A million dollars. It certainly sounds like a lot. But it’s not enough to retire early. Not for me, and quite possibly not for you either.

I currently live in Sydney, Australia. We’re going through a rather insane housing bubble over here at the moment, so housing costs are nothing short of astronomical. Add to that the fact that Australians have to pay outrageous prices for their groceries, beers and retail commodities and the conclusion is simple: this is a bloody expensive place. The golden rule of spending a maximum of one third’s of one’s income on rent therefore does not always apply here.

Mind you, my lifestyle is not as frugal as it could be. For starters, I hate cooking. For that reason, I end up buying lunch almost every working day. For dinner, my partner (bless her) and I have a good arrangement: she cooks. When she can’t be bothered though, I tend to pay for takeaway or a cheap food court meal to fill our bellies. So yeah, food is a prominent, some may say outrageously large, line item in my monthly budget.

Let’s do the math

All in all, I end up spending a bit less than $3,000 a month, which seems rather on par with most estimates of what you’d need to live a reasonably comfortable life in Sydney. A retiree can probably cut costs by virtue of no longer having to live close to work or possibly even living a nomadic lifestyle out of an RV, but for the sake of argument, I’ll just assume I’m staying put.

Assuming a safe annual withdrawal rate of 3% (debatable, but again, for the sake of argument), I would theoretically need a nest egg of roughly ($36,000/0.03=) $1,200,000 if I wanted to retire today without changing my lifestyle. Yep, 1.2 million dollars. But it gets worse.

Meet your enemy: inflation

On average here in Australia, inflation increases the cost of living by about 2.5% every year. That means that in 17 years, when I turn 50, I will need at least (1.02517*$36000 =) $54,778 a year to sustain my current lifestyle. This means that if I want to retire by age 50, I’ll need at least (54,778/0.03 =) $1,825,933. Yikes.

So yeah, this is why I want a million bucks. It would be a great start.

TLDR: if you want to retire in a first world country, you’ll probably need to save up more than a million bucks

P.s.: what about super?

Quick intro for non-Aussies: one’s “super” is a mandatory personal retirement fund that an employer is obligated to deposit roughly 10% of an employee’s salary in. A great system that is certainly a lot more sustainable than the socialist systems in Europe.

The challenge with super though, is that it doesn’t start paying out until you reach the golden age of 65. And that sucks, because who wants to wait until they’re 65? I most certainly don’t. I therefore like to keep super out of the equation; it’ll be a nice bonus once it starts paying. However, I’m not quite ready to hang all my hopes on a government-imposed system that can easily be taxed into oblivion should the proverbial shit hit the federal budget-fan.