I read a few personal finance sites, a few are good like getrichslowly.org and address the issue of life being more than just money… but most don’t. I think for most people, retirement is some far off mystic thing that is just a nebulous idea. Floating in their heads and they can kind of see it, but it has no solid form.
So, let’s make it more definite, ask yourself, why do I work? Are you putting in 40 years between 25 and 65 to retire at 65? And then what? Are you working to support your hobbies or expensive tastes? To get your kids to college?
For me the answer is simple: earn $600,000 to retire off the interest. Now, retirement is a loaded word with all kinds of connotations, for me it just means I don’t need to work anymore. It means I could work as a bartender to meet people for fun and spend all that extra money I earn on anything. It means I could master a new skill for fun. It means I could build fun projects or work for a fun company and get paid almost nothing to do fun things.
So, for me $600,000 represents not having to work and feeling good about it (I could always be homeless and not work too). Just as a frame of reference, this is the price of a decent house in a decent part of southern California, so think about that when you want to sign up for a 30 year mortgage. You’re going to pay x% interest for 30 years, which you could otherwise earn and save for yourself and retire, in much less than 30 years.
$600,000 earning 5% it represents 30 grand a year, my living expenses are less than 20 grand a year and I’m working on getting that down to 15 grand. If I want to retire at 35, I have 7 years from my next birthday, assuming I start my next birthday with $20,000 in the bank, I have $580,000 to go, not including interest. That means I need to save about $83,000 dollars per year, more than I currently make before bonuses. To retire at 40 would be $48,333, much more do-able. These are just ball park figures, but they give me a great reason to be frugal and something to work towards.
So, why do you work?
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