The Best Way to Retire Early

There are a lot of retirement calculators out there offering to calculate how much you’ll need in retirement. I don’t think too much about retirement, but I am saving about 15% of my take-home pay (10% pre-tax) in a Roth 401(k). I got to thinking how much additional money I would need to invest this year in order to retire one day early.

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 $75,000 a year in retirement, which seems reasonable, if not high. Finally, I would earn 8% on my investments until I reached retirement. I do not account for inflation. Based on this, it seems that in order to take out $75,000 a year, I’d need about $205 a day.

That means that I would be able to retire a day early if I saved another $205 for my 65 year old self, right? Well, at age 22, I have 43 years ahead of me. So, by plugging that into to a time value of money calculator, assuming a rate of 8% earnings, I’d have to put away $7.50 today in order to retire one day early.

Not terrible, but what if I only needed $50,000 a year in retirement? It drops to just $5 (I’m not sure why it comes out to 1/1000th of my needed income, but that only for my 22 year old self. At ages 25, 30, etc, the numbers aren’t quite as predictable.)

So how much do you have to save to retire a day early?

I have 4 easy steps to help you find out how much extra you’ll need to save:

If you bring your lunch to work every day this year instead of going out to lunch…that $5 a day could mean you’ll be golfing one day earlier!

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