I’m 20 Now – When Can I Retire?
Here’s a great article by The Simple Dollar . Any ordinary person can save 20-25% off his salary every month, invest, and live off entirely from the retirement fund at age 40. That’s incredible, almost impossible to imagine. But it can be done, the article says.
For someone in the same line of thinking as I do, I know that time is on my side, at least for now. All I have to do is keep 5-10% off my meager monthly earnings, and I have to do it faithfully.
Right now, I am still 20 years old, single, have no debt, have no intention of incurring long-term debts (including credit cards), and have a single investment money stashed in time deposit in a rural cooperative bank (bigger interest rate, but insured by PDIC).
But I still have a lot of things to do before I reach 40 years old. Right now, I am a stocks trader. By age 21, I want to enter medical school, finish it off by age 26. During that 5-year salary hiatus, I’ll be saving at least 1,000 every week from my school allowance. Hopefully, I can get that done.
By age 30, I have already established a portfolio consisting of 100% large-cap Philippine stocks. I intend to be this aggressive until age 40. Of course, at age 30, I feel that I need to support my parents, too, so I still have to work my ass off in some public hospital or in private practice as a doctor. But my retirement fund should remain intact, I swear.
I hope to retire by age 50, and live simply. If I will spend extravagantly, it will be about traveling to many places here and abroad. Other than that, I am already used to a life of a simpleton.
So retiring at age 40 is not impossible. Prudence in spending plus aggressiveness in saving equals healthy financial attitude.
We are facing the perfect storm in that whoever the next president is, tax rates will undoubtedly go up. Tax code enacted in 2001 and 2003 expires in 2010 and will capture all kinds of your income dead or alive, the largest increase since WWII. The Marginal tax rate will increase across the board from 13% by highest tax brackets to 50% by the lowest…go figure. Top tax rate on dividends will nearly triple to 39.6% from 15% most likely lowering stock performance. Capital gains will rise from 15% to 20% + state. Alternative minimum tax will bleed the middleclass yet more and capture 25 million new victims…akin to a plague. When you think about traditional tax deferred vehicles it does not make sense to defer taxes to what inevitably will be a higher tax bracket in the future at ordinary income. The answer may lie in life insurance structured for income and a self-directed solo-401(k)s since there are not income limits to ROTH on the solo-401(k). This is the dynamic duo of tax-free retirement income.
My book “The 3 Secret Pillars of Wealth” has solutions when we couple the taxes along with the expenses of many funds, there will be no way to get ahead with the rising cost of fuel, food and ordinary living expenses.