Скачать или смотреть 4 Numbers You Need to Know to Retire Early

If you want to retire early, you need to determine how much money you'll need to ensure you're prepared and on the right track.

People often waste time and energy, or worse–delay their retirement–because they don’t know what to focus on or understand if they're even ready for retirement.

So here are the numbers you need to know:

Your expenses: There's just no avoiding this. Many resources will tell you to budget your retirement expenses to be 80% of your pre-retirement expenses, but let’s be honest: who wants to scale back in retirement? Instead, plan to spend about 10 percent more than your current expenses as a starting point.

Bonus Tip: Know what your wiggle room is. If you need to cut back on expenses, can you actually do that? Having flexibility allows you to have a smoother early retirement with less stress.

Fixed income sources: If you're retiring early, it could be years before you claim Social Security, so what are your other income options? This could be a pension, part-time work, rental income, or deferred comp payouts. Lay out these sources of income, including a rough estimate of when they will start and end.

Now that you know what your income and expenses will be, you can determine the gap or the shortfall between these two.

This is the third number you need to know for an early retirement, and it’s crucial. You will need to fill this gap through your savings and investments, which brings us to the fourth number: your magic number (gap multiple).

The most common approach to fill this spending gap in retirement is what's known as the 4 percent rule. Although there’s some debate over the 4% rule, it generally stands up to different stressors and tests. Here’s our spin on it:

Instead of thinking about 4%, we think of 25 times. So, 25x the spending gap in assets. It's the same exact thing as the 4 percent rule, it's just reversed.

If you're targeting an earlier retirement of 55 or younger, your gap multiple or magic number should be closer to 30 times rather than 25 because you need your assets to last longer.

However, the ideal magic number will vary based on your personal situation. How much certainty do you want? How much wiggle room do you have in your expenses? What is the composition of your assets, and what is the tax status?

Each of those factors will play a role in determining your magic number.

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Timestamps:
0:00 - Expenses and income
2:12 - Shortfall and gap multiplier
4:20 - Your ideal gap multiplier
6:18 - Wiggle room
7:27 - Composition of assets and tax status