Help! Personal Advice on Early Retirement Needed

[ERE1414]

Hi Everyone!

I've been thinking about early "retirement" for quite some time now and would love some advice.

Here are the details of my financials. I'm 23 and self-employed as a Tutor, which I love. It's flexible and really doesn't feel like the work. The thing I don't love, however, is the instability and part-time hours. This is why I'm looking to have some "retirement income" to supplement the lack of stability...although, now that I think about it, maybe it won't be "retirement income" at all. Anyway, I make about 25k/yr after taxes, which doesn't leave me a lot of room for saving. I managed to save about $2100 last year making my total Roth contributions about 11k to date.

I'm now considering either going back to school to get a Masters in Math to teach at a community college level or just really pushing my tutoring business and trying to increase my income to invest more. I have some ideas (setting up a webiste, making a yelp page, etc.).

Either way, I've been thinking about how to invest my money and I've been considering just putting as much money as I can into a brokerage account. I know the taxes suck, but I'm not sure how else to get the regular income stream that I'd like. And, since I have some money in my Roth at such an early age, that should give me a decent amount of money for retirement already, and I can always contribute more in the future, when my income increases. 

To sum it up, I'm not opposed to continue Tutoring at all. I'd just like to have enough money saved up so that I can be getting about 1k per month for stability.

Any advice would be much appreciated!

[catccc]

I think that saving $2,100 from an income of $25K after taxes for (I assume, please correct me if I'm wrong) a single person leaves a lot of room for improvement.  People are going to want more details to comment on this, I think.  Any debt?  Where did the other 22,900 dollars go? 

Saving 10% (which you are not even at) would have you retiring in 51 years.  That's not going to be early at all if you are 23 already.  (Have you read this one yet?  http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/)

Since you are talking supplemental income, and not really early retirement, to get $12K of income using a 3% SWR, you'll need 400K invested.  Since you already have 11K, you need an additional $389K.  If you are saving $2.1K per year... well, you can do the math, but let's just going to say it will take a while...

[gratefulandfrugal]

Consider spending some time marketing your tutoring business and then hiring some extra tutors.  I say this because given your age, I assume you recently graduated from undergrad and have a whole host of younger friends, likely with similar math aptitude, who are looking to make some extra cash. So, you'd charge your clients $X, pay your employees $Y (an amount less than X), and collect the profit.

I personally don't have experience with this but have seen others follow this route with great success.

Best of luck!

[MDM]

Before "going back to school to get a Masters in Math to teach at a community college", talk with the Career Services (aka Placement) Office at the school where you would get the MS.  Ask for details about percentage of MS Math students getting job offers, and starting salaries for them.

If the answers are attractive, then go for it.  Realistically, you need to increase your income significantly if you are going to get to FI anytime in the next few decades (as catcc well documented).  There are many ways to do that (gratefulfandfrugal's entrepreneurship suggestion is another), and you'll need to find one.

[ERE1414]

I think that saving $2,100 from an income of $25K after taxes for (I assume, please correct me if I'm wrong) a single person leaves a lot of room for improvement.  People are going to want more details to comment on this, I think.  Any debt?  Where did the other 22,900 dollars go? 

Saving 10% (which you are not even at) would have you retiring in 51 years.  That's not going to be early at all if you are 23 already.  (Have you read this one yet?  http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/)

Since you are talking supplemental income, and not really early retirement, to get $12K of income using a 3% SWR, you'll need 400K invested.  Since you already have 11K, you need an additional $389K.  If you are saving $2.1K per year... well, you can do the math, but let's just going to say it will take a while...

Yes, you are correct. Well my rent + utilities run $1100/mo, so that accounts to $13200. I know that's really expensive but I genuinely love my roommates, so it's very hard to consider moving. And yes I acknowledge that I am making that decision based on emotions and not logic. Other expenses run about $600/mo, including my ridiculous gas bill for my job, so that accounts for about $7200, leaving about $4600. I may be able to invest a little more, but I currently have extra in the bank for tax time.

Well looks like I have a lot of work to do. I guess I knew that, but it does make going back to school sound more attractive.

[ERE1414]

And no debt for the record.

[arebelspy]

I ran similar math after reading the first post, but figured you'd only want a 2% SWR since you're so young and not planning to live on it, but just use it as a "base" amount, and thus would still want it growing larger.  That means you'd need 600k saved up.  That may be a little much though.

Continuing tutoring probably isn't the best move; going back to school or working on your business both will likely get you there much quicker, though it may slow you down a few years in the short run..

[JPinDC]

I think you should focus on expanding your tutoring business now. I know a few people in my area who've been very successful with tutoring as their primary job. They really push on word of mouth, but I think a yelp page, and being sure to have email addresses for all your current clients would help (to send newsletters, offer referral incentives).

You could also fill in as a substitute teacher in your area for daytime work, which would help make connections to schools too.