Ever wondered just how much money you’d actually need to in order to be Financially Independent, to quit your job, and retire early? Here’s the answer. Enjoy! Add me on Instagram/Snapchat: GPStephan
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First, lets define “financially independent,” because this term means different things to different people. To me, it’s having enough money to support your current lifestyle without you ever needing to earn another dollar. It’s knowing that you’ll have a certain amount of money at your disposal every single month that covers your daily expenses without ever running out.
For each of us, that number is different. For someone in rural Kentucky, maybe it takes $35,000 per year to cover all of your expenses…food, housing, entertainment, health insurance, just everything you’d ordinarily spend in a given year. For someone in New York City, maybe that number is closer to $90,000 per year…or maybe for a family of 5 in Southern California, it’s $125,000 per year. But what’s unique is that even though each of us will have a different level to what we’d consider financially independent, the math behind it stays exactly the same.
For most situations, how much you need invested in order to retire is as simple as this: 25x your annual expenses. This means if you want to spend $50,000 per year, you’ll need 25 times that…or $1,250,000. You want to spend $80,000 a year? You’ll need 25x that, or $2,000,000 invested. Spend $100,000 per year = invest $2,500,000.
In order to accurately do this, it requires you to really sit down and think about the lifestyle you want, how much it’s going to cost, and what you currently spend. By first going over your current expenses…and literally counting every cent that goes in and out of your account, you’ll get a great baseline as to how much you regularly spend on a monthly basis. From there, determine if there’s anything else you’d want and how much that will cost. Once you add everything up…multiply that number over 12 months…then multiply that by 25, and that’s how much you’ll realistically need to have saved.
So how does this work exactly when it comes to financial independence? Well, that’s what’s known as the “Safe Withdrawal Rule” or “The Trinity Study.” This study suggests that you can withdrawal 4% of your total investment annually - which is usually studied as an investment portfolio consisting of 80% equities and 20% bonds, with a fairly high success rate of never running out of money. This means that for every $100 you invest, you can safely spend $4 of that each and every year for basically the rest of your life.
.
This study takes into account that you’re invested in 75%-80% in equities, like stocks of a corporation, and 20-25% of bonds, which represent a more stable, secure return. On average, a portfolio like this should return an average of about 7% annually adjusted for inflation over a 30+ year period. This means that your investment MAKES YOU 7% after inflation…you then spend 4%…leaving you with an extra 3% left over as a buffer for safety. And this is the basics of how this study is calculated. This takes about 100 years of historic data and market returns into account to determine a number that should be safe in the majority of market situations.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
Join the private Real Estate Facebook Group:
https://www.facebook.com/groups/therealestatemillionairemastermind/
Get $50 OFF + FREE Coaching Call FOR A LIMITED TIME: Code THANKYOU50 - The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $120 million in sales: https://goo.gl/UFpi4c
First, lets define “financially independent,” because this term means different things to different people. To me, it’s having enough money to support your current lifestyle without you ever needing to earn another dollar. It’s knowing that you’ll have a certain amount of money at your disposal every single month that covers your daily expenses without ever running out.
For each of us, that number is different. For someone in rural Kentucky, maybe it takes $35,000 per year to cover all of your expenses…food, housing, entertainment, health insurance, just everything you’d ordinarily spend in a given year. For someone in New York City, maybe that number is closer to $90,000 per year…or maybe for a family of 5 in Southern California, it’s $125,000 per year. But what’s unique is that even though each of us will have a different level to what we’d consider financially independent, the math behind it stays exactly the same.
For most situations, how much you need invested in order to retire is as simple as this: 25x your annual expenses. This means if you want to spend $50,000 per year, you’ll need 25 times that…or $1,250,000. You want to spend $80,000 a year? You’ll need 25x that, or $2,000,000 invested. Spend $100,000 per year = invest $2,500,000.
In order to accurately do this, it requires you to really sit down and think about the lifestyle you want, how much it’s going to cost, and what you currently spend. By first going over your current expenses…and literally counting every cent that goes in and out of your account, you’ll get a great baseline as to how much you regularly spend on a monthly basis. From there, determine if there’s anything else you’d want and how much that will cost. Once you add everything up…multiply that number over 12 months…then multiply that by 25, and that’s how much you’ll realistically need to have saved.
