How Half of Americans Can Retire in 10 Years

Everyone’s always worried about finances.  However, I will show you today how half of American households can retire in 10 years even if they start at 0 net worth.  This would not include a huge drop in lifestyle and it also has a bit of breathing room.

The median household income in America is $68,703 [2019 US Census Bureau]. Why are we using the median?  When looking at income, this is a better indicator since the top 1% greatly raise the average.  Using the median splits the population in half.  Half are above $68,703, half are below. Since we are talking about households, I will run a scenario for a couple.

Retirement is possible when expenses are less than what you are passively earning.  In this scenario, we are aiming for:

  1. $500,000 Net Worth
  2. 5% withdrawal rate
  3. $25,000 in expenses per year.

While $500k may seem like a high target, and $25,000 per year may seem little to live off of, i will show you briefly how this can be done.

Tax Deductions

Since we know the salary is $68,703, we can talk about how much we can keep by lowering our tax liability.

  1. First we have the Traditional 401k, which has a limit of $19,500 in 2021 per the IRS.  If your employer does not offer 401ks, look into SEP IRAs or SIMPLE plans.
    1. [401k Matching] – Next, we want to see If your employer offers 401k matching, it is free money.
      1. Median matches are 4.7% (Fidelity), which gives us $3229.04 in free money to the 401k.
  2. Next, we want to look into a Traditional IRA.  The limit is $6,000 in 2021 according to the IRS.  Since we are looking at a couple, we can double this to $12,000.  We want to max that out
    1. Singles are eligible for full deductions if MAGI (Modified Adjusted Gross Income) is under $65,000 for 2021
    2. Couples are eligible for full deductions if MAGI is under $104,000 for 2021
  3. Health Insurance – Employer plans can be deducted.  I will go into Health Insurance when i go through all of the expenses.  If your employer offers a cheap plan with an HSA, I highly recommend it.  My last employer offered a free high deductible plan with an HSA.
    1. HSA limits: $7,100 for couples, $3550 for individuals according to the IRS.  You want to max this out if you qualify.  In this example, i will assume your employer does not offer health insurance.  
      1. Employers may even contribute to your HSA.
  4. Standard deduction: $12,400 for single filers and $24,000 for married filing jointly.
  5. Other: Many people qualify for various credits or deductions, but I will not go over that here since that is on an individual basis.

Total Deductions: $19,500 + $12,000 + $7,100 + $24,000 = $62,600

Taxable Income: $68,703 (income) – $62,600 (deductions) = $6,103


There are 3 taxes that we will look at. FICA, State, and Federal Taxes.

  1. FICA – 
    1. 6.2% for Social Security
    2. 1.45% for Medicare
  2. State Tax
    1. I estimate this to be 3%, there are too many variables here.  Some are higher, some are lower, some states even have 0 income tax.  Since our taxable income is so low, this assumption shouldn’t have too much of an effect on our final numbers.
  3. Federal Taxes
    1. In our example, we have a taxable income of $6103, which gives us an effective tax rate of 10%.  We now have to pay $610.30 in federal taxes.  
  4. This gives us a total post tax income of $22,562.08.


Death and Taxes is inevitable. However, expenses are finally into something we can control–at least to some extent.

