What’s Your Life Worth?

What’s your life worth? This is what you can afford…

Life is short and most of us don’t have enough money for what we want to do. But how can you quantify something as subjective as this?

“There is no greater risk than being too late to start saving.”

The simplest way is to take a look at life expectancy tables. These will tell you the average age of death, number of years left for retirement, or whatever other time frame you are interested in.

The following data comes from the Australian Life Expectancy tables by gender, which was published by Statistics in Australia . I have to admit, it’s an odd bit of information… probably not worth looking up. But if you do want to impress someone at a party…

Average life expectancy is currently around 85 for women and 80.9 for men. It’s expected to rise in the future . This means that life is likely to be even shorter than advertised, assuming trends continue. This would make it ever more important to prepare early enough!

Using the average life expectancy at age 80, a 40 year old man who was retiring today could expect to live another 40 years . He’d have a further 40 years of retirement remaining, where he might spend around AU$1,500 per month . That is AU$18,000 worth of retirement income per year. Assuming this retiree had saved about half of his earnings (assume annual salary $60,000 per year) since starting work at age 22, he’d have accumulated around 18 years worth of savings.

Assuming, there is no rate of return, this savings equates to around AU$540,000 — which is truly not enough — because he will need approximately $720,000 and this is not even accounting for inflation rate! I’m currently in my early 30s and my situation is similar. So why am I writing this post?

Why am I aiming to retire early?

I want to retire early because the money I save now can grow for longer. There are many benefits of saving money, especially when one is young .

If you assume an investment return of 3% per year (after inflation) then this would give you $702,433 after 18 years . This is not enough either! You’d need around $1,000,000 to have a comfortable retirement. This is assuming that one chose the minimalist approach in retirement!

Estimated amounts needed for retirement off of savings. The time horizon changes based on whether you are retired or not. If you are married with children, your life expectancy is lower than if you are young and single. I chose this amount as a high estimate.

People reduce their savings so they can spend on themselves and not “waste” it. This is true because people do not know what they will need in the future, and cannot plan so far ahead. I don’t want to work for another 45 years. The sooner I can retire, the longer I have to save.

I do not yet have a perfect plan to achieve this goal, but I know what will work better than others. And it could work for you too! If you save as much as possible every month and invest wisely, there is no reason why you couldn’t generate enough passive income to support yourself — maybe even sooner than you thought.

“We cannot change the fact that life is short, but we can make it shorter by wasting time.”

The plan is simple, no matter where you are geographically — just save as much as you can over your lifetime. Remove all costs that are not essential, then use any spare money to invest in assets that generate income. More expensive doesn’t necessarily mean better. Once I reach my FIRE number, I’d withdraw my investments at 4% rate and continuously invest in a low-cost index fund. Set it and forget it!

“There is no security in life; there are only opportunities.”

If you start this strategy early enough, then hopefully your passive income will exceed your spending before you even retire. This will give you the choice to retire early — or continue earning more money…

“Every man dies. Not every man really lives.”

Please note:

It should not be taken as constituting professional advice from the author.

I am not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances.