So, you don’t want to work anymore. Great! A few things:
Are you independently wealthy or otherwise born into great fortune? Are you a member of a live/work commune that will accept your labor for shelter and food? Do you have the skills needed to forage or hunt your own food and build your own shelter away from privatized land? Have you joined a cult where many of those needs are satisfied in exchange for whatever weird stuff you have to do?
If not, then you’re going to want to start thinking about planning for early retirement, say at age 50, when you still have your wits and body about you. Let’s figure this out together.
The first tweak is to the question itself, because it’s less about how much money you make than how much money you save. (Ex: If you make $200,000, and spend $205,000, that’s less than ideal for retirement planning.)
The next consideration is how many years you’re going to live after the age of 50. According to the Social Security Administration, a man turning 25 years old in 2018 is expected to survive until he is 82 years old, while a woman is expected to live until she's 86. And while it's rare to live to 100 in the U.S., there are currently about 2 million people over age 90, according to the Census Bureau — a number that is expected to increase exponentially in the coming decades.
To account for this, most too-broad-to-really-help retirement calculators hover around a life expectancy of 92 or 93 years old. Better safe than sorry, I suppose. Let’s assume the latter, due to the expected advances in medical tech—although, not too many advances, or else we’d have to figure in the inevitability of weird stuff like the Singularity—and you’ll need to save enough to last for 43 years.
Now, what does “one years’ worth of money” look like? This one is heavily dependent on one’s personal situation.
Time to Break out the Calculator
Retirement calculations tend not to look at savings as an actual monetary number, but rather “multiples of annual salary.” This is because retirement will, presumably, be an extension of your current lifestyle, just without the “job” part. You’ll go to the same amount of movies, vacations, pedicures, craft nights, and underground boxing tournaments. This multiple also takes into consideration the cost of living wherever you’re at, and theoretically will stay.
Some factors will certainly change throughout that long timespan; for instance, an average rent for an unfurnished apartment in the U.S. was $308 per month in 1980, and up to $1,478 per month in 2016. Ouch.
That’s all to say: There are a lot of moving parts! So many, in fact, that every retirement investor I spoke to said they couldn’t really answer my hypothetical without more specific details. But here’s a shot at it anyway.
A chart from Fidelity Investments shows its recommendation that, to retire at 67 years old, you should have ten times your annual salary in the bank. (This number is similar to other retirement advice out there.) So, ten times your annual salary will cover the 26 years between 67 to 93 years old, which comes out to one year of salary for every 2.6 years of life.
However, for those 26 years, you’d also likely be getting Social Security, which can be collected starting at 62 years old (with the slight penalty of receiving a lesser percentage of your full retirement benefits, compared to the 100 percent you’d get at age 70).
Assuming Social Security is still in place by the time you get there, that means you’d have to cover the years between 50 and 62 on your own. But there’s no sure bet of Social Security’s longevity in this political climate; even the SSA’s retirement calculator warns that “by 2034, the payroll taxes collected will be enough to pay only about 77 cents for each dollar of scheduled benefits.”
That’s simple enough: An extra 12 years of annual salary. Meanwhile, for the gap between 62 and 67 years, it makes sense to stick with the “one year of salary for every 2.6 years of life” formula from above, meaning, two more annual salaries.
Here’s a good time to consider another factor—your lifestyle upon retirement. Do you picture living in monk-like frugality? Cut everything in half. Want to spend your golden years bathing in champagne and commanding an army of prize-winning poodles? Let’s double the sum then.
Add it up, and if you want to retire at age 50, never work again, and plan to live your “normal life,” you’ll need to 24 years’ worth of salary before you tell the boss to fuck off.
When Can You Afford to Retire?
To see exactly how the math works out for you based on your current age, salary and savings, use Fidelity's retirement calculator here. A 25 year old earning $50,000 a year who wants to retire at age 50 with the same standard of living, would need to save $1,500 a month, invested all in stocks, to have even a fair shot at that goal. That's about $2.3 million dollars altogether. Gulp.
Since hitting those goals likely involves living in your parents' basement until you're 50 as well, it's probably high time you start looking for a higher paid job, so you can start living the good life as soon as possible.