Expenses we cannot control

  1. Housing
    1. The median rent for a 1 bedroom in the US is $955.  I will round down to $900 since we have to give up a tiny bit of luxury for retiring early.  Alternatively, you could live in an even cheaper area, find a desperate landlord, or live in a smaller apartment.  For those of us who are unable to move due to location and size needs, we will have to keep this at $900.
    2. Location
      1. Some of us need to be near home, schools, or work
      2. If you do not need to be in a certain location, you can certainly move to a cheaper location
    3. Size
      1. For a couple, a 1 bedroom is more than sufficient.  I often hear of large families living in studios, including my parents when growing up (Mom had 7 siblings too), so having a 1 bedroom for a small family is not an impossible task
  2. Health Insurance – Two Options
    1. Employee plans
      1. I have paid $56 per month for health (with an HSA), dental, and vision. This amount varies widely.
    2. No Coverage
      1. Tax Cut and Jobs Act removed the penalty for No Coverage.
      2. Self insurance is mathematically the best policy. Insurance companies have to pay for all their employees and office space in order to sell insurance, so if you ran a million simulations of your life, you will end up saving more money if you self insure
      3. If you do require large medical payments, you are allowed to tap into your 401k without penalties for medical payments in most conditions.
  3. Utilities
    1. I do not want to have people turning off their lights or not using their phones/computers while skipping showers. The average cost of utilities in the US is $162.26. We can do slightly better by using our brain and more efficient appliances. We will have an average cost of $150.
  4. Transportation
    1. Car
      1. In America, it is often helpful to have a car.  While I recommend no car living due to advancements in technology such as the bicycle or human legs, you can also take car services like Uber without the use of a personal car for occasional trips.  
      2. While it is often optimal to drive a used or old car, I will use a lease on a new car in this example because I know that many enjoy the feel of a new car, and the maintenance on a new car can be done without taking it to a mechanic–which greatly simplifies things because car maintenance is highly dependent on car models and how old they are.  
        1. When I looked for a car in 2015, I found a deal for a Nissan Sentra 2015 for a 2 year lease, 15k miles per year at 150$.  I am no magical negotiator or people person.  In fact I am an introvert by nature.  I assure that any person can negotiate with these salesmen to bump their prices down.
          1. While I know this price of $150 is lower than listed prices for 2021 Sentras, you are able to negotiate their rates down.  I will cover how to do this in a future video.
            1. Hint: go right before Christmas time and call every single dealership in a 20 mile radius and start a bidding war. During this time, salesmen need to reach end of month, end of quarter, and end of year sales quotas.
          2. I get it, some people do not want to drive a bare bones vehicle.  However, the model I had came equipped with a backup camera, automatic doors, keyless entry, AC, heat, and most common amenities.  You do not need more.  If you end up “needing” an SUV for some off roading, you may rent it for that weekend at your own expense.
    2. Car Insurance
      1. I had full coverage at $150 per month.  I suggest you only have the state’s lowest required liability insurance.  Mathematically, this is optimal.
      2. Before, my state (DC) was ranked by a study on that it is the second most expensive state for average complete coverage. It has since dropped to the 7th most expensive, but I am more than certain you can do better than $150 for full coverage and much less for only liability insurance. I will also note that I got a car at around 23 with 0 driving history and got my license at 21, so most people should be getting much better rates than me. Shop around and use a brand name insurer.
    3. Gas –
      1. The Average American drives 13476 miles per year.  You will drive 10,000 miles since we are trying to retire early.  This should only be used for going to work (you should live walking distance to work if possible, then you wouldn’t even need a car!) and maybe getting groceries (which are picked up on the way back from work to save on gas and car usage).
      2. A 2021 Sentra is 29/39 mpg, so I approximate an average of 36 miles per gallon since most of the driving done at 10k miles per year are on the highway.  If you drive with the goal of maximizing gas usage, you can easily go above the reported number of 39 mpg.
      3. According to Gas Buddy, the average gas price across the US was $2.60 per gallon in 2019
      4. This brings our gas expense to $60.19 per month. (10,000 miles per year / 12 months * $2.60 per gallon / 36 mpg)
  5. Home Supplies/Hygienic Products
    1. $25 per month.  Cleaning supplies and health products/medicine. Dollar stores are great for some items, terrible for others. Find out which is best for your region.

Expenses we can control

  1. Food – a $300 budget for 2 people is more than enough if you cook every meal and know how to shop.  If you are hardcore, you can even eat PB&Js or rice and beans everyday and have this expense be $30 or less for the entire month.  Personally, I am gluten free and spend far below 5$ a day per person.
    1. If you are wondering, you can still afford to eat meat. I eat meat twice a day at around half a pound per meal.
    2. You will be healthier
      1. Sodium and fat in restaurants and prepackaged foods are very high.  Cooking food yourself severely reduces that amount.  According to many health studies, the abundance of sodium and fat lead to a shorter life. Since we are eating less of these, we are aiming to live a longer life to enjoy retirement along with lower health costs in the future.
    3. You will need to shop at discount groceries. I mainly use Aldi’s and ethnic supermarkets. During COVID, I use Instacart (this is great if you do not have a car!) Also try to take advantage of buying in bulk at places like Costco if you or a friend have a membership.
      1. While I have been able to comfortably live on 5$ a day for food without using a freezer, you may freeze your food and buy frozen fruits/veggies for even more savings.
    4. NOTE: I will release cheap, tasty, healthy recipes in the future, so look out for that in the Food section
  2. Phone Bill
    1. $50 a month. I am spoiled by my phone. I think it is the greatest invention of our time, so I am not going to recommend free phone plans or very old phones. (Right now I pay 0 for my phone because I just use my work phone).
    2. Since everyone is different, I’m going to give you 3 options:
      1. You may spend $50 per month on a new phone and use FreedomPop for 0$ plan.
      2. You may spend $50 on a large plan (likely unlimited data) and have an older (1-2 generations back) phone
      3. You may do something in between. When I was paying for my phone, I did a $25 plan with a $25 per month phone and upgraded every 2 years.
  3. Internet/Cable
    1. Do not use cable.  There is just no need for cable since the internet exists (maybe this invention is better than the phone).
    2. Spend no more than 50$ per month on internet.  Despite what the sales reps may say at Scamcast, you can watch Netflix on multiple devices at 10Mbps without issue.
      1. If you are worried that 10Mbps is not enough, I used to play video games professionally and have grown a small YouTube channel on a 10Mbps connection.  I also have 2 smart homes, 2 phones, a computer, and a tablet using the same internet connection. The download speed is secondary to reliability, which is dependent on the service provider and your particular house/apartment.
Car insurance150
Per Month1835.19


