Invest in yourself

First things first, invest in yourself. Concentrate on improving yourself (better paying job, more education, exercise and health, etc). That will be the single largest indicator of your financial and mental well being.

How much do you need invested?

The easy way, pick your retirement date based on how much you are saving:

Savings Rate

60% 12 years
50% 15 years
20% 30 years
10% 40 years
5% 50 years

So if you save 50% of your salary you can retire in about 15 years. I cover the math behind the above table here

One way to think of it, is to take your current S&P500 investment $ amount, whatever it is, and take say 2-4% of that number, to help you recognize how much income you can have from that *FOR LIFE*. When that number gets above your expenses, you are good to go.

Conservative pulls from your equities is 2%, 4% is a touch aggressive. For my demo below I'll use 3% which should be very sustainable.

Yearly withdrawal for given value of your FXAIX(S&P500 fund)

Amount Invested 2% of 3% of 4% of
$1,000 $20.00 $30.00 $40.00
$5,000 $100.00 $150.00 $200.00
$10,000 $200.00 $300.00 $400.00

So get $3,600 invested with a 3% return for life(3600*.03) = $108/yr or $9/month. Netflix for life is now paid for :)

Another way to do this, is take your monthly bill multiply by 34, that is roughly how much you need invested to get that bill paid for life. The above example would be ($108 * 34 = $3,672) or which is $3,672 / 12 or $9.18 per month. Just enough to cover Netflix!

Calculate this out for each of your bills you care about, keep investing and pretty soon you will be Financially Independent!

If your yearly bills are $25,000 , then you need $850,000 invested. For $50,000/yr you need $1,700,0000 (1.7 million) invested.

Savings Rate

Another way to think of this is via your "Savings Rate"(SR). This is how much as a percentage you should save, and give you a time-frame for when that savings rate will generate the other part you aren't saving to retire.

save 50% of your income and you will be Financially Independent/able to retire in about 15 years, regardless of your income level. If you can save 50%, that means you only need 50% of your income to live, so by saving the other 1/2 for 15 years, you will accumulate enough in 15 years to generate the other 50% you were living off of. Math is cool!

Obviously we can't all live off of only 50% of our income, so obviously the less % you save, the longer it takes to become financially independent. With a 25% Savings Rate(SR) after-tax it would be ~ 30 years(@ 6% growth).

How this works:

if you save 50% of your income for about 15 years(as the future investment income is unknown) in a TSM(total stock market) or S&P 500 index fund, you should get roughly 10%/yr returns(averaged over decades), not including inflation.

After inflation it's 6-8% year investment income(as the US govt aims for 2%/yr inflation). After 13-20 years you should have enough to withdraw around 4% a year off the top to live off of, which should roughly equal your 50% you were living off of before. Even though during retirement, many people lower their expenses by 10-20%.

There are lots of caveats and dirty details that I'm skipping here, as with all things the future is unknown, taxes, etc, etc, etc. But the math works out that in around 15 years, you should have enough to retire.

I wrote an example using 2019 dollars available here

More information: