If your 31 I guess simple and naive answers are best. The following is a quote from a blog by two 30 somethings who “retired” and travel the world on $40,000, or maybe not exactly.
“HOW EXACTLY DOES THIS WORK?
Now, the skeptical people in the crowd will probably want to know “What kind of witchcraft/sorcery is this? Tell me EXACTLY how this whole thing works”. And kudos to you for that healthy dose of skepticism. As an engineer, I’m a HUGE skeptic too. So allow me to explain:
If you build a portfolio big enough to safely withdraw 4% investment income each year to cover your living expenses, you are essentially “financially independent” and no longer need to work. This is called “The 4% Rule“.
How big is that portfolio? To figure it out, simply take your living expenses (eg $40K/year) and multiple that by 25 (because dividing by 4% is the same as multiplying by 25). So $40,000 X 25 = $1,000,000.
So if your expenses are $40K/year, once your portfolio reaches $1 million, you can retire and live off 4% of the investment income per year for the rest of your life.
But… if you’re flexible enough that you can live on less than $40K or if you’re planning to work part-time or a side gig after “retiring” from the 9 to 5, you can do it MUCH faster with way less.”
These folks seem to think dividends are virtually guaranteed, (and apparently tax-free) even in bad economic times dividends will fund their lifestyles. Good luck with that.
A couple each earning minimum wage makes $30,160. Poverty for two people is $17,420. Thirty-seven percent of all American households earn under $50,000 per year and yet a couple can travel the world and live on only $40,000 the rest of their lives. I wonder if they have considered with no earned income there will be virtually Social Security (in this example the couple is from Canada.)
Aren’t you envious? All you have to do is earn big salaries, live super frugally, no kids, save massive amounts and accumulate $1,000,000.
Makes you wonder why so many low middle income American families struggle from paycheck to paycheck when they could me hiking in the Alps.
Read more on this discussion in my article on https://www.marketwatch.com/story/why-the-fire-movement-is-too-frugal-for-me-11623163202?mod=fire-retirement. MarketWatch