this post was submitted on 09 Jul 2023
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You're looking for what's typically termed financial independence. There are many blogs on the subject, Mr Money Moustache is one of the most popular, and I like Millennial Revolution for their Canadian flavour. You'll find quite a lot of information there (MR's investment series is quite informative).
For a broad forecasting assumption, a 4% safe withdrawal rate is common, which means you can withdraw 4% of your portfolio on any given year with a high probability that your portfolio will outlive you. That essentially means you need to save 25x your annual spending (in retirement).
There is so much nuance to it it's easy to get overwhelmed. Early Retirement Extreme has a series diving into the math and probability of withdrawal rates, with a multitude of simulations. There's FIREcalc, which can help with planning but can get complex.
To make it simple, I've not put hard limits or goals on savings. Disciplined spending will get me there. Invest in low-cost whole-market index funds, don't put too much pressure on yourself, and enjoy the journey.
I think the 4% rate is generally only safe if you're retiring much later (i.e. ~65). I think retiring at 50 will require a much safer withdrawal rate without exposing yourself to too much risk
I believe the original study (Trinity Study) that determined the 4% used a 30 year time horizon. One would have to adjust to their own risk profile and assumptions.
I mentioned ERN's SWR series because of that. He simulates longer time horizons and I believe finds 3.5% is a more conservative number, but everything will vary by individual.
Ah this is great! Thank you!
Fully agree on the disciplined saving. I basically automated my paychecks to send x% to my various savings accounts. That's got me this far, but I'm really keen to be more strategic with it. This should help!