Retiring early is not rocket science.
It's not that golden handshake after working 30+ to 40+ years. Not at all. And no, I've not retired yet, but I'm working on it consciously.
To me, retiring early means that:
Retiring early doesn't mean I'm swimming in money like Scrooge McDuck. It just simply means that my passive income is more than my daily expenses.
The mathematics is simple:
As long as my passive income is more than monthly living expenses (factoring in anomalies and unexpected expenses), then we're good. According to my wife who is also the finance minister, we need S$ 6,000 a month. That'd translate to S$72,000 per year ($6,ooo per month x 12 months).
You'd realize my 2016 dividends amounts to $12,000 for the entire of 2016, which means that I'm $12k/$72k = 16.67% "there".
So basically means that for me to have an early retirement, I'll need to have 100%; and if $12k is generated from $150k invested in dividend stock, hence I would need:
Hence I will need 6x invested amount ie $150k x 6 = $900,000.
The maths behind this is because I had a 8.137% return on investment (ROI), which is pretty decent, and I want to factor in a buffer, say the market tanked or I made a series of shitty/wrong decisions.
We can do this 2 ways:
The maths remains the same.
Hence my target will be $1,800,000 for me to be "truly passive".
To eat an elephant, we do it in parts.
So, we need to see that it'd take time. Question is, how much time?
At this point in writing, I am 35 years old. Say I want to give myself at most 10 years. If I have $150k invested, and I want to hit $1.8m, hence my shortfall is $1.8m - $150k = $1.65m
According to http://www.moneychimp.com/calculator/compound_interest_calculator.htm
I'll need to invest $95k injections every year (or $7916 per month) for the next 10 years to hit $1.65m.
Ok, that's a little hard for me.
I'll drag time a little more, say 20 years.
The numbers look soooooooo much more doable now, at $22500 per year (or $1875 per month) when I drag the timeline to 20 years.
So that'd mean that I can "truly retire" when I'm 55 (shit!!!) but of course, I have other assets to help accelerate the amounts that I can invest either by means of increasing cashflow or selling the businesses to fund my retirement income.
My real target is $72k per yer (or $6k per month) and I can achieve that with $900k invested at 8% return which is my previous achievement. I prefer to buffer it, so I effectively x2 the amount I need ie $900k x 2 = $1.8m which requires more time. Factoring in my current salary and conservatively, it'd take 20 years. I do have assets that I can sell or increase my personal cashflow to accelerate it, and the important thing is I'm aware and conscious of what my options are.
I will keep building my physical businesses, online businesses, reinvesting my dividends etc interim.
What about you? What's your passive income goals and how will you get there?