3 Things to know for the Early Retirement Formula

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Retire Early Retire Young

3 Things to know for the Early Retirement Formula

 

Nowadays the word, “Trending” is becoming a trend today. In a similar fashion, ‘Retire Early’ is a word to get excited most of the young today. Obviously everyone in the modern life wants to live their way or like an Independent.

For the early retirement, one needs a reason and stick with their personal life. The reason may become an Entrepreneur or Live as Life;Live as like. But, the numbers are different on age to the retirement determination.

Generally, Retirement planning describes itself and based on some common factors to decide. The Factors are,

  • Current Age
  • Expecting Retirement Age
  • Annual Income
  • Monthly / Yearly expenses
  • Current Savings and Investing
  • Expected ROI (Return on Investment)
  • Inflation

Even for the early retirement one should be aware about the financial numbers they had, called Financial Assets like Cash Flow and the inflation depending upon the age of retire early.

Professor, Doug Massey had created a simple formula based on Early Retirement. He was also retired early on his age of 41 and was not working for the others.

Early Retirement Formula (ERF):

 

ERF =  Your Age X  Networth / Yearly Expenses

 

From his explanation, we should know there are three things to consider for the early retirement. The Simple things that we need – Age, Net worth and the Yearly Expenses. He also said that one should maintain the ERF value is more than 1000.

Maintain the ERF value is > 1000

If your age is 30 and had an assets worth 2 Crores and your meeting annual expenses were 6 Lakhs then the ERF value for you,

( 30 X 2 Crores / 6 Lakhs ) = 1000

So, make your ERF value that is greater than 1000. Retire Early is a smart goal, but it’s a risky one. So, plan the goal wisely.

 

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