Our household makes over $400k per year and we want to have the option to retire in 20 years – are we on track?

A lot of people dream of retiring on the early side. And in this Reddit post, we have a couple in their mid-30s who are hoping to retire in their mid-50s.

Since have a net worth of $1 million and they earn $400,000 a year, their goal seems more than attainable. But it may require some careful planning.

It’s a matter of setting priorities

With $400,000 a year in income, I don’t see any reason why this couple couldn’t retire early. If they save 20% of their income, or $80,000 per year, that amounts to about $3.66 million if their portfolio gives them a yearly 8% return. And that’s a reasonable return given that it’s a bit below the stock market’s average.

But that $3.66 million is on top of their $1 million net worth now. And some of those assets are already being invested. So if there’s more growth there, which is likely, then this couple could easily be sitting on $6 million or more in 20 years. And that’s likely enough for an early retirement in their mid-50s unless they happen to have extremely expensive needs by then.

Also, it’s possible that this couple’s income will grow over the next 20 years. That could allow them to save even more than $80,000 per year, which only inflate these numbers.

So basically, all this couple really needs to do is prioritize savings to a reasonable degree in the coming years. Many people fall victim to lifestyle creep, where they allow their spending to increase as their income rises.

The couple here earns enough money that they should be able to enjoy their lives now. But if they want to retire early, they will need to make sure they’re saving at a decent clip. So what they probably don’t want to do is double their expenses or anything to that extreme.

A financial advisor can help

All told, I think it’s more than reasonable for this couple to plan for a retirement in their mid-50s. But it will require a decent amount of money.

If the couple retires in their mid-50s, they won’t be eligible for Medicare coverage for a decade. They’ll also be a good number of years away from collecting Social Security. So there’s going to be a period where they face large healthcare costs, and during that time, they’ll have to cover everything from savings since they won’t be eligible for Social Security yet.

That’s why I would recommend that they sit down with a financial advisor to make sure they’re on the right track, and to make a plan for the coming years. An advisor can also help make sure that they’re investing in the right assets and taking on an appropriate amount of risk in their portfolios.

Another thing a financial advisor can do is help them strike a balance between spending and savings. That can be a hard thing to do for couples with lofty retirement goals, so it never hurts to get some outside perspective.

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