[n00b101]

If you and your spouse can live off of $45k while you're still earning, you can save ~$100k per year and accumulate $1.5m by the time you're 40, easily.

To spend and save $145k net income per year, you need a gross comp of $240k per year where I live. To save $1.5M at a rate of $100k per year would take 15 years. To do so by age 40 would mean that you need to be at a $240k/year salary by the tender of age of 25, and also have the restraint to live off of a mere $45k per year (presumably in a city with a high cost of living, since you are earning $240k at 25). And after you retire at age 40, you get to spend 2% of your $1.5M per year ($30K) which is below the poverty line where I live (at least as a household income).

[gnopgnip]

You are not factoring in the tax savings of a 401k or other retirement account. For instance a married couple that earns up to $183k a year can save $36k a year in the 401k, plus the employer match, and another $11k in IRA's that reduces your does not count as income. Your contributions grow tax free with compound interest. If you contributed $3916 a month from when you were 18 until 40 with 5% annual interest you would have a nest egg of 1.8Mil. If you each had a salary of 75k a year you would only be paying taxes on 100k of income, about 71k take home.

[falcolas]

If you tap your 401k before you're 60, you will face major tax penalties. So, that's at least 20 years you have to manage without your 401k funds if you attempt to retire at 40.

[jaredsohn]

You will still be making money each year from your 401k, though.

Thus, for the math to work you need to verify that you have (or earn via interest/other investing) twenty years of expenses via funds outside of your 401k.

[dgacmu]

No - Google for 401k SEPPs.

The earlier comment also omitted the backdoor Roth, which can get a married couple another 11k post-tax into a Roth, which can then grow and be used tax free.

[falcolas]

An interesting exemption (basically, you set up a structured, regular payout of your 401k over the remaining life expectancy and don't touch it). I still don't see this being realistic in almost any case, but it's a good option to keep in mind.

That said, "$3916 a month from when you were 18 until 40" is simply not realistic for most people. How about college? You're not going to get a $100k+ a year job without either college or years of experience. Where do you find that perfect mate capable of immediately working their own $100k salary and contributing almost $2k a month to retirement at 18?

Personally, I make a really good salary (it's worth noting that it took until I was nearly 40 to even get to this point), have a working spouse, live in a relatively inexpensive part of the country, and I still could not put $4k into an 401k or roth IRA every month. Owning a house and reliable cars, having dependents... it's not realistic; it leaves nothing for wiggle room.

I'm also going to come out and say it: working yourself to the bone, skimping and saving is no way to live some of the most active years of your life.

That's my 2¢.

[nogbit]

"I'm also going to come out and say it: working yourself to the bone, skimping and saving is no way to live some of the most active years of your life."

Exactly the response to all of these "retire young" articles. They neglect to say that you are doing it at the expense of not taking advantage of a healthy young body to adventure and enjoy life while you can...you may get hit by a bus tomorrow and then what a freaking waste of time all the penny pinching was!

[tylerhobbs]

I'm assuming both you and your spouse are earning money, in my numbers. Additionally, you would presumably make investments with the money that you're saving, so you don't quite have to save the whole $1.5m straight up. I'm also not sure why you used a 2% withdrawal rate -- typically 4 to 5% is regarded as a conservative rate, which would be $60k to $75k per year.

I'm not suggesting that doing this is a walk in the park, you definitely have to prioritize around it (which may include living in a city that isn't insanely expensive), but it's doable.

[beambot]

You should also: Drive a reasonable used car (if at all); send your kids to public school; live with roommates (or spouse); commute so you can live in a cheaper area; avoid expensive vacations; cook at home more frequently; etc.

I tried explaining all this to coworkers when I worked at Google, and many people dismiss the idea. These are the same people who:

- Drive a new Tesla

- Pay $120k/yr to send their four kids to private schools despite good public schools in the area

- Insist on living in SF and commuting 2 hrs by bus each way

- Jetset around the world for vacations

- Eat out at every non-Google meal

You can lead a horse to water... but sometimes you just can't make them drink. And guess which of my coworkers complained the loudest about unlivable wages in SFBA...?

[econner]

Why do you need gross of $240K?

Are you saying you pay $95K in tax?

If you have a 401K you can save a significant amount pretax. You're also not factoring in portfolio growth over the 15 years you're saving.