One of the fun things about personal finance (in the nerdiest sort of way) is if your goal is to replace you income in retirement, and you invest based on a percentage of your income, it actually does not matter how much you make!
Let me give an example. Assuming both people receive a 7% real return:
Person 1: makes $300,000 a year as a doctor. From age 35 to 65 they invest 25% of their income. Using the 4% rule their retirement income will be: $303,000 or 101% of their pre-retirement income.
Person 2: makes $60,000 a year as a mailman. From age 35 to 65 they invest 25% of their income. Using the 4% rule their retirement income will be: $65,700 or 101% of their pre-retirement income.
See what I mean?? Isn't that neat? That means we can make some pretty helpful tables. Check it out
Assuming you start from $0, make 7% real return on your investments, and you want to replace 100% of your gross pre-retirement income.
Investing Percentage Rate | Years Until Retirement |
0% | Infinite |
5% | 52 |
10% | 43 |
15% | 37 |
20% | 33 |
25% | 30 |
30% | 28 |
35% | 26 |
40% | 24 |
45% | 23 |
50% | 22 |
Seeing tables like this encourage me to better understand retirement investing and invest continue to aggressively.
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