Tonight while I was reading one of my favorite blogs, Mr. Money Mustache, I came across a post entitled The Shockingly Simple Math Behind Early Retirement. It seems that everybody is freaking out nowadays because social security may not be around in 10-20 years and that automatically means we’ll all have to retire later.
News flash. Social security isn’t enough for people to live off today. What makes you think it would be enough in 40 years even if it were still around? If you don’t start saving for your retirement, no one else will. The trick is to stop complaining about how it can’t be done and spend the time necessary to figure out to do it. So Mr. Money Mustache has created a graph showing how many years it would take to retire at different savings rates. For example, if you save 75% of your income, according to his calculations, you could retire in 7 years. There are obviously some assumptions that go into that, which you can find on his post.
But think about the idea of it!
You don’t need to do things the way society has taught you to. You don’t need to work until your 65. You don’t need to be content with saving 10-15% of your money for retirement. You can do more! But why would you want to? You love work, right? Well, maybe you do. But wouldn’t you rather do it on your own terms? It’s possible. All you have to do is make it happen. In fact, that’s exactly what MMM and his wife did. They retired after 10 years in the workforce and he now spends his time doing what he loves, blogging and hanging out with his family. And the dude’s not living in poverty. So how do you make it happen? It only depends on one factor:
Your savings rate as a percentage of your take-home pay**.
That’s it. Something you, for the most part, are completely in control of. You don’t need to make six figures. You don’t need to go crazy trying to get the highest return on your money. In fact, MMM’s assumptions on that are pretty conservative. So what does that mean? Well, if you’re living from paycheck to paycheck, you’re never going to retire. Ever. Unless you change. Think you are in a position where you can’t change? Read this.
It won’t be easy, but when has anything worth it ever been easy? And how worth it would it be to be able to retire before you’re 50? Or even 40? Take this excerpt from MMM’s post:
“It’s quite amazing, especially at the less Mustachian end of the spectrum. A middle-class family with a 50k take-home pay who saves 10% of their income ($5k) is actually better than average these days. But unfortunately, “better than average” is still pretty bad, since they are on track for having to work for 51 years.
But simply cutting cable TV and a few lattes would instantly boost their savings to 15%, allowing them to retire 8 years earlier!! Are cable TV and Starbucks worth having two income earners each work an extra eight years for???”
The power of the time value of money. It’s amazing. It’s simple. And you can control it. So why conform to what society deems the normal way of doing things? It’s your life. It’s what you want. So do it how you want to do it. Obviously the implementation of it takes some doing, but it’s up to you whether you let laziness and convenience get the best of you.
All the numbers won’t necessarily fit your situation perfectly. Everyone has different incomes, needs, wants, and priorities. But I want to at least give you the opportunity to see the possibilities. You really can become financially independent in a relatively few number of years. And if you like what you do for work, by all means keep doing it. But being able to retire early simply means you don’t have to. You can choose to do it part-time, or in a consulting role, or maybe you’ll get to that point and realize that, with all the new possibilities you have, you were really just lying to yourself the whole time. No matter what your situation is, you can rock it. But make sure you have goals. With goals, all of this seems less a sacrifice and more a positive change in your life to bring you more happiness. But it’s easy to forget that your dreams and your goals will remain just that unless you take action.
**Your take home pay includes your gross income minus taxes and deductions PLUS your 401(k) and any other savings you have pulled out automatically.
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