The Race to Retirement – Revisited


Earlier this week, I spilled the beans and detailed Mr and Mrs. Money Mustache’s combined savings history from zero net worth to retirement. In the article, I tried to explain that it wasn’t a struggle or a sacrifice to become financially independent in nine years, it was in fact unavoidable.

If you get paid a ridiculous amount of money, and spend only a normal amount of money, it builds up very quickly to become an accelerating and unstoppable force, like a snowball on a steep hill. And many people agreed that with a top salary of $125,000 per year, and a wife that made it up to $70k in her short career, we were indeed earning a ridiculous amount of money.

Weren’t we?

Let’s look at the averages over that 9-year period.
Starting from graduation, I earned 41, 57,77,83,100,110,110,125, and 50k
During the parallel years, my girlfriend-then-later-wife earned 0,0,0,44,60,65,65,70,60

So my 9-year average earnings were $83,000, and hers were $40,400. When we average our salaries together, we were equivalent to a couple earning $61,700 each.
PLUS I made a $100,000 profit from renovating one of our houses and some appreciation. That brings up the annual average to $67,255 each.

So if you happen to be part of a working couple earning this much each – congratulations, you are no more than nine years from retirement, even if your net worth is currently ZERO!

But what about a more typical family – say, a high-school teacher (median US salary $51,000 according to Wikipedia) and an elementary school teacher ($40,000 from payscale.com) with a kid and a mortgage on a $200,000 house. These folks have a combined before-tax income of $91,000, which works out to $80k after federal and state taxes according to the tax calculator at efile.com.

Let’s say they spend just as much as the MMM family does for our lavish lifestyle with plenty of travel, great bicycles, and two cars ($24k per year), plus have zero equity on their $200,000 house, so they pay $10,000 of interest per year on that as well. Total spending is thus, $34k/year, leaving $46k of their $80k take-home pay available to save.

We will assume their savings earn a 5% return, whether from paying off the mortgage or saving in index funds:

End of Year 1  ‘Stash:  = $46,000, plus investment gains of $1150, total = $47,150
Year 2: $47,150 + 46,000 + $3507 investment gains = $96657
Year 3: $99,657 + 46,000 + $6132 investment gains = $151,790
Year 4: $151,790 + $46,000 +  $8739 investment gains = $206,529
Year 5: $206529 + $46,000 +  $11,476 investment gains = $264,005
Year 6: $264,005 + $46,000 +  $14,350 investment gains = $324,355
Year 7: $324,355 + $46,000 +  $17,367 investment gains = $387723
Year 8: $387722  + $46,000 + $20,536 investment gains = $454258
Year 9: $454,258 + $46,000 +  $23,863 investment gains = $524120
Year 10: $524120 + $46,000 +  $27356 investment gains = $597476
Year 11: $597476 + $46,000 +  $31024 investment gains = $674,500
Year 12: $674,500 + $46,000 + $33,724 investment gains = $754,224
Year 13: $754,224 + $46,000 + $38861 investment gains =  $839085

OOPS! The investment gains are larger than your entire living expense! Congratulations, you are retired!

So with two median US teachers, the maximum reasonable length of a career under MMM Principles is thirteen years. This puts our quintessential teacher couple out on the streets enjoying an early retirement by their mid-thirties at the latest – assuming no teacher pension, no social security, and no career advancement – only 2% annual raises to keep up with inflation.

It’s just basic math, but it’s a very happy type of math, since it means that even for an average middle-class salary, early retirement WELL BEFORE AGE 40 is not at all an extreme goal.



  • Vaughn Swenson March 23, 2021, 10:59 am

    Help! MMM, I was wondering if this example assumes that all your investments will be in ONE account. What if you have savings/investments in multiple buckets. Wouldn’t the interest earned on the total be less because you would only be earning compound interest on a smaller amount of money in each account? :). Thanks!


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