Thursday, 25 April 2013

Early Retirement.

The next scenario I am considering is Early Retirement.  Of course this means a lot of different things to a lot of different people.  For the sake of this article it's me retiring as soon as possible while maintaining my current standard of living.  (Which is quite frugal compared to most folks but it works for me.)

Over the next four and a half years I will be concentrating primarily on paying off my mortgage.  Meaning that my contribution rate to my retirement savings will stay at $359 per month.  While earning 7% interest and taking into account the current value of my savings $21,395.72 I can expect to have a retirement portfolio of $51,600 when I'm done paying off my mortgage at the age of 28.

Then things get interesting.  Since I no longer have mortgage payments to make I will have a fair bit of money each month to play with.  Anywhere from between $1,200 per month to $1,900 per month depending on how much of my mortgage I am paying directly from my pay check and how much I am paying from other sources of income.  (See original mortgage plan here.  Though it is due to be updated.)  Looking at my monthly budget I am confident that most, if not all of the $1,900 will come from my monthly pay check.  However, I will go slightly conservative and say that loosing my mortgage payment will free up $1,779 monthly.

At that rate I will have the $700,000 (plus a paid off house) that I need to retire 15 years after my mortgage is gone.  At this point I will be 43 years old.

The advantage of this plan are that I will have the freedom to retire relatively young, certainly before the age of 45.

The disadvantage of this plan is that the budget does not allow for kids in my life either before or after retirement.

1 comment:

  1. Keep in mind that the earlier you retire the more you have to save because you'll have a larger number of retired years to budget for. There's always the option of semi-retirement - getting a low stress part-time job where you get out of the house, have that social time and financial reward but leave behind the stress of a full-time career. Just something to think on..