Early Retirement – Playing With Numbers

Ever find yourself playing with numbers when you should be sleeping?

Running the Numbers

I sure do.

I was looking at my Ally account and happened to click on the “More Details” button/link which then showed me what my daily accrued interest looks like. I mean, it’s a simple calculation they’re using, but for some reason I find it exciting anyway.

Daily Accrued Interest = (Available Balance X 0.0099) / 365

For me, that works out to $1.22 per day. And soon, that will be $1.36/day!

Yeah, not exactly Bill Gates numbers here. In terms of money earned per second, it’s .000014 cents per second or in terms of minutes, it’s .00085 cents per minute.

So that made me wonder what it would take to reach different retirement numbers at 0.99%. Easy enough, just take the amount you want to earn per year and divide it by the APY you’re getting.

Playing With Numbers

$60,000 / 0.0099 = $6,060,606.06 (Yikes)

In order to earn $5,000 per month with a high interest savings account from Ally, you would need over $6 million in the bank. What a waste!

Now let’s say we find an amazing CD with a 3% interest rate. Then what does it take?

$60,000 / 0.03 = $2,000,000.00

Now we’re getting somewhere. That number is still really high but not impossible to reach. However, I’m not a Rockefeller. I’m going to need a higher interest rate. What happens if I invest in index funds that average just 5%?

$60,000 / 0.05  = $1,200,000.00

Okay, now we’re really talking. That’s just $1.2 million. Not only would I get to join the double comma (dos comas) club, but at just 5% I’d have enough money to live comfortably on in most places in the world.

Of course, it’s not outside the realm of possibility to beat 5%. For example, over the past 10 years, VTSAX has averaged around 8%. Plugging that number in should get us some interesting results.

$60,000 / 0.08 = $750,000.00

No double comma club there, but now I’m at least financially independent. And this assumes no diversification, which would obviously bring the average interest rate down but we’re playing with numbers here. (The total bond market index fund — VBFMX — has earned around 4.5% over the past 10 years). Assuming a weighted average for those two for an 80 / 20 portfolio, it would only bring the total interest rate down to 7.3.

( 80 X 8 + 20 X 4.5 ) / ( 80 + 20 ) = 7.3

$60,000 / 0.073 = $821,917.80

Not as clean a number, but perhaps leaning towards realistic. What if I want a little more money to play with? Say $100k.

$100,000 / 0.073 = $1,369,863.01 (or roughly $1.4 million)

So How Much Should I Save?

Assuming I want to reach this number before I turn 65, and assuming I’m starting from $0 at a salary of $100,000 saving just 20%, 30% or 40%, how long would it take me to get there?

20% annual savings ($20,000) invested at an average of 7.3% APY would take 25 years to get to $1.4 million. Retirement age? 57.

30% annual savings ($30,000) invested at an average of 7.3% APY would take 20.5 years to get to $1.4 million. Retirement age? 52.

40% annual savings ($40,000) invested at an average of 7.3% APY would take 17.5 years to get to $1.4 million. Retirement age? 49.5.

While we’re at it, let’s try the same thing while aiming for the lower number of $60,000.

20% annual savings ($20,000) invested at an average of 7.3% APY would take 19 years to get to $822k. Retirement age? 51.

30% annual savings ($30,000) invested at an average of 7.3% APY would take 15 years to get to $822k. Retirement age? 47.

40% annual savings ($40,000) invested at an average of 7.3% APY would take 12.5 years to get to $822k. Retirement age? 44.5.

Sure, I could have used one of the many calculators online for this stuff. Mr. Money Mustache has an excellent one! But sometimes it’s good just to figure the math out for yourself and go through some of the scenarios.

Another thing is that all of these scenarios suppose that I’m living purely off of interest from index funds. It says nothing about dividend payouts from individual stocks or investment property income. Both are avenues I intend on pursuing just to bring that year number down to just 10 years, which is the goal I’ve given myself on my about page. Oh, and also — I’m not starting from $0. I’m starting from about $100,000. If I decide to sell my house, I’ll be in even better shape.

This year has been an excellent year for savings … so far. As you know if you’ve been reading, a rough patch is coming. But that doesn’t mean I can’t maximize before then!

