Bothpaninis, I think you’re neglecting other information in that post that is very relevant. This reader also had $300,000 in 401k and IRA accounts and a $140,000 mortgage. When MMM said that the reader needed $403,000 more to retire he meant that the reader’s yearly expenses, $2,351*12 = $28,212, could be supported at a 4% save withdrawal rate if he had $28,212 / .04 = $705,300. Since the reader already has $300,000 in savings, he only need an additional $405,300 in order to retire by this approximated math. MMM might have been using the reader’s actual numbers instead of approximations to get the slightly lower $403,000 total.
MMM recommended that the reader first add his $80,000 in savings to the $300,000 in investments, and let that compound for the next 8 years yielding ($300,000 + $80,000)*(1.07)^8 = $652,910.70 after 8 years. He then advised the reader to pay down the mortgage on the house over the next 5 years; let’s assume that the reader uses all 5 years to do this contributing all savings to the mortgage. His remaining contributions would occur in years 6, 7, and 8 at a level $28,000 per year yielding $28,000*(1.07)^2 + $28,000*(1.07)^1 + $28,000 = $32,057.20 + $29,960 + $28,000 = $90,017.20 at the end of the 8 year period. When you add the two accumulated values up, $652,910.70 + $90,017.20 = $742,927.90 which is enough for him to retire. Note that after 7 years, the reader would only have $668,157 which is not quite enough.
