The big issue for those who want to opt out of the rat race and retire is how much money is needed to walk away.
When you reach your mid-to-late 30s, you are hit with a panic-inducing life question—how will I ever get out of this rat race and retire? It's a terrifying moment in a person’s life. All at once, you’re contemplating your life’s purpose, where you are, what you’ve accomplished and the goals you have yet to achieve. There is an overwhelming fear of an unknown future, where you may not have enough money to live the life you want or had planned.
In our parents’ and grandparents’ generations, things were different. They would loyally devote themselves to a company for the majority of their working lives and then retire around the age of 65. A gold watch and pension would be rewarded to them for their years of hard work and dedication. Social Security benefits would add to the money needed to retire. Since the average lifespan was much shorter then, the funds didn't have to last too long.
A back-of-the-envelope calculation requires you to take out about 3% or 4% of your accumulated saved money each year. On $1 million, that works out to be $30k to $40k per year. If you live in any major city, that amount doesn’t go far. You’ll also need about 75% of what you earned, while working to keep up the same standard of living in retirement.
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