How Much Do You Need To Save To Retire 1 Day Early?

invest
by turbotoddi

Retirement calculators out there offering to calculate how much you’ll need in retirement. I love thinking about retirement (even if it is 40+ years away), and am saving almost 50% of my after-tax income, a large portion of that in my Roth IRA and Individual 401(k).

Thinking in the long-term can be pretty depressing, and even looking at the ideal amount of savings by age 30 can be hard for some people to handle, so I got to thinking: how much additional money I would need to invest this year in order to retire one day early?

Assumptions

I’m making several assumptions. The first is that at the current rate, I would be saving enough to retire at age 65. Additionally, I’m assuming I would need $100,000 a year in retirement, which seems reasonable.. Finally, I would earn 8% on my investments until I reached retirement. I do not account for inflation in this calculation. Based on this, it seems that in order to take out $100,000 a year, I’d need about $274 a day.

I Need to Save $12.61 Today To Retire 1 Day Early

That means that I would be able to retire a day early if I saved an extra $274 for my 65 year old self, right? I’m 25, so I have 40 years ahead of me. By plugging all this into a time value of money calculator, I’d have to put away $12.61 today in order to have $274 when I’m 65 and be able to retire one day early.

Not terrible, but what if I only needed $75,000 a year in retirement? It drops to just $9.46

Try It Yourself

How much do you have to save to retire a day early?

If you want to check out how much you’ll need to save today to retire 1 day early, here’s a link to the spreadsheet. Feel free to play with the numbers for yourself!

If you bring your lunch to work one or twice this week instead of going out to lunch, that could mean you’ll be golfing one day earlier!

13 Responses to How Much Do You Need To Save To Retire 1 Day Early?

  1. Michelle says:

    This is very interesting to think about! Such a small amount for one extra day of freedom, sounds like a win to me :)

  2. Kelly says:

    I think you need to have a serious discussion with Mr. Money Mustache or Jacob Fisker. If you’re saving 50% of your income, you should be able to retire in less than 20 years. Why do you think you need $100,000 in retirement if you’re so frugal right now? Also, why would anyone want to wait until 65 to retire!?

    • @Kelly, What would I do at age 45 if not work? 40-50 years of doing what? Sounds boring, but maybe I won’t feel that way then.

      Also, I’m able to save that much now, but I don’t have any major responsibilities yet. No kids, no house, but hopefully that will change eventually!

  3. I use to be able to save about 75% of my take home pay now with a family I’m able to save right around 50%

    I would caution you to research that metric of making 8% a year on your money. A lot of funds and manager state they can achieve those results yet when researched you will find that it is a lie.

  4. I had never thought of that, why I don’t know, but very cool. For that little bit of money it certainly seems worth it to me to get that extra day of freedom.

  5. That is a really cool way to think of things. Very nice Daniel. :-)

  6. KC @ genxfinance says:

    This is awesome Daniel. Even with just small little things if it is done consistently can pile up and become big.

  7. S says:

    I saw your comment on Grayson’s post about whether you should pay off your spouse’s debt and just had to share that my boyfriend did exactly the same thing for me! He gave me $5,000 to put in a traditional IRA for the 2012 tax year. We decided on a traditional IRA for tax deduction purposes and used the refund ($2,000) to pay down the principal on the highest interest portion of my student loans. We figured that reducing the interest payments on my loans took priority over being taxed later on the traditional IRA. Even though the account is under my name, it’s “our” retirement money. He may not buy me jewelry or take me on nice vacations, but he takes care of our financial future! :)

    • @S, Thanks for stopping by! I agree, there is no “I” or “me” in retirement (although, there sort of is: retIreMEnt…), if you’re married, you’re planning on staying married throughout retirement, so splitting accounts makes little sense. Everything should be done with the mindset that you’re in it together and decisions should be based on what’s best in the long-term for you as a couple.

  8. Huh interesting! I didn’t realize you were so close to my age, Daniel, although I’ll be the very old age of 26 in just a few days. ;)

  9. Ira says:

    It is unrealistic to count on 8% over 40 years. That is a very optimistic estimate – obviously this year seems easy, but you need a longer view. I think you should base your plans on 5-6% and then if you exceed that you’ll be in great shape. Plus, $100,000 a year in today’s dollars is moderate (unless you are not including Social Security, if it’s still viable in 2053). At age 65 you are still young enough to do some very cool things (such as travel, hobbies) that cost a lot of money. And, you may want to help out your kids, grandkids. I am thinking that $100k would be fine for me, but I intend to retire at 70 – those five years really make a difference. Realistically, that leaves fewer years for high cost activities. And, lastly, all of this assumes you have some good long term care insurance (since if you need nursing care, etc. that could quickly eat up savings).

    Also, as someone who is 60 and has no interest in retiring very soon – why do people think that it is great to retire very early? Unless you have a very specific plan (that you have a hobby or interest that you are dying to spend time doing – such as painting, music, volunteer work, etc.) there is no great advantage to not having a structure in your life at an early age.

  10. jim says:

    I agreee with Ira – what in the world are you going to do ALL day long, EVERY day if you retire early? I’m 55 and went to a 4 day work week ’cause I was burning out – a couple of years ago. It was fantastic at the beginning, but now I find myself looking for things to do on my “extra” day off. Plus, how in the world are those that retire “early” going to take care of their kids’ college, etc? I don’t get it.

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