Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Old 09-20-2009, 10:21 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
Join Date: Sep 2005
Posts: 5,381
Originally Posted by friar1610 View Post
I'm not sure that's entirely true. When I was looking at early retirement as a possibility, I ran across John Greaney on the web. IIRC, he retired at 38 or some ridiculously young age an did not have a windfall. . . .
As mentioned by others, the point wasn't about retiring early, it was about replacing 100% of your peak earnings on a recurring basis at a very early age.

Just to show how nearly impossible this is I ran some numbers. Assuming our retiree earns 100% of his peak earnings every year of his 20 year working career, earns a 5% real return on his investments, and plans to withdraw 4% of his portfolio at retirement (a high WR for a ~38 year old retiree), our retiree would have to save 76% of his GROSS pay (before taxes), every year. Many people pay more than 24% of their earnings in taxes.

If we assume he gets even a modest 2% raise every year, he would need to save 96% of his gross pay.

While this might be an interesting mathematical exercise, the bigger question is why anyone would set this as a goal in the first place. If one is capable of living on a fraction of their pre-retirement salary, why would they need to replace 100% of their peak earnings anyway?
Gone4Good is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-20-2009, 12:21 PM   #22
Full time employment: Posting here.
Join Date: Feb 2008
Posts: 920
Originally Posted by . . . Yrs to Go View Post
If one is capable of living on a fraction of their pre-retirement salary, why would they need to replace 100% of their peak earnings anyway?
Yup, I'm sure it's been mentioned in these forums before, this is the flaw in the oft-bandied about need to replace 70% of pre-retirement income. Everyone's situation is so different that it's a completely pointless number to state even as a general barometer.
tuixiu is offline   Reply With Quote
Old 09-20-2009, 04:32 PM   #23
Full time employment: Posting here.
Join Date: Sep 2007
Posts: 974
Agreed. At best, you only need to replace 100% of what your adjusted income was.

"Adjusted" means after subtracting out FICA, 401K & IRA contributions, etc. FICA is 7.2%, 401K is maybe 10%-15% ($15,500 max), IRA is $6000 max. Plus back out most of your income tax, since most of your post-retirement income will be either not taxed or taxed at a lower rate.

Plus, for us, moving to another state and trading my $13,000 real-estate tax bill for a $2500 one.
rayvt is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Retired Military Guy Here. BLS53 Hi, I am... 13 03-30-2008 12:10 PM
A Good Retired Morning haha Life after FIRE 28 08-12-2007 06:14 PM
Are you retired for good? Florida Life after FIRE 57 07-03-2007 01:17 PM
A good day to be retired Khan Life after FIRE 11 12-05-2006 06:24 AM

» Quick Links

All times are GMT -6. The time now is 01:56 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.