# Early Retirement Extreme Calculator

Published: August 31, 2012 at 4:59 pm

Last Updated on September 1, 2021 at 7:19 pm

Can you become financial independent and retire in 5 years?
I came across the Early Retirement Extreme blog sometime back. Dr. Jacob Lund Fisker is a theoretical physicist who became financially independent in 5 years by saving upwards of 75% of his take-home pay. He has also written a book about how he did it.

According to Dr. Fisker:

• To achieve early retirement : you need to save more than 75% of your take-home pay each month for about 5 years!
• For a goal that is only 5 years away the power of compounding is not that important! There will not be a significant difference between the amount invested and the compounded amount.
• If you are in your 30’s and wish to retire in 5 years, expect to live for another 30-40 years! Basically forever! So your retirement nest-egg should last that long.
• How about a corpus which never depletes throughout your retirement? For  this to happen the interest earned by your corpus should be more or at least equal to the amount you withdraw from it for your expenses. This is known as a perpetuity.
• In real life this means that the interest earned must be much much greater than inflation.
• Of course this is impossible unless one adopts a high-level frugal lifestyle. That is my expenses to a large extent are only weakly dependent on inflation. So I can assume yearly inflation in retirement to be quite small (compare to real inflation) or even zero!
• This means I can just take my entire corpus and put it in an FD and simply get monthly interest for the rest of my life.

I was fascinated by this scenario and I have made an ERE calculator to see if this is possible.  Play with it and see if you can pull this off. Is this possible in India? Why/Why not? I recommend treating this calculator as an educational tool primarily. Use this in conjunction with the ‘When Can I Retire?’ calculator to learn more about the factors that influence the road to retirement. To keep things simple I have removed some features that are part of the other retirement planners.

Notes regarding the calculator:

• Inflation after retirement is not accounted for. Don’t change this initially. Then introduce an inflation to see what happens!
• To mathematically handle the perpetuity the years in retirement is set as 1000! Don’t change this initially. Once you are comfortable you can play with this as well.

If you are confident of pulling this off please do share your story with me.

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(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via or Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “” an organisation promoting unbiased, commission-free investment advice.
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