

Today we’ll see if you’re on track to retire by 40, 50, 60, or later. I spent a few hours cranking numbers and hopefully it will be useful for some of you. I wanted to make it more general, but the math is way too complicated for my current ability. I’m sure I could have worked it out when I was in college, but that was a long time ago…

How much do you need to retire by 40, 50, or 60?

I used a bunch of different retirement calculators and made a few assumptions. I will use our household as an example.

Assumptions – retire early and start drawing down right away

  • Withdraw about $4,000/month in today’s dollars (2013.) This is a key assumption here. If you need much more or less, then the numbers will be wildly off base.
  • Life expectancy = 85 years old, yes I am an optimist. Retiring at 40 means 45 years of withdrawal.
  • After retirement, our investment ROI will beat inflation by 1%.

The calculators said I need about $1.75 million dollars if I want to retire by 40 and withdraw $4,000/month for 45 years. From here, I extrapolated backward to see where you should be at your current age. I also ran the same calculation for retire by 50 and 60. In those cases, you would need less money because you’ll spend less time in retirement.

Let’s make a table so you can see where you are.

Table 1 – start withdrawing as soon as you retire

are you on track to retire early?

Here is how to use this table.

First, you need to figure out your household net worth. Yes, I’m using net worth here. You can always sell your house or take a reverse mortgage. 🙂

Then find which track you are on. For example, if you’re 30 and have $200,000 net worth, then you’re closer to Retire by 50 than Retire By 40. OK, so you can see this is a ridiculously difficult undertaking. How many of us can save up almost 2 million dollars by the time we’re 40 years old? The graph is quite steep. You’d need to be making a lot of money and save most of it to be able to fit into this graph. Retire by 50 or 60 are more realistic options here. Even in those cases, you still need more than a million dollars to retire early.

Are you on track to retire by at 40?

It’s Not Hopeless

Don’t Panic (one of my favorite quotes, by the way.)  Let’s see if we can make it a bit easier by changing some key assumptions. For me, I left my career before I was 40, but I’m still working part time on my blog. Mrs. RB40 is also still working because she likes being in the workforce. The income is enough to pay the expenses so we don’t have to withdraw from our retirement account until later. Let’s use this model and see if we can make it more palatable. We’ll also assume our investment is doing better than 1%.

Assumptions – retire early, but don’t start drawing down until you’re 65

  • At 65 years old: withdraw about $4,000/month in today’s dollar (2013.)
  • Life expectancy = 85 years old. By putting off withdrawal, we only need to withdraw for 20 years.
  • After retirement, our investment ROI will beat inflation by 4%.

Table 2 – don’t start drawing down until you’re 65

check if you can retire early

This is still difficult, but doable now.

Of course, the assumptions are also more severe. You will have to figure out a way to make some money to pay the bills so you don’t have to start drawing down until 65. Most people will have to work part time for this to work. You also need to invest wisely and beat inflation by 4%. This is not easy considering the house, cars, bonds, cash, and other low yield assets in your net worth.

Can you retire early? check against this table

Which model?

Now it’s time for you to give me some feedback. Which model do you like better?

  1. Retire early, stop making money, and start withdrawing right away.
  2. Retire early, work part time, and start withdrawing when you hit 65.

Option 1 is an extremely difficult target to hit. Option 2 is not easy, but it’s more manageable.

For me, I like model 2 much better since that’s the model I built my exit strategy upon. Currently, we are doing well and we are beating the Retire by 40 track according to table 2. Table 1 is too difficult for us and we are somewhere between Retire by 40 and 50.

Let me know in the comments which table you choose and where you are on that table. You can comment anonymously if you’d like. I would love to see some data. Don’t forget we assume you’d like to withdraw about $4,000/month. If you need more, then the amount will increase quite a bit. I’m not sure how to make the table more flexible with the withdrawal amount. If you have an idea, let me know.

Have a great weekend!

Disclaimer – This really is just for fun. The math is complicated so the tables probably aren’t very accurate. I over estimated my mathematics ability when I first started this article and quickly ran into trouble. I used quite a few retirement and inflation calculators to make the tables.

track your net worthIf you need help keeping track of your finances, try using Personal Capital to manage your budget and net worth. It can help you keep track of your income, expenses, and net worth, all in one place. Personal Capital is geared for investors and has many great tools. See my review of Personal Capital and how they helped me reduce what I’m paying in investment fees.


