5 Steps to Determine How Much to Save to Retire Early with Retire Early Calculator

You want to retire early- how much money do you need to do this?

In this post I will help you determine how much to save to retire early.

Well, first you will need to know how much you will spend in retirement.

This is what you need to know:

  1. Determine your monthly and yearly expense after your retirement.
    • After we pay off our mortgage and retire early, we expected our monthly expenses to be $2,500 and yearly expenses of $30,000. We can factor in a safety factor of $1,000 extra per month, bringing the yearly total up to $42,000. So our target is $30-$42k/per year. This is how much money we will need to withdraw from investment each year.
    • Use the 4%/25X rule to determine how much money you will need to retire. Multiplying $30k-$42k by 25 equals $750k-$1M needed for retirement – to meet our current expenses per year and never run out of money. (Your savings will grow enough to offset your withdraws each year, preventing your saving from reaching zero).
  2. Determine what age you want to retire.
    • I want to retire by age 45 or sooner (14 years from now). I want to have enough money saved to volunteer, coach for our future kids sports teams, and take them on a decent yearly family vacation.
  3. Determine what rate of return you expect.
    • We are anticipating a conservative rate of return of 7.5%. The 30 year average return of the S&P 500 is around 12%/year with dividend reinvestment. Past performance is not an indicator of future performance, but will provide a good baseline. I will be performing calculations with a 7.5% to 12% rate of return for my projections later in this post.
  4. Add all your retirement and savings accounts together.
    • We currently have $145,000 saved in the following accounts-
      • Roth IRA 1- $17k
      • Roth IRA 2- $30k
      • 401k – $62k
      • 403b – $17k
      • HSA 1 – $1k
      • HSA 2 – $2k
      • non-retirement ETFs/Mutual Funds- $8k
  5. Determine how much you can save each month.
    • We are paying off some last bit of debt. Once that’s done we can save roughly $6,000/month
  6. Use interest calculations to determine how much money you will have at your target retirement age.
    • This sounds easier than it looks which is why I created a simple calculator in Google Sheets shown below. All you have to do is enter in your current savings, how much you can save per month, how much more you can save each year, your expected average rate of return, your current age, and your target retirement age.

With the Financial Free Runner Retire Early Calculator, I have graphed 2 scenarios below. The first is with a 7% rate of return, the second is with a 12% rate of return.

Getting a higher rate of return almost doubles my total savings by 2039!

7% rate of return, $145k initial investment, $6k/month savings with 2%/year increase
12% rate of return, $145k initial investment, $6k/month savings with 2%/year increase

According to my calculations in the spreadsheet I’ve made, if I retire at age 45 I will have $2.3M in the bank with a 7% average rate of return; I will have the same amount much sooner at age 42 if I get a 12% average rate of return.

My 25X rule calculation in the beginning of this blog determined I would need $750k-$1M to retire with our current expenses, however we have a plan to have children and our yearly expenses may grow. Therefore, I am setting our goal somewhere between $2-$3M.

I have made an easy shareable Google Sheet, shown below, to calculate my potential savings. I can share this with you, if you subscribe.

Financial Free Runner Retire Early Google Sheet

Subscribe to get access

Get access to the Retire Early Google Sheet by subscribing today.

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