I should probably sleep now.

Until tomorrow!

Disclaimer: Any errors in math are totally not my fault because it’s nearly 2AM where I live and will be corrected once someone inevitably points them out, at which point I will recoil in horror and existential dread because I will be so much further from my goal; meanwhile, I will sleep in blissful ignorance.

Setting Goals for the Long Road Ahead


In a few short days, I will complete my big primary goal to fill my Emergency Fund to 100%.

I will, of course, post when it happens but with the end of that goal approaching, it has occurred to me that even though this is only one of three major and ongoing goals, there’s something missing.

After much thinking, I believe that missing thing is the finite number attached to this goal. For some reason, without that number my mind starts to sort of go fuzzy. And knowing myself, that usually means a loss of interest which will mean the next goal goes up in smoke.

Maintaining That Hustle

This realization, along with a conversation I had with a friend of mine earlier today, got me to thinking about the reason why I have dropped the ball on some things in the past, despite promising starts.

Part of it definitely has to do with being too quick to share my early successes. It is easy for me to feel that sense of completion and fulfillment out of something without having actually seen the thing to completion. That’s a problem.

Another part of it is that I often start things for the thrill of just starting. Starting new things does feel good. Even finishing them feels great. It’s that boring middle ground where there are few successes to share and all the work to do in order to push a thing along.

That’s where things often fall out of order.

Don’t get me wrong — I do finish many of the things I start, but those things are typically important to other people. It’s the things I start on my own that get the least love. So I’ve spent some time contemplating why I’m putting other people before me when it hit me.

I put priority on completing things for other people because they demand progress. There’s no one demanding progress from me for the stuff I want to do.

So the way I see it, I’ve got to trick myself into the same kind of accountability.

Setting Mini Goals

A thing I’ve often read about tackling big tasks or projects is that you should break them into smaller tasks. The same can be said for big goals. My next goal, for instance, is to start investing in general.

Could that goal be any more scary and vague? Probably not.

So the logical next thing to do is to break the menacing goal into little ones. For general investing, that’s easier said than done. At least for me.

First of all, I have some questions to answer. Like where I’ll invest, whether it’s taxable and then how much in each.

Last month, I would have answered each of these questions differently. However, now that I have some rough seas ahead of me, things have changed. As a recap, my primary three goals are:

  • Fill my Emergency Fund to $50k
  • Fill my IRA to at least $5500 every year (diversified and rebalanced often)
  • Begin non tax-advantaged investing

So by July, goals one and two will have been completed actually. And for those of you who are paying close attention, you probably noticed I said “at least $5500,” and that’s because I have the current benefit of having a SEP IRA which allows me to contribute up to 25% of my income or $53,000, whichever is the lesser. However, not being an expert on tax law, I don’t know how much longer I’ll have the benefit of adding to that fund.

And there we have it. My first goal is to figure out when I have to stop contributing to my SEP IRA based on my transition from a self-employed freelancer into a salaried employee. And on top of that, I have to figure out whether I can even keep my SEP IRA or if I have to change it into some other investment vehicle.

Now, depending on the answer to that, I either have to stop putting money into my IRA immediately or I still have some time left to put up to about $45,000 into the account before I have to roll it into (most likely) a Roth IRA.

If I do have to stop, now I have the option to start a brokerage account or wait 90 days to begin investing in my 401k (with 5% matching, I might add).

At this point, my decision tree is getting a little bit complex. I could either plan for all of these scenarios or just get started on goal number one and, once I figure that out, establish the second mini goal.

I think I’ll do just that.

Keep On Keeping On

For me, the most important thing is to keep moving and stay positive. Every step on this long journey counts, no matter if they were at a racing pace like they’ve been for the past year or at light jog, like they’re about to be.

It’s that forward movement that matters.

After all, it could be worse, right? There are so many positives in my life that, even when the wind gets knocked out of me, it’s not hard for me to get back up knowing I have so much to be thankful for. I’ve got my family. We’ve all got our health. I’m still gainfully employed. I’ve got a new community of like-minded people that I love catching up with on a daily basis, who often do the same for me.

Life is good.

Excellent Podcast: Radical Personal Finance

I know, I know. I’m late to the party, as usual.

