How Anybody Can Achieve Early Retirement

The FIRE movement (financial independence, retire early) has sparked a lot of controversy. Many have written that there’s no way to early retirement if you aren’t making a six figure salary or come into a huge inheritance.

Despite the backlash, the math shows that anybody can retire early. You just need to start as soon as possible, and save at least 20% of your income. Top that foundation off by growing your income through career development, and you’ll have a massive nest egg for retirement.

Early Retirement for Anybody

Even the average person can retire early. The trick is to start saving as much as you can, as soon as you can.

The median income per person in the United States is $48,150. Let’s assume that you make this amount right out of college, and that your salary will only go up with inflation for the rest of your career. Most people see their incomes dramatically improve during their 20s and 30s, but let’s be conservative.

If you start your career making the median income, and save a minimum of 20% based on the 50/30/20 rule, your nest egg will be $4.7 million when you’re ready for retirement. Not too bad for an average income!

Based on the 4% rule, you can safely withdraw 4% of your total savings per year while maintaining your principle. 4% of $4.7 million is $188k, so you’ll be able to retire and consume 80% more than you made in your sixties. In fact, you could have retired as early as 53.

The amount you save is incredibly important. Had you only saved 10% of your income, your nest egg would be cut in half to $2.3 million.

Using the 4% rule, you’ll be able to withdraw $94k per year with a $2.3 million nest egg. Although this is below your $102k income, you can probably get by with this amount. Just in case, you always have the option to work a couple years longer to build a cushion. Either way, the more you save now, the more options you’ll have later.

Increase Your Salary to Retire Sooner

There are two ways to increase your nest egg – save more money, and make more money.

Making more money is a lot more fun than tightening the belt. Even more fun is that increasing your net income will substanially increase your retirement savings.

Several engineering degrees pay as much as $60k – $95k out of college. Let’s assume you get one of these degrees and get paid on the low end for $60k per year. Since you have a lucrative engineering degree, we’ll assume that your salary increases by 5% per year.

By graduating with a lucrative degree, job hopping every few years to sustain your 5% income bump, and saving 20% of your earnings, your nest egg will be over $8 million when you’re 60. This is 76% higher than the $4.7 million we originally calculated.

These numbers are conservative as well. Ideally, you’ll increase your savings rate as you increase your income. Increasing your after-tax savings rate will substantially improve your retirement savings.

Early Retirement – The Bottom Line

Anybody can retire early without compromising their standard of living. The trick is to save as much as you can, as early as you can. By saving at least 20% of your income, you’ll be able to retire at 53 while maintaining the exact same lifestyle.

Your income is important as well. The more you can increase your earnings, the more you’ll be able to save. Keep building on your career to maximize your income. By investing in yourself and developing your career, you’ll be able to negotiate for a higher salary.

Keep saving and keep developing your career. Your retirement savings will grow exponentially, and your future self will thank you.