Retire at 40: Here’s how — assuming no taxes, which is a bit of a big “simplification”:
If you were to take 20% of your annual income starting at age 20 and put it in a fund following the S&P 500 Index, that fund continued to grow at the long-term historical rate (12%) and you received a 4% raise each year, you could walk away from your job and live off the interest at age 41 matching your current salary — or quit at 43 and be able to give yourself a 4% “raise” each year from the interest, which is probably the better plan because it combats inflation.
As this spreadsheet demonstrates, a 4-percent annual raise more-or-less doubles your salary over the course of 20 years — and 20-percent savings combined with aggressive 12-percent returns can match that after 20 years:
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