#Shockingly simple math behind early retirement how to#
If you feel more comfortable with a more conservative asset allocation during accumulation, know that you can have that reduced volatility without too much extra time required, especially if you have a higher savings rate (the difference in medians is 1 year for a 60% SR and 60/40 v. This video shows you how to retire early with shockingly simple math.Ive been a personal finance nerd for a while, and the idea of early retirement is. The Shockingly Simple Math Behind Early Retirement This is the blog post that shows you how to be wealthy enough to retire in ten years. While a 100% equity allocation results in the shortest time to FI on average, the difference is somewhat surprisingly not that big. It turns out that the shockingly simple math is based on these two equations: income expenses + savings FV PMT(1 + i)((1+i)n-1)/(i) That second equation is known as the annuity formula, a variant of the compound interest formula that only takes into account contributions (or payments) and assumes the interest rate period is equal to the payment/contribution period. Don't be surprised if your FI date comes years earlier or later than you estimated deterministically. I highly recommend you read the article, but in case you don't want to, here are the main takeaways:Įven assuming constant income and expenses, the time to FI can vary significantly based on market performance, with larger effects for lower savings rates. Money Moustaches math tells us we can retire in 17. It turns out that the market can have a significant impact on time to FI, which is further validation that it's important not to put too much weight on net worth/ FIRE date goals. The savings rate that many in the FIRE community strive for is 50. ERN's post today ( ) evaluates the uncertainty in MMM's famous post about the Shockingly Simple Math behind early retirement.
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