How much money you need to retire at 45 and live on investment income alone until 90

If you reduce your annual spending target to $65,000, you'll need a starting balance of about $2.7 million in a taxable investment account.
To ensure the account's growth, Brian Fry, a certified financial planner at Safe Landing Financial , recommends an "aggressive" asset allocation of 80% stocks and 20% bonds.
To arrive at these figures, Fry made assumptions about the retiree's investments and tax treatments, which are listed at the end of this post.
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Two decades in the working world gives you plenty of time to shore up cash, but you probably still need millions if you want to retire by 45 and live on investment income alone.

To find out exactly how much you'd need to invest, we consulted Brian Fry, a certified financial planner and the founder of Safe Landing Financial .

Fry used a Monte Carlo simulation to estimate the starting balance someone would need in a taxable investment account the day they leave work to live on either $100,000 a year or $65,000 a year in dividends (fixed income from bond investments) and capital gains (income from equity investments), after paying taxes, until age 90.

To run the simulation for a hypothetical retiree, Fry had to make assumptions about the retiree's investments and tax treatments. You can find the full list of assumptions at the end of this post, but in short, he used JPMorgan long-term return estimates used for investments, a conservative 3% inflation estimate, assumed no state or local taxes, and did not factor in Social Security .

In addition, the investments are assumed to be held in a taxable investment account, nota retirement account like an IRA or 401(k) , since you can't withdraw money from those accounts without penalty before age 59 and a half.

How much you need invested to retire at 45

According to Fry's calculations, an investor who leaves work at age 45 would need at least $4.3 million in a taxable investment account on the day they retire in order to have an annual post-tax income of $100,000.

If the investor reduces their target annual income to $65,000, they would need about $2 million less or $2.75 million invested on the day they retire. If you plan to live on even less or expect to reduce your spending as you age, you'll likely need a smaller lump sum to start.

For instance, Business Insider contributor Chris Reining retired at 37 with about $1 million in an investment account, assuming he would need about $40,000 a year to cover his expenses. A few years into retirement, he's spending about half that amount annually and his nest egg is expected to last much longer than anticipated, he explained .

Fry recommends investing 80% of the lump sum in stocks and 20% in bonds, which is considered an "aggressive" asset allocation, due to the age of the investor. However, he notes, it's important the retiree update their financial plan yearly, or whenever they experience a significant life change.

"Investors tend to be their own worst enemy when experiencing investment losses," Fry said. "If you don't have the time, interest, discipline, and expertise, it's better to work with a fee-only certified financial planner that can tailor your investments to track to your financial plan."

How much money you need to have invested to retire early Alyssa Powell/Business Insider

It's worth noting that many early retirees, especially those who quit corporate life in their 20s or 30s, continue to earn income after leaving their 9-to-5.

In fact, some who earn passive income through real-estate investing , blogging, or some other monetizable hobby, consider themselves financially independent rather than retired, meaning they don't need to earn a steady paycheck to afford their lifestyle.

Fry's simulation also did not factor in potential Social Security income . Americans born in 1960 or later age 59 or younger in 2019 can retire with full Social Security benefits at age 67, so long as they worked at least 10 years.

The amount of a person's Social Security benefit is equal to an average of monthly wages for their 35 highest-earning years, adjusted for inflation. The maximum monthly benefit for someone who retires at the current full retirement age of 66 is $2,861. The future of Social Security is uncertain, however, and some financial planners recommend their clients implement a saving and investing strategy to afford retirement without it.

Assumptions used to calculate starting investment balance for a 45-year-old retiree

Fry notes that the Monte Carlo simulation has two clear limitations: The outputs are only as good as the inputs and it does not factor in the behavioral aspects of finance, or how investors react to swings in the markets.

Here are the assumptions used in the simulation:

Investments

All investments are in a taxable account
Used $8,333/month for $100,000 target annual income and $5,417/month for $65,000 target annual income
JPMorgan long-term return estimates used for investments, 3% inflation used for conservative amount
Assumed younger investors can take on more risk than older investors
5% annual portfolio turnover
$0 capital loss carry over
No asset-under-management fees included
Lump-sum is invested at start of simulation as cash with no built-in gains

Taxes

No state or local/city tax factored in
Standard deduction taken for a single filer
No Social Security payments factored in for older investors
Dividends 85% are qualified dividends, 15% are non-qualified dividends
Capital gains 90% long-term capital gains, 10% short-term capital gains
Tax law TCJA sunset 2025: reflects all updated provisions related to TCJA, including the sun-setting of most individual income tax provisions in 2025