Retirement is pretty far away for some of us. And it’s better to set smaller milestones for your savings now than to focus on the big, lump sum amount you’ll need to retire. However, it’s also interesting to look at the numbers, and this early retirement grid shows you how long it will take.
The grid, which comes from personal finance site Four Pillar Freedom, is pretty easy to read. It compares your salary and spending to tell you how many years it will take you to reach financial independence. If you earn $60,000 a year, for example, and you spend about $30,000 a year, you can reach financial independence in about 16 years.
You’ll want to work with your after-tax income here, and the graph assumes an annual withdrawal rate of four per cent and an investment return of five per cent. It also doesn’t assume any other savings. It’s a relatively simple chart, but it’s interesting to see how your numbers vary if you adjust your spending.
For example, on a salary of $65,000, you can reach financial independence in 28 years if you spend $45,000 a year. Try to live on half your salary, though, and you can cut that down to under 15 years. This isn’t to say you should shoot for a specific amount — it’s your money, your life and your goals. It helps to visualise your potential, though. Check out the full post at the link below.
The Early Retirement Grid [Four Pillar Freedom]