13.2.12

Early retirement: how much?

First of all you will need to calculate what your expenses are going to be. We are not taking into account that during the first years of retirement you will expend more than the last years. It´s a fact  if health care is insuranced. Imagine you will need 25000 USD a year.

Second, you have to decide how many years you are going to live after retirement. Be conservative on the estimation as it wouldn´t be nice to run out of cash, before... There are many calculators that can get you an approximation of your life expectancy. Search on internet.

Third, for every 30 years of living, multiply the needed amount by 50. If we retire at 65 and plan to live 30 years, we should have 25,000x50=1,250,000$ prior retirement. If we retire at 40 and plan to live 50 years then 25,000x50x50/30=2,083,333$.

Fourth, the investment of this money should be conservative typed, but not all bonds, as it should have some nice percentage of dividend stocks to take care of inflation.

Doing it this way, which by the way is hard, there are less possibilities to run out of money.