Early retirement and calculations

That moment of truth

Out of all the things in the world of personal finances that you are able to measure, I decided to measure my money matters in terms of monthly passive income. This in itself is not a bad thing as I am planning an early retirement.

The issue came in when I started researching how to calculate the amount you need to retire – which most people focus on stocks and ETFs only. The calculation looked vastly different, which was a cause of concern for me financially.

There’s no single way to measure how much you need in retirement for all asset classes, and I think even using these you cannot truly have certainty. I love the way many of the financial service providers add the following in their clauses (for insurance and also investing with a fund manager):

We reserve the right not to pay out the monies in case this could negatively affect the business. We will also not pay out in the case of an ‘act of God’.

But that’s enough about my rantings about certainty, let’s dive in and check some of my calculations that I have been using.

My measurements and calculations

My calculations are quite simple:

Monthly Expenses = what I need passively every month

And in property this is even simpler – All I do is minus my property expenses from my rental income:

Property calculations

Rental IncomeLevies (incl special levies)
Rates and Taxes
Agent fees (incl. finders fees)
Other fees (incl. parking and vacancy)
Totals IncomeTotal Expenses

This will give me the total money I have for income from my property investments. I then just need it to be more than my monthly expenses.

Simple, right? This calculation would technically mean, that as of the time of writing this, I am currently 77% from reaching our retirement goals. 

Stocks and other measurement means

Using the 4% / Multiply by 25 rule, you’re able to calculate the number you would require to retire. 

The 4% rule

The 4% rule is fairly simple. You need to take out 4% of your investments every year to live on. This would mean the following, as an example:

  • Your monthly expenses are R 10 000
  • Your yearly expenses are: R 120 000
  • R 120 000 should be 4% of your investment

The calculation looks something like this in reverse: 

Retirement amount needed  = YearlyExpenses x 25

With this calculation, it means that I am only 11.4 % away from retirement. Looking at these calculations, I think i would rather want to invest in property! 

This is so wrong

There seems to be a 9% difference in my calculations – and it’s somewhere between annoying and alarming. Technically I can reinvest my property rental income and get more money from that, which would then fit into the 4% rule – yet getting a lower 7% (depending on the investment) for my rental income will also have an impact on my retirement investment.

What else can I do?

The fact is we need a lot of money to retire. It’s not the type of money I find in my back pocket! Whichever calculation you use, the most important thing you need to do is focus on investing and lowering your monthly expenses (e.g. paying off debt). Here’s some of the things I can do to help me retire faster and more efficiently:

  • Lower my living expenses
  • Up my savings rate
  • While I am not retired yet, I can reinvest my rent/dividends into some place that will give me higher returns – ETFs and other opportunities, here I come!
    • Find ways to minimise risk and cut fees so that I can invest more
    • Diversify for less risk

    Calculations with inflation in mind

    One of the biggest killers of your financial future is inflation and the way it compounds. This is a 

     I have done some of these calculations, and it seems my personal properties are still on track:

    • Work out your inflationary increase on:
      • Property value
      • Rental income
    • Do a annualised return of your ETF / stocks to see if you are beating inflations
    • Do a touch base on all fees and costs – are these above inflation? Are you able to lower these in any way?


    As seen above, it’s really difficult to calculate how much you need for retirement. 

    It’s vital that you know what’s going on in your finances – do calculations often and keep your finger on it.

    Good luck with your calculations!

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