Sunday, October 29, 2006

"Body & Spirit" -> Retirement

I want you to retire in 25 years, and I'm going to assume you are average. To do this, you need a nest egg that grows every year.

Here is the vision: By the time you are 45-46 years of age, you are still young and vibrant. You have good health, and the ability to create and be strong. After all, Carlos Lopez set the world record for the marathon when he was closing in on 40. So, this is just a few years after your prime, and you'll still be strong.

Think of the freedom of not needing to work. If the Lord wants you to spend the rest of your years teaching children, you can. If you decide to continue to work and give away your salary, you can. If you get into a work situation that you feel is displeasing to the Lord, you can quit without a worry. You will have freedom to do whatever the Lord would have you do.

In the time of Paul you either worked for yourself (fishermen, tent makers, farmers), you were a temporary hired hand (field worker), or you were a servant or a slave. In today's world, we have become servants and slaves of who we work for. While we should serve our masters as unto the Lord, Paul also said to get free if you can.

1 Cor 7:21-24

21 Were you a slave when you were called? Don't let it trouble you—although if you can gain your freedom, do so. 22 For he who was a slave when he was called by the Lord is the Lord's freedman; similarly, he who was a free man when he was called is Christ's slave. 23 You were bought at a price; do not become slaves of men. 24Brothers, each man, as responsible to God, should remain in the situation God called him to.

There is no shame in being a slave or a servant, but if you can get free, isnt' this better?

Sounds great! How do you get there?

Let's say you work hard, and graduate with a business degree. The average business degree job out of school will pay you roughly $40,000 per year. This is also the average salary in the USA, so having a degree is a smart investment.

If you want to retire in 25 years, with the average USA salary, you will need to have funds inflate over time. In this case, let's say the average salary increase 3-4% per year. This means that in 25 years, the average salary in the USA will be $100,000 per year.

To finance this, you need about $1M in funds if you can make 10% on your money because you're a smart investor.

So how do we get there?

Very simply:

Save $5,000 per year.
Make 14% interest per year
Wait 25 years.


Save $9,500 per year.
Make 10% interest per year
Wait 25 years


Save $20,000 per year.
Make 5% interest per year
Wait 25 years

Clearly, a little more interest helps you a lot. This is why I am keen on doing things like covered calls. If you are careful, you can save $5,000 per year. If you are very frugal, you can save $9,500 per year.

I don't know how you can live on $20,000 per year and save half your salary. Afterall, the poverty level in the USA is roughly $20,000. While the USA poverty level is better than many "rich" people in many countries, it is really going to be difficult to be functional in our society.

However, you can figure out, by hook or by crook, you can figure out how to save $5000 per year. Maybe this means that you live in a smaller apartment. Maybe this means that you give up Starbucks and lunches out. Maybe this means that you figure out how to buy a second hand car.

The second thing that you need to do is figure out how to invest that money. If you put it in the bank, you'll be pull 3-4% interest per year, and that is never going to allow you to retire. While strictly speaking, I can't help you learn all you need to learn, you can learn by hard work.

Good luck.

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