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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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51 thoughts on “Are you on track to retire by 40, 50, or 60?”

  1. I didn’t see anything about savings vs 401k. I plan to retire at 50 with 1mm in savings and 1mm in 401k that is still earning. Am I ok with this plan?

    • I think you are in a great shape. You can live off your saving until you can withdraw from your 401k. It’s nice that you don’t have to pay the 10% early withdrawal penalty. It also depends on your expenses, of course. If your expense is moderate, you’ll probably be fine. You might want to check with a financial planner.

  2. Interesting. I finally found something that have similar mentality. The cool thing, is I also start thinking about my exit plan when I was mid-20s because I was hitting dark times at work. I’m in my mid-30s now and I have far exceeded table 1 values. So it’s good to know that I’m on track. My career is better now, but I never know I will hit the bottom again. So I’ll continue to do what I’m doing.

  3. I’m thinking between my pension and 401k/tsp savings, as well as any roth ira/regular stocks, I will be able to retire by 45-50. That is with hopefully a little help from an early retirement offer since I work for the gov, and my pension normally wouldn’t start until 57. So hoping for some luck on that part. Otherwise just trying to save as much as I possibly can. Currently spending around $2500 ish a month, that should lower once student and car loans are gone.

    • I thought you could retire with the “rule of 70” or something like that.
      Good luck! Sounds like you have good plan.

  4. This is my road map to retire by 40. Everyone’s situation is unique and I can only tell you what I’ve done so far. To retire early, you need to build up a big war chest and that’s what I’ve been doing in phase 1 of my plan (20 -40 years old.) I have been working in the tech industry for about 15 years and I took advantage of every form of savings and incentives my employers offered. Here are what I’ve done so far.

  5. Since I missed the boat, I won’t be able to make it by 40 anymore, so my plan is to be aggressive in investing and learn alternative ways how to boost income (for example using options). My goal is next 10 years of intensive saving and investing and then another next 10 years use option #2 – part time work and then retire and start withdrawing.

  6. $4000 a month obviously does not include healthcare costs that are spiraling upward 5-10% per year. I just was looking into healthcare plans just for me & my spouse and was coming up with more than $20,000 per year. If you don’t get health insurance, you risk losing all the savings you need to live on. For instance, an encounter with cancer and with no health insurance, you would be impoverished in a few years because you would be forced to take huge amounts of capital out of savings to pay for hospital, doctor and medication costs. It is much more likely that people will need medical services as they age. Another factor to consider is that people who are working right now are used to relatively low medical insurance costs because they often belong to an employer group. This skews the numbers (too low) that they consider when planning for retirement. Retirement means no group and much, much higher costs. I want to retire early but there is a great deal of risk of retiring without planning on healthcare costs.

    • You are right about the healthcare cost. It’s getting more and more expensive everyday.
      One alternative is to move to countries with public healthcare like Canada.
      It’s tough in the US. Many self employed people I know just insure for catastrophic coverage. It’s more affordable and you can just pay for the small incidents.

  7. What inflation rate are you basing things on real ,cpi or shadow stats ? Also are you considering black swans such as cyprus type bailouts, dollar devaluation , inflation running in the low teens ? If one has such savings 100k + the risks of being impactted by such events greatly increases.
    So how does protect part of his portfolio against this ?

    • I used a flat 3% inflation. I didn’t consider black swans events. The investors have to do their own diligent.
      For me, I shoot for a diverse portfolio. We have dividend stocks, rental properties, bonds, peer to peer lending, and a few other investments. We will still be impacted, but hopefully we can weather those events.

  8. It would be relatively easy to scale for various monthly incomes, since the monthly amount is “outside the parentheses” of an annuity.

    • Which is to say, the graphs would look exactly the same for various monthly incomes; only the left axis labels would change. The tables would change linearly – 25% more for $5k/month, 25% less for $3k/month.

  9. Really hoping to retire early, but like my job and accept that it won’t lead to massive income levels needed to retire by 40, or 50 for that matter. I am on track to hit my goal by 60, and if I do it sooner its icing on the cake! Thanks for the post, the #’s help w/ planning.

  10. I think I’ll go with option # 2 which is to retire early, work part time, and don’t start withdrawing your money until your 65. Although I still need to work, I’m somewhat more assured that I will not worry too much about my finances when I’m 65 because I already saved a lot of money that can cover my expenses until I die.

