Sideways point of view about early retirement

First of all, let´s face the facts. To be able to eary retire, we need a huge amount of money. There are many estimates of this number, we could use a retirement calculator, or calculate how much money we will need to withdraw every year and do the numbers backwards..., but in any case we will need to estimate: inflation, stock market evolution, and years of living.

We have been talking about inflation lately (link). Unfortunately, our estimates almost double the traditional one of 3.3%. To fight inflation we cannot use bonds, but shares. As Warren Buffett said on his last letter, gold and bonds are not a solution (link). The future of the markets depends on the moment you start buying it. As a rough estimate, the average P/E (Schiller adjusted) of SP500 is 16. If we buy stocks when P/E is higher than 16, we could estimate we are buying expensive. Right now is around 22. Check out this amazing chart (Schiller P/E ratio). This doesn´t mean the market is going to fall down, perhaps it´ll stay even, while the company profits increase.

According to last papers, unless we buy shares when the market P/E is really low, we shouldn´t withdraw more than 2% of money a year to live 30 more years (Is the 4% rule still viable?). Besides, once in while, black swans happen (our logo).

Last, and it´s obvious, we need to estimate how many years we are going to live. Genetics, smoking, place of living..., all could be taken into account. There are great calculators. Look for your favorite one (by the way if you find a free easy one, please let us know, our Twitter is @simplynorisk). You may try living100.com. It´s quite easy and complete. The problem of living more is... that more funds are needed (link)!!