How Much Money You Need To Save To Retire By Age 40

The more you save, the sooner you can retire. But how much do you actually need to save before retiring? Business Insider reporter Lauren Lyons Cole breaks it down in this video.

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Following is a transcript of the video:

First, figure out how much you spend each year, then divide it by 4% (0.04).

This is how much you need to save before retiring.

Once you know your goal, you can leave work as soon as you reach it. But to make this work you have to invest your savings.

You can survive for only 25 years on these savings alone. So if you retired at 40, you would have to start working again at 65. But there's a way to make it stretch even longer.

Continue to invest and earn an average of 5% on your investments each year, then you will have enough to live on for the rest of your life.

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[SteveDaniel]

To obtain financial freedom, one must either be a business owner, an investor or both, generating passive income particularly weekly or monthly basis. That's The key to being financially stable even after retirement

[davidforesto]

Big ups to everyone working effortlessly trying to earn a living while building wealth. I’m 50 and my wife 44 we are both retired with over $3 million in net worth and no debts. Currently living smart and frugal with our money. Saving and investing lifestyle made it possible for us this early even till now we earn monthly through passive income.
Thanks to fire movement. //

[ThisLittleCriticSanad]

Oh man I’m behind. I need to start saving money. - a 6 year old

[Kingboldisproductions]

Come over here to Peru. I feel like Im retired Im 24 years old. Including everything rent, food, cell, gym, traveling once a month I spend $500 a month.

[zackdreamcast]

I’m 41 with a combined net worth with my spouse of 2.5M but that includes circa $1M in retirement accounts I can’t touch until I’m 59 1/2. So there is the question… can I or should I retire? At the moment my plan is to work until 50 yrs old but is that worth it?

[BRuane-pwxq]

Groucho Marx was asked where he put his money his answer Govt Bonds. Someone said you cannot make much doing that, he answered, you can if you have enough of them.

Point is for average person you must save consistently and invest aggressively in stock market . That is where returns are but you need a long view as market is volatile over a given period. The 08 Depression was brutal for people at or near retirement however they earned it all back plus more by staying invested. You only lose when you sell. Stocks and or real estate can get you the appreciable assets to get you to your goals. However retirement at 40 without inherited money seems overly aggressive. Healthcare alone is very costly. Shoot for your 50 s that is doable for some assuming a good stock market. Invest in your career and skills also and while savings is about denial remember live in the moment, enjoy now. Life is about balance and reasonable goals .

[jfalbo]

All I gotta do is save 2 Million and I am set for life? LOL

[mylifeisamememylifeispathe]

What if I save all this money right, and then I just die then what?

[mylifeisamememylifeispathe]

Can't relate my father is a billionaire. I don't work.

[JW-nssl]

Yeah, but what do you invest in? As so as you pull money out of the investment, boom, taxes...
Should look at investing in index universal life insurance.

[acorgiwithacrown]

Invest in a crap ton of bitcoins when one of their websites gets hacked, the price drops to almost nothing then jumps back up to over 2k within a year.

[karibennett]

Until you or family is old or sick and need medicine that costs your whole check.

[jartagniancopria]

Honestly speaking, 5% a year??? Theoretically its possible but in reality, that’s impossible with our current economy and investment products with banks, globally speaking. Even Bernie Madoff who promised a 1% return a year was a lie, how about 5% a year?!! On the other hand, if you have a business that’s successful like apple, facebook and amazon then yeah I go ahead

[Uhuss-qqcq]

Who even said you will live to retirement age.

[acorgiwithacrown]

Ok, use a government grant so you can attend a college course for free, don't attend any other courses, eat primarily ramen whilst in college, don't drink or smoke, as soon as possible attempt to get a job situated to the course you took but know you'll likely get (even if it's a low paying job with your qualifications you can get raises and promotions if you work hard), stay with your parents until you get a job then rent a reasonable quality apartment when you get a job, don't get a girl friend or kids, focus on work and keep the image of you relaxing without a care in the world for the rest of your life in your head constantly. Excellent, now I have my early retirement planned out.

[TheRosswise]

Reading the comments, WOW some of you need to research financial independence.

[adamdayy]

I guess having a family is out of the picture

[jerzs]

Im 20 saving 65-75 percent of my income now and sorry but this wont all work cuz u get married or travel more/less shit happens...if there's someone who spends the same much every year for 20 years i wud love to meet them. Cuz life isnt just the same every year

[GibsonArtola]

Ok, that's great... I'm 47, I live in Europe, they take money out of my salary every year for my retirement. Now what?

[MrTupperwar]

This is chump change. This video is not helping anyone. 5%? That's it? The average inflation is 3% per year. Do yourselves a favor, look up Phil Town, Warren Buffett and a book called Rich Dad Poor Dad. The government wouldn't look out for you. If you want it, go get it!