I see a lot of information out there about how much a person needs to retire. I also hear a lot of people asking the question, “how much money do I need to retire?” There are online calculators on just about every investing website, though few seem to answer the question, “How can I retire early?”

As a person who likes simple things and applies common sense to just about everything, this whole concept of having a big chunk of money in order to retire is confusing to me. But for fun, I choose to complete a retirement calculator and see how much money I would need to achieve early retirement the traditional way (I’m not counting in my rental income or equity in my properties).

I choose the Nerdwallet calculator because I like their website. Sometimes they have cool stuff, so I figured I’d give it a try.
The first step was to enter my age.

Step two was to enter the age I want to retire. I put 62, though I was shocked when the Nerdy Insight informed me that I could get 100% of my social security benefits at age 67. I guess I thought it was 65, and I am now feeling kind of cheated.

The next question was my pre-tax income. By this point, I am also starting not to like their Nerdy Tips since it is suggesting that I need to save twice my annual pre-tax salary by the age of 35. Yeah… that’s not going to happen.

Next, it asks how much I’ve saved for retirement. A few years ago, I set up my own self directed 401k since I am self-employed. I contribute $1250 each month into the account and then invest it with companies such as PeerStreet, or in real estate syndications. Anyway, I only have $60k in my 401k, and I kinda feel like a slacker now.

The final question asks how much I contribute toward retirement. The Nerdy tip tells me I should be at 15%. Based on my math, I contribute 5%. Yikes, I’m way behind in my retirement savings, according to Nerdwallet.

My results are pretty depressing. I am “in the red” and at 22% of my goal. Apparently, at my current savings rate, I would be able to retire at 82 years old, twenty years longer than my goal at the start of this exercise.

Here is what concerns me. I wonder how many 30-year-olds even have $60k in retirement?! I mean, it’s great that someone would be checking out this retirement calculator, but I also wonder how many “give up” or feel defeated after getting a response like this.
My other issue is why do these retirement calculators (Nerd Wallet’s is not the only one) not ask about passive income streams?
In this day and age, it seems like everyone has a personal blog, FBA Amazon Business, DropShipping Store, or real estate…. I love this blog article on the Top 12 Passive Income Ideas. I think some or all of these ideas would be a perfect retirement income strategy. I bet you could even set up a self-directed 401k and get a business license and fund it with the income from any one of these ideas if you wanted to. Wouldn’t that be beneficial for this magical retirement calculator to factor in?

So after my initial shock at being in the red, I reminded myself that I have passive income, and quite a bit of it.

I have a memory from a few years back. I had maybe five rentals at the time, two duplexes, and one single-family. I remember opening the mail one night, and one letter was from the Social Security office. It was my annual social security statement which calculated that I would get $1200 per month if I continued working until 62. I laughed and showed my husband. He laughed too because that was the cash flow we were already getting from just one of our duplexes. I was very tempted to mail them a letter back telling them to close my account and disburse it to others because I’ve got it covered myself. I understand that you can’t do that, but in all seriousness, I then started to wonder how many people my age are expecting to retire on social security benefits.

Just for fun, I completed the Action Plan that was suggested to me by the Nerdwallet Retirement Calculator. Guess what their fantastic advice was? Increase my monthly savings to $4,002 per month.

With inflation at around 2% and bank interest at like .05%, this is horrible advice. I understand that financial firms advise to save and invest so you can live off of the dividends (if those still exist) the interest or off of the profits of selling stock.

But where are all the new school financial planners who share with us young millennials how to create passive income that doesn’t require sending them thousands of dollars every month?

I love that there are so many bloggers who share how they created their own path to financial freedom, though I think that a fee-based financial planner who knew about this stuff would be super helpful. I read a useful book recently, Tony Robbins’s book Money: Master the Game is a long read, but he went straight for the stockbrokers and mutual funds and exposed their horrendous fees. In real estate land, usury is a no-no, but these guys are making a killing while hiding it in the fine print.

I dropped out of college at 20, and I felt terrible that my mom and dad paid for schooling that I never finished. So I repaid them by doing a real estate joint venture, which they earned back ten times their college investment. I dropped out so that I could learn the skills I felt I needed to succeed on my own, and that decision paid off.

Learning those skills required me to work in sales jobs, customer service, and sometimes I had two jobs because I figured in working two jobs at once, I could double my rate of learning and earning at the same time.

When I started making some real money in real estate, the first thing I did was start saving up for a down payment on a duplex, and every year I set out to buy at least once property so that I could eventually replace my income.

I currently own 16 units, I have two more under contract and I’ll likely buy 10 more this year, but we’ll focus on what I currently have. These rentals produce $80,880 per year in net income. That’s after all expenses.

Update: It’s been 3 years since publishing this post and we are now earning over $120,000 in passive(ish) income from our real estate investments alone. 

My amazing husband was able to retire at 29 years old from construction because of our rental income. I could too, but I am now more fulfilled helping other families build their passive income portfolios. It’s not about making more income anymore; it’s about growth and contribution.

While we do not have $1 million in the bank,  if we did, it would likely not be able to produce $120,000+ in annual income from traditional investing.  We do have several million in equity in our properties, and while it is not liquid, we can still access that equity.

I am well aware that our equity could get wiped out in a few months with another downturn like in 2008-2012. If all of our equity got wiped out, that would mean that real estate values would have gone down 50%, so I’d probably spend every last dollar buying everything up that I could.

My husband will attest to the fact that a few times, I almost made us broke by buying a few too many houses at a time. I truly can never turn down a good sale. 

So, let’s assume we didn’t buy anything else, and I retired at age 62, which is 31 years away from now.

Let’s also assume that I do not take any further loans or lines of credits out on the properties, and the rents do not increase at all for 25 years.
Leaving everything as it was in 2017, that would equate to $16,785 per month or $201,420 in annual income. I think I could comfortably retire off of that…

So tell me, why do we use calculators that tell us how many millions we need in the bank and why do we always hear that we need to work hard and save every last dollar to eventually retire at the proper age?

I’m curious why more people are not looking for additional passive income streams in order to retire, or not live paycheck to paycheck. Then retirement would look more like a monthly passive income number, not an age.

At what passive income level would early retirement be an option for you?

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