> It shouldn't be called retirement.
In personal finance it's called, "Financial Independence." Which basically means you aren't necessarily done working for the rest of your life, just that working has become completely optional.
In personal finance it's called, "Financial Independence." Which basically means you aren't necessarily done working for the rest of your life, just that working has become completely optional.
Optional - as long as you live in your parents' basement and don't want to start a family. :-)
I think this is where there's a fundamental disconnect in cultures.
I'm 33, my wife 31. We're about to have kids, and we've strongly considered moving in with my parents, not only to spend more time with them, but also to provide care when necessary as well as have their help watching and raising our children.
Just because we're well off (we're financially independent) doesn't mean we need an expensive mortgage in the suburbs to raise our family, nor does it mean we can't live with family or have them live with us.
America is far more broken than I expected.
Otherwise, prepare to move to the basement.
It's just a cultural thing: many Americans prize their independence and privacy, so grown kids want to get away from their parents.
And vice versa, by the way! My parents definitely would not want me to move my family to their house--they love us and enjoy visits, but are enjoying their own independent lives too.
It turns out that you can safely withdraw 3% a year indefinitely (from a portfolio composed of a mix of stocks and bonds in low-fee index funds) without reducing the the value of the investments in the long run. A higher rate of 4% will decline on average over time but can be enough to survive multi-decade retirements, so that's often a more realistic target. There are tools (e.g. http://www.firecalc.com/, http://www.cfiresim.com/) to run simulations based on historical market data.
At 4% you need a portfolio equal to 25 years worth of expenses. Let's say you spend $60k a year in today's dollars. This works out to a monthly budget of $5k. If you can save $1.5M then that will pay your expenses for 30 years, without any other income, with a 94% chance of success. At 3% you need 33 years of expenses, or $2.0M, and that has a 100% chance of success. This is all based on past data of course (past performance does not imply future performance and all that).
These are large sums of money, but it's possible for most professional workers, and especially couples, to accumulate them if they are fairly frugal and make a decent income. The time required entirely depends on what portion of your income you can save (see http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...). Assuming a constant income, as well as constant expenses while working and after, if you save 50% of your household income it will take 17 years to reach the 4% level. So start at age 30 and you'll be done by 47.