### Author Topic: CNN Money says you need 20X your annual salary for 10 years of expenses  (Read 3486 times)

#### economist

• Posts: 54
##### CNN Money says you need 20X your annual salary for 10 years of expenses
« on: September 14, 2017, 10:15:34 AM »
Another great "early retirement" article from CNN Money. http://money.cnn.com/2017/09/14/pf/early-retirement-savings-penalty/index.html?iid=hp-stack-dom

"When you retire at age 65, you should have about 13-15 times your income stashed away, says (Jon Ulin, a certified financial planner at Ulin & Co. Wealth Management)."

"But in order to retire by age 55, you may need to save 33 times your annual salary."

So in order to retire 10 years earlier, you need 20 extra years of income (not even spending!) saved? That is some funky math there. I suppose to retire at 45 I would need 53X my expenses, or 73X at 35? It goes without saying that no context is provided for these numbers (why do I need 13 times my income at 65? Are we assuming I only need half the 4% rule because of SS? In that case where does the 33X figure at 55 come from? Inquiring minds want to know).

#### fattest_foot

• Pencil Stache
• Posts: 580
##### Re: CNN Money says you need 20X your annual salary for 10 years of expenses
« Reply #1 on: September 14, 2017, 10:36:21 AM »
Yeah, I'd love to see how the author arrived at that number. How does 10 extra years of retirement require 20 extra years of savings?

Just being ignorant of investment gains you should still arrive at 10 years at the most.

What the heck are those extra 10 years of savings going towards? I must know!

#### caffeine

• Stubble
• Posts: 111
##### Re: CNN Money says you need 20X your annual salary for 10 years of expenses
« Reply #2 on: September 14, 2017, 10:50:53 AM »
I think he's trying to account for the loss of Social Security benefit from reduced year's work.

But he's advising 33 x Salary. Not even spending.

Someone who earns 60k and spends 30k a year:

• Trinity Study: 25 x 30k = \$750,000 (no dependence on social security)
• Jon Ulin, a certified financial planner at Ulin & Co. Wealth Management: \$1,980,000

Jon's approach doesn't seem feasible since it would scale with your salary. How do you save 33 times your salary? You would need to be frugal, lucky, and an inheritance most likely. If you were so frugal that you saved 33 times your salary at 55, could you spend it before you died? It seems that would be a challenge for someone who is so thrifty.

#### frugalnacho

• Magnum Stache
• Posts: 3153
• Age: 35
##### Re: CNN Money says you need 20X your annual salary for 10 years of expenses
« Reply #3 on: September 14, 2017, 11:01:21 AM »
I think he's trying to account for the loss of Social Security benefit from reduced year's work.

But he's advising 33 x Salary. Not even spending.

Someone who earns 60k and spends 30k a year:

• Trinity Study: 25 x 30k = \$750,000 (no dependence on social security)
• Jon Ulin, a certified financial planner at Ulin & Co. Wealth Management: \$1,980,000

Jon's approach doesn't seem feasible since it would scale with your salary. How do you save 33 times your salary? You would need to be frugal, lucky, and an inheritance most likely. If you were so frugal that you saved 33 times your salary at 55, could you spend it before you died? It seems that would be a challenge for someone who is so thrifty.

Your final year should be a part time minimum wage job so your salary is very low.  FIRE hack.

#### ducky19

• Bristles
• Posts: 477
##### Re: CNN Money says you need 20X your annual salary for 10 years of expenses
« Reply #4 on: September 14, 2017, 12:24:50 PM »
Your final year should be a part time minimum wage job so your salary is very low.  FIRE hack.

lol, thanks - I needed that!

#### MgoSam

• Magnum Stache
• Posts: 3640
• Location: Minnesota
##### Re: CNN Money says you need 20X your annual salary for 10 years of expenses
« Reply #5 on: September 14, 2017, 12:47:34 PM »
Your final year should be a part time minimum wage job so your salary is very low.  FIRE hack.

lol, thanks - I needed that!

I snorted out some coffee, thank you for this!!!

#### zolotiyeruki

• Magnum Stache
• Posts: 2826
• Location: State: Denial
##### Re: CNN Money says you need 20X your annual salary for 10 years of expenses
« Reply #6 on: September 15, 2017, 10:25:53 AM »
I think he's assuming that if you retire at 65, you're living off of SS (from 40 years of working, the most lucrative of which 35 count) plus your own savings.  If you retire at 55, you have to cover 10 years of expenses all on your own, and *then* use your remaining savings, along with a lower SS check (since it's only 30 years of income that counts), for the remainder.

How someone is expected to save up 33 years of salary in 30 years appears to be left as an exercise to the reader.

...which I did. :)  Assuming 7% returns and a constant salary, if you save 35% of your salary each year, and start at age 25, you'll have 33x your annual salary when you hit 55.  Of course, lots of people are expecting lower than 7% returns, and your salary usually starts lower and peaks at the end of your career, but a 3% withdrawal rate is pretty conservative, too :)

#### Miss Piggy

• Handlebar Stache
• Posts: 1224
##### Re: CNN Money says you need 20X your annual salary for 10 years of expenses
« Reply #7 on: September 15, 2017, 10:46:48 AM »
I think he's assuming that if you retire at 65, you're living off of SS (from 40 years of working, the most lucrative of which 35 count) plus your own savings.  If you retire at 55, you have to cover 10 years of expenses all on your own, and *then* use your remaining savings, along with a lower SS check (since it's only 30 years of income that counts), for the remainder.

Not to mention paying for your own health insurance. I anticipate that costing a crap-ton of money. (Sorry to get so technical there.)

#### Kimera757

• Posts: 89
##### Re: CNN Money says you need 20X your annual salary for 10 years of expenses
« Reply #8 on: September 29, 2017, 08:07:01 PM »

I stumbled across this one today: http://www.msn.com/en-us/money/personalfinance/why-i-buy-dollar5-lattes-even-though-everyone-says-not-to/ar-AAsCHxq?li=BBmkt5R

"Why I buy \$5 lattes even though everyone says not to "

Quote
I'm fortunate enough to not have student loans and put about 30 percent of my income towards various investments each month. Coffee is an expense I've made room for in my budget and can afford.

Still, that's \$60-\$80 a month that I could be putting to work and letting accumulate over time. Trust me, I know.

But it's an expense I can justify, and here's why. I don't just swipe my credit card and head out the door, drink in hand. I order to stay. Then I pop a squat and spend at least an hour reading, writing in my journal or setting goals.

I use the time to educate myself, to think of ways I can improve in various aspects of my life. And it's good for me: Successful people emphasize the importance of investing in yourself, whether that means reading consistently, taking a course or exercising.

Do I have to be at a coffee shop to educate myself? Technically, no. And I work on my goals in other ways too, like while training for marathons. But the coffee shop is a productive, distraction-free place for me. It serves as a designated time when I can focus on what I want to focus on.

There's probably a lot of people who could afford this (although libraries are free, and you could bring your own homemade coffee in a thermos). However the person writing the article has already paid off their student loans and has enough income to save 30% after expenses... and there's a lot of people who aren't in that position.

#### Telecaster

• Handlebar Stache
• Posts: 1375
• Location: Seattle, WA
##### Re: CNN Money says you need 20X your annual salary for 10 years of expenses
« Reply #9 on: September 29, 2017, 08:32:56 PM »

Your final year should be a part time minimum wage job so your salary is very low.  FIRE hack.

Ha!