How much money you need to retire at 35 and live on investment income alone until 90

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• To retire at 35 and live on investment income of $100,000 a year, you need at least $5.22 million invested.
• With an annual spending target of $65,000, you'll need about $3.25 million invested.
• A certified financial planner recommends an "aggressive" asset allocation of 80% stocks and 20% bonds.

Most Americans have been in the working world for at least a decade by the time they reach their mid-30s. For some people, that's enough.

With an early retirement craze taking hold in the US, you'd probably be in the minority if you haven't wondered, How much money do I need to quit my job and never work again? On a quest to crunch the numbers, we consulted Brian Fry, a certified financial planner and the founder of Safe Landing Financial.

Fry used a Monte Carlo simulation to estimate the starting balance someone would need in a taxable brokerage account the day they leave work to live on either $100,000 a year or $65,000 a year in dividends (fixed income from bond investments) and capital gains (income from equity investments), and principal, after paying taxes, until age 90.

To run the simulation for a hypothetical retiree, Fry had to make assumptions about the retiree's investments and tax treatments. You can find the full list of assumptions at the end of this post, but in short, he used Right Capital, a financial-planning software that used JPMorgan long-term return estimates for investments; assumed a conservative 3% inflation estimate; assumed no state or local taxes; and did not factor in Social Security.

In addition, the investments are assumed to be held in a taxable investment account, not a retirement account like an IRA or 401(k), since you can't withdraw money from those accounts without penalty before age 59 and a half.

How much you need invested to retire at 35

According to Fry's calculations, an investor who leaves work at age 35 would need at least $5,225,000 in a taxable investment account on the day they retire in order to have an annual post-tax income of $100,000.

If the investor reduces their target annual income to $65,000, they would need about $2 million less — or $3,250,000 — invested on the day they retire.

Fry recommends investing 80% of the lump sum in stocks and 20% in bonds, which is considered an "aggressive" asset allocation, due to the age of the investor. However, he notes, it's important the retiree update their financial plan yearly, or whenever they experience a significant life change.

"Investors tend to be their own worst enemy when experiencing investment losses," Fry said. "If you don't have the time, interest, discipline, and expertise, it's better to work with a fee-only certified financial planner that can tailor your investments to track to your financial plan."

It's worth noting that many early retirees, especially those who quit corporate life in their 20s or 30s, continue to earn income after leaving their 9-to-5.

In fact, some who earn passive income through real-estate investing, blogging, or some other monetizable hobby, consider themselves financially independent rather than retired, meaning they don't need to earn a steady paycheck to afford their lifestyle.

Fry's simulation also did not factor in potential Social Security income. Americans born in 1960 or later — age 63 or younger in 2023 — can retire with full Social Security benefits at age 67, so long as they worked at least 10 years.

The amount of a person's Social Security benefit is equal to an average of monthly wages for their 35 highest-earning years, adjusted for inflation. The maximum monthly benefit for someone who retires at the current full retirement age of 66 is $3,627. The future of Social Security is uncertain, however, and some financial planners recommend their clients implement a saving and investing strategy to afford retirement without it.

Assumptions used to calculate starting investment balance for a 35-year-old retiree

Fry notes that the Monte Carlo simulation has two clear limitations: The outputs are only as good as the inputs and it does not factor in the behavioral aspects of finance, or how investors react to swings in the markets. 

Here are the assumptions used in the simulation:

Investments

• All investments are in a taxable account
• Used $8,333/month for $100,000 target annual income and $5,417/month for $65,000 target annual income
• JPMorgan long-term return estimates used for investments, 3% inflation used for conservative amount
• Assumed younger investors can take on more risk than older investors
• 5% annual portfolio turnover
• $0 capital loss carry over
• No asset-under-management fees included
• Lump-sum is invested at start of simulation as cash with no built-in gains

Taxes

• No state or local/city tax factored in
• Standard deduction taken for a single filer
• No Social Security payments factored in for older investors
• Dividends — 85% are qualified dividends, 15% are non-qualified dividends
• Capital gains — 90% long-term capital gains, 10% short-term capital gains
• Tax law — TCJA sunset 2025: reflects all updated provisions related to TCJA, including the sun-setting of most individual income tax provisions in 2025

This article was originally published in August 2019.