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How to retire early – let’s break down the steps to early retirement.

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This video shows you how to retire early with shockingly simple math.

I’ve been a personal finance nerd for a while, and the idea of early retirement is really interesting. I’m a huge fan of Mr. Money Mustache who wrote a great article on the shockingly simple math behind early retirement. Since I make videos, I wanted to take his theories and break them down into a digestible video.

I hope you enjoy! And like I say in the video, please like and share this video, then leave a comment. What do you think? Is this amazing or crazy? What is your savings rate? What other personal finance questions do you have?

I credit a lot of this work/theory to Mr Money Mustache. Read his full article about it here (http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/). Also, check out this cool early retirement calculator (https://networthify.com/calculator/earlyretirement?income=50000&initialBalance=0&expenses=17000&annualPct=5&withdrawalRate=4)


Hi, my name is Phil. I’m a video creator and online instructor. I’m also a personal finance nerd.

Because of that, I want to create a series of videos that breaks down some of the most mystifying topics that plague our society.

In a world where people’s finances are typically locked away and not-talked about, I believe opening up the gates of financial conversation will help everyone live a better and smarter life.

In this first video, I want to explain the shockingly simple math behind early retirement – thanks to one of my biggest heroes, Mr Money Mustache.

While the ability to retire may seem like a distant and unreachable goal for many, the premise comes down to one thing. You need to invest money so that it earns more money. This could be investing in stocks or bonds, real estate, or any other of investment vehicles. As soon as your investments earn enough money for you to live on each year, you are able to retire.

Let’s break it down further to know when you can retire.

The most important concept is knowing your savings rate, basically how much you make minus your expenses.

If you spend 100% of your income, you will never retire… because you will never be able to invest any money that earns money for retirement.

If you spend 0% of your income, you can retire right now… because somehow you are living without needing to make any more money.

Between 0% and 100% are a number of savings rates that correlate with the years it will take to retire.

For this, let’s assume your annual investment return is 5% (which is conservatively low) and your withdrawal rate is 4%… meaning you spend 4% of your net worth each year. For example, if you have a $1,000,000 net worth, and you live on $40,000.

If your savings rate is 10%, you will be able to safely retire after 51.4 years. Safely, meaning you will never run out of money.

If your savings rate is 25%, you can retire in 31.9 years.

50%, you can retire in 16.6 years.

And if you can somehow save 75% of your income, you can retire in 7.1 years.

Now getting to that savings rate might not be easy in our world of societal pressures, keeping up with the Joneses, and bad habits. But you can get closer by making smart decisions, avoiding debt, and living simply.

The key take away is…
Cutting your spending rate is way more powerful than increasing your income because no matter how much money you make, decreasing your spending will speed up the process.

A note, The math behind early retirement works if you are working a minimum wage job or a 7-figure CEO salary.
It’s all about the savings rate.

So if you want to retire in 10 years, the math tells us that you need to save 66% of your income.

Now there is a lot that I didn’t talk about – like how to invest, and how to cut expenses to get to a high savings rate. Those will come in a future video.

For now, get excited about the honest truth about retirement (and early retirement at that!)!

Let me know what you think in the comments below? Is this exciting or bogus?

Until next time… start being money smart.

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36 replies
  1. mark Gimson
    mark Gimson says:

    the best retirement plan i made was starting stocks trading with Mrs Nancy Berman Epstein ..she handles all my trading activities and i make about 25,000USD monthly. it is very satisfying ….

  2. Ditching The Grind 3
    Ditching The Grind 3 says:

    1. Never take out car loans- Pay cash. Buy used Toyotas and Hondas. (Reliable). 2. Stop eating out. 3. Your mortgage payment should be 25 % or less of your take home pay. 4. Do not carry a balance on your credit card. 5. Limit the number of children( 2) and dogs (1) and cats (1). 6. Ride a bike when you can instead of a car. 7. Get a roomate to help with expenses. 8. Use Living On A Dime Cookbook to keep food expenses down. 😀🐾🐕👍

  3. Moto arzan
    Moto arzan says:

    SAVE & INVEST 10-20% of every penny you make starting in your early 20's. And if you have an excuse you're already broke and poor…too bad! simply live an additional 10-20% poorer than you already are. You know why? Because it's better to live 10-20% poorer for the first 2-3rd's of your adult life than 100% poorer in the last 1/3 of your adult life at a time when you won't be able to physically go out and earn money even if you wanted too. That day is coming whether you like it or not.

  4. xfjea01
    xfjea01 says:

    There may be even faster ways to reach financial freedom, such as explained by this well known man from Singapore. About 150-200% of annual expenses is enough, which usually only takes less than 5 years of saving on an average income.

  5. manuel mauri
    manuel mauri says:

    i've bought you course in udemy (YouTube Masterclass) it was the best investment i've made in the last years! In 2 months my earnings are grown 104%. Thank you for your teaching abilities and to share with us you knowledge 🙏🏻

  6. richard carlin
    richard carlin says:

    How long it takes to save for retirement depends on 1. How much income one makes each year. Someone making $100,000/yr should be able to reach the goal much faster than someone making $25,000/yr. Earn too low of a salary, and it might be impossible to save. Why? All of the money is needed to live. I agree that if high earners spend near as much as they make, they also will have a hard time saving for retirement.

  7. BISKIT Garcia
    BISKIT Garcia says:

    Dude, the 4 percent rule will only last 20 to 40 years depending on when you retire and how the market does. What happens when you retire at 40 and run out of money at 65. You are screwed…


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