The Goal: Retiring by 35

As I mentioned in my last post, one of my major goals is to achieve financial freedom the the time I am 35.  I’m 22 now.  Here’s the breakdown:

One quick fact you should know is that my annual expenditures are around $20k, or $1,667/month.

Personal Investments: $500k

Using the 4% withdrawal rule (which I’ll get into another time), I get a lump sump of $500k.  However, the 4% rule typically assumes that you want the seed money to last forever and you would live off of the investment returns.  I have no issue with spending the seed money, because I only need the $500k and the interest from it to last me 30 years, at which point I will have my retirement funds.  So I have plenty of safety buffer here.

Retirement Investments (IRA, 401k): $250k

If you’ve googled “How much do I need to retire?” you probably found numbers like $1M, $2M, or 25x your ending salary.  In my case, I am going to go with $250k. IT seems way to low.  But remember, this $250k is going to be in retirement accounts so I won’t be able to touch it until I’m 59.5 years old anyway.  Based on a 8% yield and 3% inflation, I would end up with $2.5M at the age of 65.

Extra for Family: $100k

While my parents have been very clear that they do not need or want any assistance in the future, I’m planning on investing a little extra in case they need it.  $100k might seem a bit small, but if I get that invested in some good funds, I should have a good amount of money for them when they’re older and would most likely need assistance with anything.  15 years after I invest the seed money of $100k, my parents would be roughly 70, and I would have another $300k to help provide for them, whether health issues or vacations.

My favorite financial calculator is from BankRate, click here for the link.

The grand total is to acquire $850k in 13 years.  Obviously, I am going to have to save a ton of money in the next 13 years.  I am currently an entry-level engineer making slightly over $60k, but I do manage to save about $33k annually (401k + matching contributions, IRA, Vanguard, everything).  All of my bonuses also go towards my savings.

While I am focusing on the dollars and cents, what I really care about is the lifestyle.  Sometimes, I really hate the 8-to-5 work life, and I want to just have the power to choose for myself If I want to keep at it.  I have family and loved ones in around the world, and I want to be able to visit them for more than 1 or 2 weeks.  But in the end, despite what I may or may not do later in life, I want to be able to choose.  I want freedom.