You must be making baller money. Just live frugally, bank it away and invest it. And in a few years you will NEVER HAVE TO WORK AGAIN.(or just work on your own projects)
Your advice of living frugally and investing is good, but since you need, let's say $5M, to retire in your 30-40s with the expectation of living the same lifestyle, "a few years" is much longer than you might think.
If you're living frugally, your annual expenses will go down. Supposing you continue living frugally after retiring (which is easier, since you have more time to "DIY" expensive things you formerly hired someone for or paid extra not to have to do), you don't need 5 million. Wow no.
Let's assume the common 4% withdrawal rate. $5 million will provide you with $200,000 a year for all eternity. This assumes you never do anything for extra money. It further assumes you never put any money back into the investment (because, you know, you're not saving for retirement anymore).
Going even more conservative with a 3% withdrawal rate you'll be pulling $150,000 a year.
Interest is beautiful, living frugally combined with interest is even more so. Supposing you wanted to pull $30,000 yearly you'd only need $750k.
But.. interest rates are currently running below inflation (here in the UK). With that happening, you're going to need to top up the fund to something higher, to ensure withdrawings can increase in line with inflation for the rest of your life.
Well, I'm just some guy on the internet. You really have no idea what I think is important in life, so withhold your judgement.
You're probably right that I overestimated the amount. Since frugal investing isn't my goal in life, $5M was a made up figure. What I'm saying is that the number is higher than it might seem.
It depends on how aggressive you are with your financial planning. Remember, this is the rest of your life you're planning for. Are you just going to get lattes and travel until you're dead, or do you want to raise a family? Do you want your children to go to good schools? Do your projects require capital investment to be successful? Do you want to be an angel investor? Are you interested in philanthropy?
Counting on 6% interest in perpetuity is reasonable, but is probably more aggressive than I'd be willing to go. What happens if the stock market takes a dive? It's not out of the realm of possibility that your net worth could be cut by 30-40%. That means that your interest income would be cut by the same amount.
Also, once you're out of the industry, it's hard to just come back and get another job. The software industry is pretty strong right now, but will it be in 10 or 20 years? Will you still have the skills you need to compete, after years of working on whatever you want to work on?
Let's say your planning figure is 4% instead of 6%. Although $1M is a lot of money, if you're talking about living off the interest, each $1M yields $40K gross a year at 4%. After 20% in capital gains taxes, it's $32K. If you have to pay AMT (which you will, if you're an American making money off of investments), expect an effective tax rate closer to 30%. This means that you can expect a net yield of $28K in interest per $1M of capital.
Also, remember, if you're spending every cent of interest that your investments earn, they will never compound, and you will be at the mercy of inflation (about 2%) and your risk exposure will be dramatically higher. You should try to plan to have net income that you can reinvest.
$5M gives you $200K gross or $140K net. That's a very handsome income, but if you want money to reinvest and you want to keep a conservative risk profile, it's not Bugatti-Riviera money. If you're willing to burn down your initial capital, it's a lot easier, but then you have to consider your risk -- and whether you're interested in leaving an inheritance.
Regardless of the actual amount you're talking about saving, my point is that it's probably more money than it seems like, and it takes a tremendous amount of time to save it working 9-5.
A general rule is that you can live indefinitely if you withdraw 3-4% of your investments annually to pay living expenses. There are calculators out there (Google 'FIRECalc') that work out the odds of success (i.e, not going bankrupt) with various starting points and spending rates. At 3% there's about a 95% chance of success over a few decades, based on the past performance of the financial markets.
Let's say you spend $5k/month normally, as a round number. That works out to between $1.5M ($5000x12/3%) and $2M ($5000x12/4%) to sustain your living expenses indefinitely with no further income.
This dovetails nicely with the conventional wisdom that over 30s is unemployable in tech fields.
So either retire penniless in your 30s and never work in tech again, or retire with $5M in the bank in your 30s and never work in tech again.
Also if your gross is say $120K and you keep about $90K of it and save most of it to retire, living off maybe $30K which is more than most Americans get, 5e6/30e3 = a mere 166 years of retirement, assuming your investments return about the real world inflation rate, which is a fairly realistic goal. Of course $5M in the bank and $60K/yr invested means you will have to start your savings program at age -60 or so if you want to retire in your 30s.
Its probably a lot simpler to just contract like my Dad did. Do your thing when you need the cash, and when you don't need the cash, don't work for awhile. Nobody wants the programming contractor to advise the board at the end of a 16 hour day, especially when they see your hourly overtime rate.
I work at a startup with a development team of 9 people. Of those, one is in his 30s, two are in their 40s, and two are in their 50s. The rest, myself included, are late 20s.
Just because some parts of the tech industry fetishize young developers doesn't mean all of them do.
That depends entirely on what sort of lifestyle you're trying to sustain.
There shouldn't be much difference between the level of savings needed to retire at (say) 35 and (say) 45. In either case, you want enough that with low-end-of-plausible stock market growth, you're taking out less than growth is putting back.
There's some research around what level of growth it's safe to assume; how much you trust it depends on whether you think the past behaviour of the US stock market is a good predictor of the future behaviour of whatever you invest in. I suggest (but this is Not Financial Advice and I am Not a Financial Advisor) working on the basis that you can probably get ~2.5% of your investment out per year pretty safely. (Usually it'll grow more than that, even after inflation. That cushions you a bit against cases where bad things happen. I assume you are willing to trim your lifestyle back a bit in bad times.)
That means you need about 40 years' worth of spending in your savings. That would be $5M if you are spending $125k/year. In my opinion (about which you need not care), if you are spending $125k/year then either you are earning so much that saying $5M isn't going to be a big challenge for you, or else something is amiss with your priorities.