Life is full of milestones…
You’ll never forget your first love.
You’ll never forget that moment when you knew you’d found your soulmate, that person you couldn’t live without.
The birth of your children is a big one. And then your grandchildren…
There are countless moments along life’s journey that make an everlasting impact on you.
There are also milestones in your financial journey that hardly anyone talks about.
Today, I will.
These are the moments that make a comfortable retirement inevitable. And no, I’m not talking about your 67th birthday when full Social Security retirement benefits become available. A lot of people think this default plan is the only way to reach retirement, but that’s not true.
On the contrary, retirement planning can be boiled down to a relatively simple checklist with a few magical, mathematical milestones for you to keep your eye on.
Starting with…
The First $100,000
It was Charlie Munger who said that “The first $100,000 is a b****, but you gotta do it.”
He’s right.
Mr. Munger also said, “I don’t care what you have to do. If it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000.”
That might be a bit much, but you get the point.
The first $100,000 is when you’re doing all the heavy lifting. Saving is hard, arduous work that seems daunting to many. But that’s the first milestone.
Assuming $10,000 invested with a conservative 7% annual return, you’ll reach $100,000 in 7.8 years. And if you’ve already hit it, congratulations, you’re ahead.
From there, time begins to do more of the work for you. Have a look at the table below.
Source: Four Pillar Freedom
After $100,000, your money is working just as hard as you are. It’s only going to take 5.1 years to make your next $100,000 (using the same $10,000 annual investments plus 7% annual returns scenario).
From there, things accelerate further.
Now, your money is working harder than you and going from $200,000 to $300,000 (again, using the same assumptions) takes 3.8 years.
And that’s your next milestone…
$300,000 Is Halfway to a Million
A $1 million portfolio is, of course, a milestone. But, first, you have to get halfway. You might assume that means $500,000. But it’s $300,000.
Allow me to explain.
In our scenario, it took 17 years to save up to $300,000. But it takes less than half of that figure – 14 years – to reach $1 million. That’s, of course, thanks to the wonders of compounding.
And so, measured in time rather than dollars, $300,000 is halfway. More than halfway, in fact.
Source: Tip Ranks
This is why once your money is doing more work than you are, in terms of retirement savings, then your dreams begin to look more achievable.
Knowing that your money is working harder than you do is great but knowing that your retirement is inevitable is even better.
The Final Milestone: Time to Coast
Once your portfolio becomes large enough, your savings can become so insignificant that they no longer matter.
Your money is doing the heavy lifting now and you can relax. You can “coast” as they say in the financial independence community.
At a certain point, you could never save another penny, and you’d still reach your retirement target, all because of the organic compound interest taking place within your portfolio.
Ultimately, this is the reason that all of us invest. Financial freedom is achievable for all; however, we can’t do it alone.
The stock market is going to be your best friend in terms of reaching that goal. You need the help of compound interest and no assets provide safe, secure, and reliable compounding results over the long-term like the blue-chip stocks that we cover at Wide Moat Research.
Those are the milestones that make retirement inevitable. It takes time. And discipline. But it can be done. And we’re here to help you along the way.
Regards,
Nick Ward
Analyst, Wide Moat Research
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