If you're new here, this blog will give you the tools to become financially independent in 5 years. Here is how I did it and here is how I currently do it. The method is robust and replicable (no need to win the lottery, start a blogging business, or win at real estate), but not easy; much in the same way that a diet results in weight loss but is hard to follow persistently unless you set your mind to it. The key is to save 75%+ of your net income and invest it in income producing assets (bonds and dividend stocks). There is a "21 day" step-by-step plan for how to get to 75% in the left side bar. I try not to be too trite, so if I cover a topic, you will probably not see it again for a very long time, thus you may want to read the older posts here and here. Also, check out my answers to frequently asked questions and while you're at it, don't forget to subscribe to the blog via google or RSS.

This is a very frequent question on this blog and the answer is that

• If you need your money to last 30 years and you invest it 100% in index funds and you withdraw your annual expenses every year, you need 25 times as much money in index funds as your annual expenses (including taxes).
• If you need your money to last 60 years instead and follow the same procedure, you need 33 times as much money.

The way this is calculated is by looking at many different historic trajectories of the stock market and presuming that they will be representative of future market behavior (this may not be true!). The procedure is simple. If you want to check a 30 year period, pick one, say 1971-2001. Investing everything, say $1,000,000 in a virtual portfolio. If the market went up by 5% and you withdrew $40,000, you will calculate 1,000,000*1.05-40,000 = 1,010,000 for the next year. And so on. You will do this for many periods to get a representative idea of your possible future. This is made simple using tools like firecalc.com. All you need to do is to enter the amount of years the portfolio must last, its initial size, and your annual expenses.

The numbers above will be different (lower) if you possess superior investment skills which can be maintained throughout the period. I don’t.

The required size of the portfolio will be lower if you can reduce your expenses. This is the approach I advocate. If you can reduce your annual expenses by $4,000, this means $100,000 less to save for retirement which depending on your income could reduce the number of years before your retirement by several years.