  11. Table 1 far left column is the closest fit for me: 25=125k, 30=360k, 35=835k, 40=2285k. I started lower but crossed over around 37. Guess I could’ve retired a decade ago at 40, but I didn’t. Stayed on because I thought I needed a lot more to fund a lavish retirement. Fast forward to today, and I realize I can’t spend that much. I’ve hit my ceiling in terms of promotions and raises, so what’s keeping me attached is mostly unvested stock options. I like my work, my colleagues, and my management, so I have no desire to stop working. Financial independence probably helps my work attitude, I feel no stress and only do the parts of my job that I enjoy. So I don’t have a target date, I’m ready when the time comes.

    • Wow, that’s very inspiring! Congratulation on reaching financial independence so early in life.
      Have you ever thought of leaving your career and pursuing something more fulfilling? You can do it now, what’s stopping you?
      I guess if you enjoy your job, then why leave. have a great weekend!

      • Joe, good question, I think my situation is very different from yours in that I’m not having job-induced health problems pushing me away (none that I’m aware of anyway), and I don’t have family or other interests pulling at me. Admittedly I’m looking for inspiration (otherwise I wouldn’t be here), and so far I haven’t found it. I guess the upside is that if I do find something I want to spend more time on, I can do it without sacrificing much. Paid my dues in advance so to speak. But it’s a weird deja vu feeling when I ponder the “what do you want to be” question, I’m more lost now than when I was a teenager. I guess unlike most FIRE types who are very goal oriented and know exactly where they stand and where they are going, I’m one of those floaters who happened to end up here.

        • It’s a hard question for everyone. Many of us are on track for a normal career and ordinary life until something goes off rail. Maybe you should take an extended leave to explore your interest. You can also try reading different books to see if anything will inspire you. Inspiration come from the most unlikely place so try to go out of your routine once in a while. Good luck!

  12. I have been focused for years on dividend income as I don’t want to rely on withdrawing from a portfolio. I have seen my parents retire in the 40s with that model and I know it works. It’s all about making your money work for you and switching to that mental model. If you don’t work on making your money work for you, than you have to withdraw and it’s constantly about deriving if you will have enough or not – only those with a pension plan have that luxury.

    I also agree with Krantcents about reaching financial independence – also known as Findependence 🙂

    • Wow, that’s great. You have a great example.
      Right now, we are also reinvesting most of the dividend income. Hopefully at some point we’ll have enough passive income to cover everything. That’ll probably in about 10 years.

  13. I love the way you broke this down. I, also, am on a path much closer to Table 2. I’m pretty focused on the gap between what I earn passively and the total of my bills. If that gap is small enough that I can cover it with part-time work, I’ll keep doing that, at least until Pretired Baby goes off to school. But if I do go back to work to increase my comfort level, I should be able to put close to 100% of my earnings away so it should build up quite quickly.

  14. A whole week about net worth?

    I’ll take a month, please!

    I choose Table 1 and I would like to fall into the Retire By 40 Column…

  15. I would rather advocate for financial independence! By saving early, you create more choices which is what rich people have. What can you do with the savings to make your future secure enough to do the things you want to do? The answer may be different for everyone, but he outcome must be the same.

  16. I love those calculations, never get bored of them. My initial ones were for 40 and I ended up 11 years early to reach my goal, it is really motivating to follow an ambitious number and then find out you can make do with less.

    • That’s very admirable. You are working really hard to achieve your dream and I’m sure you’ll get there soon. Good luck!

  17. According to your calculations, where we are now does not bode well for retiring early for us (or even on-time)! However, I encourage folks to look at these numbers as a starting point – we have a lot of debt, so our investments are not getting as much inflow as they will in a year or two. That’s one thing I don’t like about these calculators is that they assume that your spending, income, and savings rate will stay the same until you retire – and unless you’re retiring in 3-5 years, I think that’s a big (mistaken) assumption.

    As for which model is more attractive – I’m shooting for the first (no work needed), but will probably be living the second model as I’m pretty sure I’m going to *want* to work at least part time once I’ve “retired”.

  18. Great post! I am 33 years old with plans of having car, land (34 acres in Texas being cultivated to a vineyard), home all paid off and keeping bills for a family of 4 under 3K a month by the time I am 40. I’ve had the cars paid off for a while now. The land will be paid off in May of 2016 (that’s a little over 6 years of payments on a 100K piece of property). The home will take until January of 2021 (I’ll be 40) and right now average credit card bill is holding steady at $3200 a month. Country Bloke doesn’t want to retire with me because he LOVES what he does. He also works from home so he has the good life. I think I might be between table 1 and 2 because Country Bloke might retire when he is 55. If we don’t have any sort of passive income supporting us, we will have to retire. But I think there might be a rental property or two in my not so distant future. Plus we have the vineyard… (-:

    • Hopefully the vineyard will make some money. 🙂 It’s a pretty tough business from what I hear though.
      Good luck!

