How To Retire Young and Retire Rich

Updated: January 24, 2024

To retire young and rich is everyone’s dream.

While some are satisfied with just imagining this possibility, some are fiercely determined to make this a reality. If you’re the latter, then this article is for you.

As with any goal, the initial step is to define what you want to achieve objectively. Thus, we need to clarify first the age that we can consider to be relatively young to retire and, more importantly, quantify what it means to retire rich.

They say that life begins at 40, so let’s use this as our goal. But let’s not be so strict and make it acceptable to retire young, in our 40s or our early 50s.

Our next step is to define what it means to be rich, which is unfortunately quite relative. Some people would consider themselves rich if they have 10 million pesos in the bank, but I know some who would say that’s not nearly enough to call themselves wealthy.

So, let’s just go for the minimum requirement for an individual to retire, which is to have enough to cover their monthly expenses until they die.

This means if you plan to retire by 40, and you believe you will live until 100, then you need to have savings and investments that can produce 60 years’ worth of your monthly expenses. How much exactly would that be? It would now depend on you.

If you love working with spreadsheets, then you can create one and project how much exactly that would be. Don’t forget to consider inflation, which you can safely set at 4% per annum, in my opinion.

Retirement Planning Using Your Savings Rate

However, I don’t really want to complicate things, so let me offer you a simpler way of solving this problem, which uses your monthly savings rate as the key to determining your plan of action.

If you earn P50,000 but spend only P37,500 per month, then your monthly savings rate is 25% because you can save that much portion of your income every month. Then, if you divide your spending rate by your savings rate, you’ll get the number of months that allows you to save enough money to cover one month’s worth of your expenses.

In our example, P37,500 is your one month’s worth of expenses and represents 75% of your monthly income – this is your spending rate. Divide 75% by your savings rate, which is 25%, and you’ll get 3. That’s 75 divided by 25, which equals 3. This means you can save one month’s worth of your expenses every three months.

Let me give you another example.

If you earn P40,000 and you can save P4,000 or 10% of your income every month, how many months does it take for you to save P36,000 or one month’s worth of your expenses?

In this case, you spend 90% of your income and save 10% every month. Using our formula, that’s 90 divided by 10, which gives you 9. This means you can save one month’s worth of your expenses every nine months.

Now, how is this information useful for retiring young and rich?

You can use this to estimate how many years’ worth of living expenses you will be able to save during your working years. The table below gives a summary.


Column 1: SP%
This is your spending rate, or how much of your income you use for your living expenses each month.

Column 2: SA%
This is your savings rate, or how much of your income you allot for your retirement each month.

Column 3: M1
This is the number of months it will take for you to save one month’s worth of your average monthly expenses. As illustrated in a previous example, if you save 25% of your income each month, you’ll have one month’s worth of your expenses after three months.

Column 4: Y1
This is the number of years’ worth of expenses you’ll save after one year for the specific savings rate. This is calculated by getting the fraction of Column 3, or 1 divided by M1.

According to the table, if you save as much as 60% of your income each month, you’ll be able to save 1.5 years’ worth of your expenses after a year. To calculate this, we just calculate the value of 1 / 0.67.

Column 5: Y10
This is the number of years’ worth of expenses you’ll save after ten years for the specific savings rate. This is computed by simply multiplying the value of Column 4 by 10 or Y1 multiplied by 10.

According to the table, if you always save 50% of your income, you’ll have ten years’ worth of your expenses after a decade.

Column 6: Y15
This is the number of years’ worth of expenses you’ll save after 15 years.

Column 7: Y20
This is the number of years’ worth of expenses you’ll save after 20 years.

Now let’s say that you’re 25 years old, you want to retire by 40, you save 25% of your income every month, and you’re optimistic that you’ll live until 100 years old. How can this table help you plan for your retirement?

According to the table, at a 25% savings rate, you’ll be able to save five years worth of your living expenses after 15 years, which is the number of years that you’ll be working from 25 to 40 years old. After that, you plan to live for another 60 years.

So the question now is, how can you have enough money for retirement if you will only get to save five years’ worth of your expenses during your working years?

This is where investments come in. And the goal is to find an investment that will grow your money just enough to sustain you until you’re 100 years old.

Compounded Annual Growth Rate

To make that five years’ worth of expenses grow and become 60 years’ worth of expenses, your money increases 12 times or grows 1200% in the span of 15 years. That may seem impossible, but it’s actually not, thanks to the concept of compounding.

There is a financial concept called the compounded annual growth rate. I wrote it before here, and the formula is given below:

CAGR = [ (Ending Value / Beginning Value) ^ (1 / Number of Years) ] – 1

If we plug in our numbers, the ‘Ending Value’ that we want is 60, the ‘Beginning Value’ is 5, and the ‘Number of Years’ is 15 – which gives us roughly 18% for the CAGR.

What this means is that if you invest your money in an instrument that grows an average of 18% per year, then you’ll have enough funds to last you for 60 years after you retire at 40.

I hope you got that. If not, then here’s another example.

Let’s say that you’re 30 years old, you save 30% of your income, and you believe you’ll live up to 90 years old. What should be the CAGR of your investment if you want to retire at 50 years old?

According to our table, after 20 years of working, you would have saved 8.57 years worth of your expenses. This is your ‘Beginning Value’ for the CAGR formula. Your ‘Ending Value’ is 40 (90 years old minus 50 years old), and the ‘Number of Years’ is 20 (50 years old minus 30 years old).