Investments and rates of returns are hotly debated topics. The rate of return of the S&P was 9.7% including dividends from 1928 to 2019. With an inflation rate of around 2-3% during this timeframe, we can estimate our rate of return to be around 7%. Note that Total Market funds have performed slightly better in the past. While we have no clue if this will continue, it is something to consider.

Fund choice does not matter too much as long as you look for a fund with a low expense ratio. Search up “Total Market Fund” or “S&P 500 Fund” in a search engine and look for one from a reputable company with a low expense fee. Some funds even pay you to own the fund–more on this in a different article.

The Math

  1. Starting at $0 Net Worth
  2. We make $68,703 a year
    1. Put away $19,500 in a traditional 401k, $12,000 in a traditional IRA, and $7,100 in an HSA
      1. We get a 4.7% 401k match of $3229.04
    2. With all our deductions, we have a taxable income of $6,103.00 and have to pay a total of $610.30 in federal taxes, $183.09 in State taxes, and $5,255.78 in FICA taxes.
  3. Our after tax income is $24,053.83
  4. Our expenses of $1835.19 per month leave us at $22,022.28 per year for expenses
  5. We have $2,031.55 in investable after tax income after we subtract our After Tax Income by Expenses.
  6. Total Investments per year: $43,860.59
    1. $19,500 from Traditional 401k
    2. $12,000 from Traditional IRA
    3. $3,229.04 from 401k match
    4. $7,100 from HSA
    5. $2,031.55 from leftover after tax income
  7. We need to have $500,000 net worth based on our projections
  8. We have an investment rate of 7% per year.  We will convert this to monthly by dividing by 12 months.  (Note: this yields a rate slightly higher than 7% due to compounding)
  9. Using an investment calculator using monthly intervals, we reach 500k in 8.47 years. 

Hopefully you are starting this journey with positive net worth, in which case it would be even faster. At 8.47 years, we have some breathing room for more expenditures based on personal preference. Maybe some people do not have an HSA, which would contribute to this too, but you will likely still be able to retire in less than 10 years on a median American salary. Also keep in mind for a lot of these expenses, we assumed something close to average usage. Many people live on less, which means you can too. For example, we are using a new car on a lease, which is a luxury. Ideally, you wouldn’t even have a car and live right next to work.

However, please note that we did not include health insurance here because coverage varies so much based on employer plans. I paid $56 per month for Health, Dental, and Vision. As discussed before, it is mathematically optimal to self insure.

Early Retirement is Possible for Many People

At a 5% withdrawal rate for a nest egg of $500,000, we have $25,000 to spend every year.  This is more than our pre retirement expenses of $22,022.28, which means we have ~$3000 dollars of breathing room. If you like being precise, we could theoretically  sustain this life at $440k, which we would accomplish in 7.67 years.  With $60,000 worth of breathing room, some of life’s unexpected expenses may be covered as part of your ten year journey.  There are further cost reductions upon retirement. For example, we do not need to drive as much since we do not need to commute to work, so we may get rid of our car, which leaves even more room for safety.

The more tax advantaged accounts you take advantage of, such as an HSA, the faster your journey becomes.  If you are able to move, I have heard of people living for $300 or less in major cities.  This may involve sharing a 2 bedroom with a different couple, or buying a home and renting out the rooms.  Right now my friend actually gets paid to live in his house because he rents out two units which covers the mortgage.

There are many other ways to reduce the retirement timeline, such as taking shorter showers, using less phone data, less driving, among others, but I will not go into the specifics in this article. I will cover each topic individually in separate posts.  Lastly, just because you quit the job you hate doesn’t mean you need to quit working forever.

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