We offer a financial independence calculator here at Patch Your Pocket. Simply enter your details in the top five fields, and click the “Calc” button to calculate how many years it will take to reach your financial independence goal.
Many industry leaders say that you need about 25 times the annual amount needed to meet your expenses in order to become financially independent.
If you need a gross income of $30,000 in retirement, you would want to have a retirement goal of at least $750,000. If you need to have a gross income of $50,000 in retirement, you would want to save and invest at least $1,250,000.
It is always recommended to set your goal a bit higher in case of unforeseen expenses or medical emergencies, but this is generally a good starting point.
The idea is that you would only withdraw up to 4% of your total investment once you are financially independent, and 4% of $750,000 is $30,000.
Because the stock market usually averages 6-7% in growth per year, 4% is generally a safe number for your investment to be able to rebuild itself after each annual withdrawal.
Try it out and let us know what you think on twitter @patchyourpocket or email us at [email protected]
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