Retiring at age 40 is one of the dreams of almost anyone, but it is also one of the most difficult tasks to carry out. Living off income and investments for the rest of your life is possible, although to do so you will have to have worked hard beforehand and have followed a series of steps that entail saving a very significant amount.
With only four decades of life and just over two of work, you can no longer find yourself in the labor market. A statement that more than one would like to tell but for which many concepts must be taken into account. Starting with what standard of living you want to have once you are retired, because the mattress should be different, you also have to take into account that the evolution of the economy plays a key role.
All without the need to play the lottery, since it is more unlikely than living on income, personal finances will have to have taken into account before turning 40 a reduction in expenses and considerable control of accounts. And it is that without a clear habit, it will be impossible to deal with debts and costs that arise.
In addition, once you live on the investments, the performance of these will determine if you can face a life of 1,000, 3,000 or 5,000 euros per month. Economic independence where the profitability of the market will be very important, a factor impossible to control and under which you will be at its mercy.
The level of risk in the market can be a difficult psychological factor to overcome
With a 7% historical return, you also have to take into account that you will have to pay commissions, between 1.5% and 2.5% less on profits, and inflation, around another 2% less. For their part, taxes also take a large piece of the pie and subtract about 20% per year from benefits.
In this way, and assuming all the risks involved in living on investments (both in the stock market and in real estate, the two most common examples) to retire at the age of 40, it will be necessary to have an initial cushion of around 200,000 euros. This is the example that marks a life of 1,000 euros per month, 12,000 per year, with a return of 6%.
A case that can be achieved is not as difficult as you think, but it will depend on everything mentioned and the ability of each person to endure the most extreme situations. All in order to be able to confirm that at the age of 40 one no longer depends on the labor market.
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