Retiring early is possible if you work at it with a plan. The speed at which you can do it depends largely on how much you save and what your comfortable standard of living is. Of course, when you make more money as an engineer, this becomes easier as you bring in more money while also keeping your expenses low. This is a unique situation which allows for very rapid retirement if you wanted to. I’ve broken this down into a year by year play on how much you will save and make so you can take a look at where you stand.
How’s it going everybody this is beat the bush today i’m going to show you exactly how you can retire on an engineer salary within 10 years i’m going to give you very specific examples on how to do this of course your salary is going to change a little bit depending on what kind of engineer you are where you work etc you can see on the first line you graduate
With a bachelor’s degree and you make on average about $60,000 a year i projects a pretty good first year pay increase because generally your front-end loaded as an engineer you’re going to hit a very high salary pretty quickly you can see a pretty good pay increase the next year the next year after that and sometimes after that i only add about three percent pay
Increase who account for inflation generally it kind of slows down after you’ve worked in the field for a while you’re going to get an estimated bonus anywhere from zero to even up to twenty percent or so but i put an estimate around five percent so you’re going to see it’s always five percent throughout every single year of these ten years i added a little bit of
Side income here as a projection because you really should build up this ability to be able to make at least a little bit because after your retirement after you’re not actually working at all these skills would be very important so i estimate about a thousand dollars in the first year and then incrementally increases from there if you work hard asses you will make
More and more money i also add in credit cards points value if you actually use the points for living expenses you’re actually saving money so i put in about five hundred dollars in the beginning because in the beginning you can’t get that many credit cards because your credit score isn’t that good but as you build up your credit score you get a higher and higher
Credit score you can be able to get more and more cash back bonuses all the way up to the tenth year where you get about two thousand seven hundred fifty dollars when you’re working at your job you should really load up on all the retirement accounts just max them out including 401k eighteen thousand dollars a year it’s going to hurt a bit in the beginning because
Your paycheck is going to be more than slashed in half you should contribute to a roth 401k which adds another five thousand five hundred dollars of pre-tax money you should also add the hsa which will add another three thousand four hundred dollars all of that added to is about $27,000 that you’re not taxed on so that’s pretty good after you deduct all those
That’s tax-free you get a take-home pay of about $37,000 you assume roughly i don’t know like 20% tax rate is texas tax rate so you’re paying seven thousand four hundred twenty dollars here after tax dollars thirty thousand dollars and here i assume you’re going to spend about one thousand dollars on rent and this is a key point if you live in somewhere that’s very
Expensive then you really should look to living with roommates or something especially during these retirement years you really really need to try to lower your rent cost living cost somehow so i allocate about one thousand dollars to do this living expenses i allocate for you about fifteen thousand dollars this is a comfortable amount although it’s really low it
Takes practice to get it to that amount i have other videos that tells you how you can actually do this while remaining having a good standard of living so therefore your total living expenses is about twenty-seven thousand dollars on your first year you save only about three thousand dollars in actual cash your other savings is in retirement account so you don’t
Have to worry about all you only have three thousand dollars of cash total accumulated in retirement accounts like i said before is twenty seven thousand dollars your first year right off the bat your networks increased from zero to thirty thousand dollars now i put at the very end this four percent safe withdrawal rate i talked about this in other videos where
You can actually take 4% out of whatever savings you have and how that amount remain there in most cases so right now the 4% safe withdrawal is about $1,200 that you can which off of course you’re not going to read all this on this first year you’re going to do this when you’re retire just knowing how much you can withdraw you can compare this amount to your burn
Rate and as soon as this is above your burn rate then you know you can retire somewhere down the line in the accumulated savings in year three four five or six you’re going to have a big chunk of cash cash not our main account saved up and you’re going to be itching to spend it and you’re going to go ahead maybe i should buy a house well this particular plan does
Not actually account for buying a house if you buy a house you change the dynamics of it because if you make money on the house your net worth of course is going to increase but if you lose money on the house well it’s going to be a little bit harder for you to retire especially right now the housing price is kind of heated it’s kind of like a toss-up i don’t know
What to recommend i feel like it’s a little heated and so you should proceed with caution so when you accumulate the savings all of the savings it’s not actually stuff in the savings account where you only earn one point oh five percent interest rate you really have to put this into an smt 500 fun of vanguard b oh oh fun maybe and i assume here in the spreadsheet
That you’re actually gaining roughly on average 6% per year now all of this is based on 6% average per year now are we really going to get 6% on average last year we got like some like 20% we should know that this is average and it’s likely more like average over 10 20 years average not you know one or two years average so at some point you’re going to have to be
Mentally and emotionally prepared to see the smt go down and not sell out you’re going to have to do this for five or six years on average and that’s a tough pill to swallow and before doing this you got to go in knowing that yes maybe one day whatever savings you put like 100k in there all of a sudden it’s going to be 50k and you’re going to hold still and go the
Course still and keep on investing so when you look at the spreadsheet you can see that all of your retirement accounts is paid to the max all ten years you can also see that i set your standard of living at spending only 27 k every single year and you didn’t really increase from there now even at a 15 k burn rate per year you can probably still do one internet for
A year which is you know not too bad when you look at your accumulated savings you can see that it balloons up pretty quickly and by the end of the tenth year you’ve got four hundred thirty six thousand dollars in cash of course invested in the smp your retirement account including your 401 k roth 401 k hsa needs to all be also invested in the smp your final total
Network this is not even inside the houses it’s just retirement accounts and savings account that’s invested comes out to be seven hundred and ninety thousand dollars at the end of ten years so it’s pretty impressive for you know ten years of work and four percent of that is thirty one thousand dollars and this covers your living expenses and then some and then a
Little bit more you’ve got to know your living expenses changes quite a bit after you retire one of them is to anticipate that you have medical expenses to pay for you have to pray the premiums yourself on medical expenses i have a whole video right there i’ll put it right here so now let’s look at the graph form of all of this at the very bottom there is the four
Percent safe withdrawal rate where it kind of creeps up a little bit every single year until the point where it passes your total expenses that is when you know your average gains from all your investment that’s going to outweigh whatever you’re spending on average the third line from your bottom is your engineering salary you can see that it comes up pretty quickly
And then it tapers off and just kind of slowly increases according to inflation however when you look at the accumulated savings and your total network it’s just kind of snowballs after these ten years because if you do it consistently for ten years and you don’t increase your standard of living too much then yes this is going to happen and it’s very realistic so i
Hope that was helpful for all the engineers out there i’ll put a link in the video description below for where you can get that spreadsheet so you can look at those numbers more carefully don’t forget to give me a like on this video comment down below let me know what you think of retiring in just ten years if you’re interested in supporting the channel don’t forget
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Transcribed from video
10 Year Retirement Plan for Engineers | BeatTheBush By BeatTheBush
