The Shockingly Simple Math Behind Early Retirement
As popularized by Mr. Money Mustache, the math of early retirement is simpler than most people realize. It doesn't require an extraordinarily high income or winning the lottery. Instead, it's all about the percentage of your income that you save.
The Double Impact of Frugality
Reducing your spending accelerates your timeline from two directions:
- More to Invest: It increases the amount of money you have to invest today.
- Smaller Nest Egg: It permanently decreases the overall nest egg you need to sustain your lifestyle in the future.
Core Assumptions
This calculator uses the following standard assumptions for financial independence planning:
- 5% Annual Return: A conservative after-inflation (real) investment return.
- 4% Safe Withdrawal Rule: Assuming you need a nest egg 25 times your annual expenses to retire safely.
- Steady Savings: You maintain a constant savings rate and all savings are invested.