Did you know that you might be losing out on $100,000 for every single year that you delay investing? So it’s time to start now, right? Right. The earlier you start investing, the easier it will be to retire. But at what point have you invested enough? When can you be confident that your investment portfolio will provide for your retirement? This is called your “stop investing” number — when your portfolio is big enough to achieve your goals without contributing another cent. And you’ll reach it much earlier than you think.
Most people think of retirement as a rich person’s dream. To retire, you need to wear a suit, earn hundreds of thousands of dollars per year, and invest most of it. With a multi-million dollar nest egg, you can finally “live the dream” of retirement. There is no way a household that earns $30,000 per year can ever afford to retire, right? Wrong. Even if your income is $30,000 per year, you can still retire, it just takes a little bit of planning.
When it comes to early retirement, everyone tends to focus on net worth. Seriously, net worth is king. I track mine every month, and there are plenty of others who do it as well. Many of the personal finance blogs on Rockstar Finance also track their net worth. But is this the right metric to track? Should we spend all of this time meticulously counting every quarter to determine “the number?” Probably not. We should focus on passive income.
Get ready for a long read, because saving for retirement is extremely important. The government wants to make this as complicated as possible so you don’t do it. When it comes to saving for retirement, the two most popular ways are investing in a 401(k) and Individual Retirement Account (IRA). A 401(k) is a retirement offered by your employer, an IRA is an account that you can open at any brokerage firm. You purchase shares of individual stocks, ETFs, mutual funds, and even bonds with the hope that they increase in value over time and pay dividends. These accounts are popular for retirement because they provide you with a tax advantage.