CAGR = [ (40 / 8.57) ^ (1/20) ] – 1
CAGR = 8%

Again, what this means is that if you invest your money in an instrument that grows an average of 8% per year, then you can comfortably retire at 50 and live until you’re 90.

But how about inflation? And what if I have other financial goals?

I chose not to consider inflation because the assumption here is that your income will also grow through the years, but you’ll be disciplined enough to stick to your savings rate and perhaps increase it by a few points along the way.

As for your other financial goals, such as buying a house or starting a business, you can lower your spending rate to create funds for those.

With that said, we now go to the next question that you might be thinking about, which is the specific investments where you should put your money to get your required CAGR.

Investments for Retirement Fund

The most popular investment to put your retirement fund in is the stock market or an Equity Fund. Historically, in the Philippines, these investments grow somewhere between 12-18% per year, which is just about the rate that you need to achieve your retirement goal.

If you’re like the second example, whose required CAGR is only 8%, then you can opt to invest in moderate-risk investments such as Balanced Funds as well, which grow between 6-12% per year in the country.

Do remember, though, that you shouldn’t put all your eggs in one basket. When investing, diversify your portfolio by buying a handful of different companies in the stock market and investing in various Equity or Growth Funds being offered by banks and mutual fund companies.

You Can Retire Young and Rich

The strategy just described may seem a bit simplistic, but it’s nevertheless a good starting point in creating your retirement plan. The most important aspect of this strategy is actually having the discipline to save and invest every month.

Financial planning is a life-long process, and those who succeed at it are those who start as early as possible. Your plan may not be perfect, but you’re already way ahead of those who are just drifting through their working years and hoping that their pension will be enough for a comfortable retirement.

Lastly, I would like to share that the point of retiring early is not really so you can stop working altogether, but because you want to stop working for the money and begin working for your passion.

With your costs of living already covered well until your senior years, you can now focus on more meaningful types of work, find worthy pursuits, and dedicate your time to advocacies that give you purpose and self-fulfillment.

What to do next: Click here to start your financial journey with IMG Wealth Academy


  1. A good way to start the year. Hope everyone will have this kind of goal, it will be tough but when you get there all your hardwork will be paid off.

  2. Hi just want to ask, is the VUL offered by Sunlife a good investment for this goal? Thanks in advance.

  3. Hi sir fitz! Im 33, i want to retire at 50yo and i plan to live until 80yo (may lahing high blood, hehe). Nagcompute ako. @20% SA, CAGR ko ay 13%. Kung ganun ay tama nga po na sa stock market ako nag invest. Malaking tulong sa akin ito. Thanks sir fitz!

  4. @AETH – your financial advisor should answer that for you as he/she knows your situation better; personally, I don’t like VUL but that’s just me.

    @Den – yes, you can also diversify towards equity funds (UITF and mutual funds)

  5. Want to invest and I want guidance my email linorosete@gmail .com
    Thanks and hoping for your guidance

  6. Free advice from an old guy that has been there – done that. Life does not NOT always go as you planned. My first wonderful Bride developed cancer at a very young age, soon after we had our last child. With great medical care, a super healthy organic diet and healthy lifestyle choices, she not only beat the cancer but we enjoyed sixteen more years together. Only our youngest son was not yet an adult as something began to go wrong.. When the cancer finally did return, it came back with a vengeance. A few weeks after my wife’s passing, I woke up on my 52nd birthday and it really set in. I will tell you that no amount of insurance money can replace a great marriage. I spent years paying bills, settling the estate issues and eventually wanted to try out some of the retirement locations that my first wife and I had in mind.

    The truth is, nothing seamed to fit anymore until I started looking at the Philippines. I can tell you that I am in act 2 of my life as I type this. God has certainly given me a second bite of the fruit of happiness. My second Beautiful Bride brought three wonderful children to our marriage and we have one young son together. When I hear the word “retire” I just laugh. I really am way too busy these days. My wife had a number of superior business ides that I could in no way find any fault with her plans. My Bride has three college degrees (working on a fourth these days) and was fully self supporting producing papers as an academic writer. With three kids there was never really enough capital for her to start anything beyond her academic writing.

    After our marriage, we discussed her and my ideas in detail. I suggested that she accept a small amount from me and go do a test run of her first plan. The rest is history. We have several local business ventures with a brand new one launched during the height of the 2020 COVID-19 pandemic. My wife is full of energy and and that inspires me to continually improve in my night time occupation of option trading on the US exchanges. I will only “hang it up” and retire when and if I can no longer physically sit in front of my computer to place weekly trades for income. I guess at that point I will simply collect dividend income from my holdings and perhaps enjoy some of the income from our family business operations. Retirement for me is being able to do what I want when I want.

    With several business operations up and running, academic writing is still my wife’s passion, albeit for much less income than the business operations produce. Actually, we put all business earnings back into the business to compound. We live well below our means even though we do not have to. I have written before that wife states that her writing “it is like being paid to stay in school” as she continually researches new things that keep her up to date in her fields of study. For me, you could say I get paid to wait as each option I sell ticks away time value until option expiration and I get to “rinse & repeat” writing (selling) new option contracts. Did I mention how much fun it is?

Leave a Reply

Your email address will not be published. Required fields are marked *