Lately, I’ve been bored of just reading what seems like the same thing over and over again on the blogs I follow. It’s no one’s fault, really; how much can you possibly write about on this topic? I’m doing the same thing, after all. So I’ve decided to give my eyes a break and use my ears for a while.

I just got done listening to the Financial Independence Podcast by the Mad Fientist — which was also excellent, by the way — but you can’t leave me hanging with so few episodes. Each of the episodes Mad Fientist did were great to listen to. I listened to a couple of them twice, actually. The episode on generating passive income by buying web properties through sites like Flippa was of particular interest. But oh well. I’ll stay tuned just in case he decides to give an update (also, I left a comment on his Podcast page).


So I just started to listen to the first couple of episodes from Radical Personal Finance and I really like the way Joshua comes off as totally down to earth despite an obvious in-depth (or at least broad, yet shallow) deep understanding of a variety of financial subtopics. It was just the kind of thing I wanted to hear after coming off of a Mad Fientist high.

Going through the archive, I can even see he did an episode called “What Advice Would You Give to an 18-Year Old You?” which is right in line with my Younger Me series. I’m also seeing some interesting interviews. Plus, a whole bunch of just general interest finance stuff that looks to be very entertaining.

So I just wanted to leave off by saying two things. First off, thank you to Joshua Sheats for taking the time to create such an endeavor (and giving me financial sustenance). And secondly, if you haven’t given either of these podcasts a listen, please do so now. Drop everything you’re doing and listen. Right now.

Would you recommend any other excellent podcasts for FI?

Rough Seas Ahead

Let me just say, today has been interesting.

So has the past month, for that matter. See, I’m currently a contractor and it was recently made very clear to me that I either join up as an employee or start looking for work elsewhere.

Of course, it was put in much nicer terms. I don’t work with monsters, after all. They value me as a team member and want to keep me on board. Had that not been the case, I suspect I would have been cut out a lot sooner. Luckily, I’m somewhat of a workaholic and the kind of work I do is in high demand for the time being. The only problem, dear friends, is that going from contract to salary is … tough. Rarely do you get the chance to do a straight contract-rate to salary conversion. In my experience, there’s always a cut. Always a price to pay for being a permanent member of the team with raises and the like.

So how much of a cut? Well, in my case, it’s about 38%. You might be familiar with that amount as most of what I save every month.


So I’m dealing with that at present.

Plus, I have another offer on the table that would mean commuting about 50 miles each way, but it’s for $15,000 more. I’ve done the math a number of different ways and even with tax deductions, traveling that distance would quickly beat that $15k bump into submission. In other words — it would work out to be about the same because I would spend a lot more on automobile-related expenses. Plus, there’s that whole opportunity cost of being in traffic for 2-4 hours every day. Yeah, the more I talk about that offer, the less desirable it sounds.

There are more perks to keeping the job I have now, of course. For example, I get to work from home every single day, which means I get to see my family. Every day. On top of that, I’ve been meaning to start a business for a long time and just haven’t gotten going. Keeping this job would mean there would be a certain … urgency … to that pursuit that wasn’t there before. I’d like to work that in my favor. There are parts of my brain sorting out the details right now (time to get some excellent sleep), but I now have an obvious challenge placed before me: earn the difference with a side business or bust.

It’s strange what times like these will do to your confidence and extremely important to reflect in order to turn emergencies like these into opportunities.

I mean, I’m not out of a job. By the time this change goes into effect, I will have fully funded my Emergency Fund and started investing. Things aren’t that bad. I’m just really bummed that I won’t get that big monthly infusion into my various retirement-focused accounts. The story I want this blog to reflect is that of someone who learned the error of their consumer ways a bit later, but not too late. Someone who faced successes despite bumps, setbacks and rough seas. Someone who doesn’t lie and pretend things are always happy.

I honestly hope that’s what you all take away from this.

For now, I’ve got a lot of thinking to do. A lot of talking to do with my wife. We have to make sure our expenses will be covered. Maybe this is the catalyst we needed to down-size the home (and mortgage payments with it) in an effort to live more simply.

Of course, I’ll keep you posted on where this takes me.

Wish me luck!