And I'm not sure it beats, e.g., work hard and save hard at tech company for a decade, then use the invested surplus as passive income to work lightly thereafter. At least, not in the general case.
I used an LLM to help me do the math but it appears you would have to make $1.5 million/year at "tech company" if you were to save 20% of your income and have $4 million saved after 10 years. That $4mm saved would allow you to appreciate to $5mm to retire on after 20 years while simultaneously withdrawing $150,000/year in passive income to live on.
Of course you can adjust this based on how aggressively you save, how much you need to withdraw each year, and how much runway you have until retirement and how much retirement you need to be comfortable.
Regardless, what you're suggesting is available only to the privileged few who can get extremely high-paying jobs early in their careers and hold onto them while having low enough expenses and high enough discipline to save aggressively.
OP's approach is a very doable path for folks who aren't so fortunate and/or young, but can code, have some life experience, and don't want to go get another job.
- Very few people earn $1.5M/year
- Saving 20% implies that you're spending ~$1M/year while working, so $150k/year in retirement would not be appealing
Did the LLM pick the numbers for you?
Of course very few people earn $1.5M/year. That's my point -- the poster I was replying to was naively thinking they could just work hard for a tech company and save for 10 years and then live off the passive income of the saved investment, which is silly.
The rest of the numbers were conservative figures I chose. $5mm to retire, 20% saved while working, $150k/year passive income. The whole point is that what he's describing is pretty unrealistic.
How did you choose "20% saved while working" as a number? Why not 80%?
I mean, you’d be terrorizing the economy, but that’s also what you do when you eat food grown and prepared by people with inadequate labor protections, so why not take the red pill and double down on being a true slave-supported neo-Athenian?
Let's run a different scenario: your post-tax income is $200k and you save half of that. In 11 years, you can retire and get $100k per year at a 4% withdrawal rate.
People in either of these scenarios are obviously privileged, but the latter isn't unrealistic for a single FAANG dev.
engaging-data.com has cool fire calculators. Highly recommend checking them out
- income: tech sector salary median
- spending: median spending + 25%
- passive income target: median net income
Now add some indie project income as a topping.
If you're not very close to passive income after ten years, you're doing it wrong. If you're not financially responsible for lots of people, that is.