Let’s flash forward and assume you’re 65 today just to make things simple. You could retire and live pretty comfortably if you had $750K in savings, and your house and car are paid off. You could invest $400K in high-yield fixed income at 8% and get $32K/year pre-tax, plus you’d get about $18K/year in social security. (You’d invest the other $350K for growth to keep up with inflation, which your fixed income won’t do.) So, you should have about $50K/year pre-tax, or about $3K/month after tax and you’d be on Medicare. You should be able to lead a reasonably comfortable life on that and keep up with inflation until you keel over. (Yeah, the math is rough, but it’s not too far off.)
So, you’ve got 23 years to get there. Adjusting for inflation – assuming 3%/year – you’ll need about $1.5 million in 2031 dollars plus you’ll need to buy and pay off a house in the meantime. You’re starting with nothing. Forgetting about the house, and using raw division (this is imperfect analysis, I know), you’ll need to save/achieve-through-investing an average of $65K/year for the next 23 years. Again, that doesn’t include the house you’ll want paid off.
Given the taxes and cost of living here in CA, slogging it out at a $100K/year job and saving a little bit each year isn’t going to get you even close. No, you need a plan of action.
My suggestions: (a) Marry someone wealthy, (b) Marry and divorce someone REALLY wealthy (no pre nup), (c) Inherit money, (d) Win the lottery, or (e) Pray harder for one of a-d.
