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Those are a lot of numbers for a post title. However, I love doing these basic equations for a variety of reasons and sharing them, including the fact that I love to spur thought in others around the endless possibilities life has to offer outside our conditioned status quo.

And when it comes to conditioning, I have mentioned several times how we are conditioned into a mold when it comes to thinking about retirement and the “industrial” life cycle of work. However, with these types of posts, I want to help condition you differently. Now reading some text on a blog may not be the kick in the rear you need to act upon, actually doing something. I mean, maybe you are comfortable where you are. Perhaps you are in a situation that seems far-fetched from what I portray here. Either way, I believe that if I just give your thought process a kick-start, that you’ll think about priorities in your life and what you want to do, and when.

The most important part of all of this is planning. It’s a matter of grabbing life by the horns and having a strategy. Some know at 18 that they don’t want to work their whole lives, while others “go with the flow” and accept that society expects us to work until age 67 (generally across the board). Nonetheless, whatever you choose, it’s your choice, and you still need a plan either way. A plan to rely on your savings and investments when the time comes. The cool thing about understanding certain financial instruments is the power it can harness in the mid to long run regarding the ability to retire and live off of returns without evening touching your so-called nest egg. So in this post, I take a mid-aged number, a number I feel is the sweet spot to “retirement.”

Again, I always base this off on a few assumptions and this post, as stated in the title, is about retiring at 45 with €75,000 in passive income. I’m going to consider that you have no money saved, and we do not factor in any other occurrence – in other words, inflation, taxes, other sources of income, etc. Another factor I’ll put in here to show that it is technically possible (and many do it), rather than using my standard 6% rate on returns, we’ll notch it down to 4%. There are many strategies out there that financial planners, consultants, etc., dish out but for this, I’m going to go with the so-called 4% rule (whether outdated or not). A general principle that says you can withdraw ca. 4% of savings each year from your portfolio to live off of. Again, it’s about strategy and planning and with these types of posts I want you to start thinking of options and outside the box of traditional, get up, go to work, come home, live life, and hopefully have something from it when you reach 67.

So based on that information, let’s take a quick look at how you can do this.

Age Interest Monthly Savings Annual Return Savings at 45
22 4% € 4,152.00 € 75,000.00 € 1,875,000.00
25 4% € 5,112.00 € 75,000.00 € 1,875,000.00
30 4% € 7,619.00 € 75,000.00 € 1,875,000.00
35 4% € 12,733.00 € 75,000.00 € 1,875,000.00
40 4% € 28,281.00 € 75,000.00 € 1,875,000.00

Now, while the Monthly savings may seem completely obnoxious and unrealistic once you hit your 30s, the point, again, is to get you thinking outside your box. I fully understand that a majority of workers will not earn anywhere near the “monthly savings” amount to even put aside, especially fresh out of college. However, depending on industry and relationship status, couples are more than able to achieve this together, given the right circumstances.

The power goes back to compounding. Your money works for you. If you start at age 22, fresh out of University, you just need to invest roughly 1 million Euros with the remainder of the €1.8MM needed coming from a return on investments. With each year this invested amount logically increases. If you actually put in the work for the first ~2 decades and stick to it, then once you hit 45, you can comfortably utilize the 4% rule (all market volatility aside), and take out ~75K/year, which is more than sufficient for a family of four on a general scale, without even eating into that € 1.8MM portfolio in the first place.

Imagine, at age 45 all the things you can still do, no matter what path in life you choose, knowing you can do what you want, when you want, how you want. That is freedom.

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