So how does this work exactly when it comes to financial independence? Well, that’s what’s known as the “Safe Withdrawal Rule” or “The Trinity Study.” This study suggests that you can withdrawal 4% of your total investment annually - which is usually studied as an investment portfolio consisting of 80% equities and 20% bonds, with a fairly high success rate of never running out of money. This means that for every $100 you invest, you can safely spend $4 of that each and every year for basically the rest of your life.
.
This study takes into account that you’re invested in 75%-80% in equities, like stocks of a corporation, and 20-25% of bonds, which represent a more stable, secure return. On average, a portfolio like this should return an average of about 7% annually adjusted for inflation over a 30+ year period. This means that your investment MAKES YOU 7% after inflation…you then spend 4%…leaving you with an extra 3% left over as a buffer for safety. And this is the basics of how this study is calculated. This takes about 100 years of historic data and market returns into account to determine a number that should be safe in the majority of market situations.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
I need 260k dollars invested cuz' i live in india
Must lower!!
Great vid, I come to the conclusion I'll be flipping burgers at 85 years of age 😂
How to retire early: Move to Bali
$948,600
Stunning presentation Stephan! It helps us a lot!
Would this plan still work if I have saved up 25x of my expenses, but have 50-60 years of retirement? Wouldn't I run out of money? Would these numbers adjust for inflation or increased cost of living? I expect that I would have to spend more as I get older – like medical costs and long-term care. This sounds like people could potentially run out of money after 25 years.
2500000! Definitely more than I expected.
25 times based on what? A 30yo will need a higher multiple than a 60yo, correct? What is the multiple based on age?
Liked! Love your videos Graham! Super informative and science based! I’ve been getting financially advised to get life insurance to eventually insure a mortgage or might be useful if I get children. What do you think about it? And there are so many options permanent vs term, buyback vs not, and buyback with interest. Thanks a bunch!
Love it, Thank you!
Graham great job on the videos! I was wondering if you have any information or strategies you take for health insurance since you are self employed. What is your best research so far?
I was just re-watching this video for the information so I could see where I stand on being financially independent. The number was actually much lower than my expectations which is because I was raised to have the mind-set that you always need to work and retirement is an illusion. At any rate, the number was well under $1 million even after adding an additional 10% to my annual expenses for an 'unknown' buffer. I started thinking to myself that retirement may really be possible, but then I started thinking of my current lifestyle vs my future lifestyle. Currently I'm single with no kids, semi-healthy, and living a somewhat frugal life so my annual expenses are near the bottom of what I can possibly make them. However, as time goes on my cost of living will certainly go up due to inflation. Bills will certainly increase, health will decline which means health care costs go up, and that's not even factoring the added costs of a family. It all makes my head spin, and makes me wonder if this guide has factored all of that into it.
What's your thoughts Graham?
Real Estate over stocks yes in returns. But what about the work you have to do between the two? Stocks are more passive. It's better to do a little of both.
2 million is all it takes
600k to cover my actual lifestyle, it’s lower than I expected 🤭
I don't understand why you have to reduce the safe withdrawal percentage to 3% if you plan to retire early. As long as you've saved up 25x annual expenses, couldn't you withdraw 4%, regardless of how long it took you to save up that amount?
Buffer? Dude this ain't League of Legends.
I see a lot of stuff about "how much you need to retire."
I don't care.
I don't care how much I "need." The number is infinite. I dont wan't "living expenses" for the rest of my life. I don't want a "travel budget" in my sunset years. I want "fuck you, I do whatever I want" money until I die. THAT is the goal.
Retiring at 35 shouldn't be the goal. The goal should be finding a job you don't want to retire from that gives you time and freedom (in English: money) forever.
I've been re-evaluating my retirement recently and came up with a spreadsheet showing I need about 750k. Then I watched this, did the math and came up with 750k again! Could have saved me some time if I'd seen it sooner lol.
dang so i can just dropship for one year and retire at 20 yrs old if i go ham
Ok, I've been watching for about a month now. This guy you keep referencing (the guy that's financially independently financially) cracks me up. Who is he and do you have a link to the original video you pull these snips from?
Im so behind on your vids need to catch up 😂
The Stock Market can Crash and all of you real estate investors / speculators are going to CAUSE this. Damn you all.
Very informative. Thanks for uploading