  19. I like “save enough to retire from the career that you may no longer enjoy early and then switch to something you actually like doing that will generate income to pay for your low expenses that you’ve already optimized”. Since at this point you will like what you are doing, there will be a lot less pressure to “retire”.

    • Love it! I came to that realization a bit late, but it’s working out well. I can always change to do something else more enjoyable later too.

  20. Another great blog column Joe. OK. I see the numbers and at our age of 76, it’s a woulda,coulda,shoulda situation. Yet we’ve had a wonderful 20 years of retirement starting at age 56. We started with $7000 a month the first ten years. Big house, big expenses, big travel, big everything. Then the market turned south, our annuity company went bankrupt, and we were left to Social Security and I-Bonds and savings. We simpy added occasional work to our new cash bucket and made it another ten years. Today on a vacation with our children, we are back to a Maine island where I worked during high school and college. The real estate prices have zoomed upwards from $5000 for a house to $600,000 for the one we would like. So, yeah, there are times when we wish we had more than enough, but with our trusty motorhome, we have figured out how to spend a month here in the summer for $2000 without the hassles of home ownership.
    What’s more important than one or two million is creativity and flexibility. The fact is, there will never be enough. Rule #1…Live beneath your means. Rule #2…Don’t forget rule #1.

    • I love how you pulled it off. 20 wonderful years is gravy. Hopefully my wonderful years will last as long.
      Creativity and flexibility are the keys to a happy retirement. You can plan, but things rarely work out the way you want. We just have to deal with it, right? You sound happy so that’s really great.

    • If it’s not too personal, David, would you mind elaborating on your annuity situation?

      One of my main concerns with annuities is that the company would go bankrupt. I had heard that there was some sort of insurance for annuities, but never really looked into it.

      Did you just end up losing the benefit you expected? Did you get a fraction of it back? Anything to watch out for so that others can avoid this unfortunate situation?


      • I thought the state insure the annuities as well. My pension company said we’d get maybe 50% of the money if they go bankrupt. Not really sure what happened to David’s company.

  21. I live on less than $2,000 per month and I am using that as my budget number for retirement. I will be living on my principal.

    I would love to retire early working less until I am 65 sounds like the more realistic option. I can live on 3 days pay but I can’t save anything or pay debt on 3 days. If I could I would cut back today.

    Does the model for retire early and wait until 65 to collect allow for the fact that I will be saving nothing in those years that I suspect will be 59 to 65?

    • Yes, it does. It’s assuming you won’t add to the saving. However, it also assume your net worth will grow at 4% higher than inflation. That’s quite difficult to pull off consistently.

  22. I find it useful to use a range for monthly income. Our family can definitely get by on about $2000 a month, so that is the baseline. We like to travel and eat out, so a slightly indulgent monthly income would be about $3000, and going all out would be $4000.

    Thus, once we hit $2000 a month in passive income I know we will probably be okay, and anything after that is gravy. I like my job so not planning to retire, but would like the security of passive income so having a range to shoot for avoids the terrifying numbers you mention in the article while allowing us to make inroads into the necessary saving…

    Enjoying it so far!

    • That’s a good idea. I’ll try to make more tables with ranges next.
      $2,000/month is actually pretty good for us too. $4,000 will let us travel in style though.

  23. I think when people talk about to retire at 40 they usually mean model 2. It makes sense because nobody will stop working by 40 and will not make any extra cents for the rest of their lives.

    The only difference is the “option” to say “no” and still have an income. So you will not need 4k by 40, but maybe 1k to cover your fixed expenses. then you work for every extra dollar you wanna spend on “fun” and “enjoying life”

    • I’m not sure I’d agree with that. assumption. Not to be all Internet Retirement Police, but when I hear (or read) the word “retirement” I assume it means “no longer working.”

        • Got cut off… Oops. Thanks for replying so I noticed. 🙂

          What I meant to say was that I assume it means “no longer working” until I am corrected otherwise. Depending on what the author’s own idea of “retirement” is, the transition can be more or less jarring.


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