How long until you reach Ramen Retirement?

TL;DR: Check out this awesome (manic?) retirement calculator I created. It will help you think about the big financial decisions in life, and it will show you when you might expect to reach Ramen Retirement yourself!

The main purpose of this site is to help people reach Ramen Retirement. To that end, I thought it might be helpful to share a manically detailed Ramen Retirement calculator I pulled together in my abundant free time. This is a calculator built in Google Sheets, so to get your very own copy simply request access here or email me at: I’ll share it with you, so you can make your own copy and tailor it to your own situation.

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The calculator takes in some basic inputs related to your current income, expenses, assets, and investment choices. Then it crunches the numbers for you to figure out how soon you could be Ramen Retired.

Some assumptions of the model

You’ll note that the calculation for Ramen Retirement runs the numbers assuming that your only income is passive income – this is because if you’re interested in Ramen Retirement, what you care about is the after tax cashflow available from your passive investments. If we mixed your actual earnings into that cash flow as well, then it would increase the marginal tax rate and paint an incorrect picture of your true Ramen Retirement.

Also of note is that the only investment options are either stocks or real estate. This is intentional, because it’s the investment approach I recommend. You can play with your allocation of capital between the two, but can’t venture beyond those categories.

Running different scenarios

The best way to use this is enter inputs that match your current situation, and then start playing with assumptions:

  • What happens if you pay down your mortgage and bring down your housing costs?
  • What if you move to another city with lower housing costs?
  • What happens if you allocate all savings toward real estate as opposed to stocks?
  • What is the impact of earning more?
  • What is the impact of spending less?

I’ve run a few scenarios below.

High income earners in the Bay Area

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In this situation, I’ve assumed two relatively high income earners in the Bay Area. Think of this as two folks who work in tech, with a decent level of savings, each earning $200K per year. Assuming we start this model at age 30, a plan that allocates all their incremental savings to real estate will get them to Ramen Retirement by age 39. If, instead, they allocate all their savings to stocks, their Ramen Retirement changes to age 57… wow. The reason, of course, is that with the assumptions I used, the after tax yield of real estate starts out at 8.29%, vs. 1.44% for stocks – a 5X difference. Clearly, the right real estate investments can be a tax advantaged, fast track path to Ramen Retirement.

Moving to a lower cost location

Another interesting approach is to consider moving to a location with a lower cost of living. Depending on where you live, you can reduce your housing costs anywhere from 50-75%. So instead of $100K a year, assume something closer to $30K. Then drop food costs modestly by $8K to $16K per year. The rest of the costs I’ve left the same, because things like insurance and transportation don’t necessarily change based on geography. All in, annual costs go from $158K to $80K. If the couple is able to make this move while earning the same amount, then they can reach Ramen Retirement by age 33. Of course, it’s likely they’ll take a pay cut when making that move. The breakeven point of age 39 is reached when they are both earning $100K per year. So assuming they take a 50% haircut on their pay, they’ll be able to retire at the same time as if they stayed in the high cost location.

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So a few examples here show you the power of changing your cost of living and how you invest your money. Information is power, and with this information in hand you’ll have a much more concrete grasp on what it will take to reach your goals. As mentioned above, if you have questions about the model or any assumptions therein, drop me a line. This is far from an exhaustive analysis of your financial situation, and there will be subtleties and nuances that I haven’t captured here (for example, I used $24K as the standard deduction – you might have higher deductions if you have a large mortgage). But it captures the broad strokes, which is what you really care about.

Take it for a spin, see which assumptions make the biggest difference in your future financial situation, and then take action!

and… as always, enjoy the journey!

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