How to retire in less than 25 years on minimum wage

Think it’s impossible? It’s not. This article isn’t meant to minimize the struggle that some minimum wage workers go through but rather show that retiring early is possible at any income level if you make it a priority. It should be said before I begin here that adding a kid or two into the mix here would certainly complicate things and make this a bit more difficult, but again not impossible. It would just force you to be a bit more creative. So anyway, let’s take a look at some numbers.

Lowest minimum wage across U.S. in 2017: 7.25/hour
Assume 40 hour work week
40 hours @ 7.25/hour = 290 per week
290/week * 2 weeks = 580 per paycheck
~2 paychecks per month = $1160/month before taxes
1160-(1160*.25) = $870/month after taxes at 25%

So let’s say for one individual working minimum wage for 40 hours a week, they’re bringing in roughly 870 per month. Let’s take a look at how we could budget that money.

-Rent: 350/month
-Utilities: 50/month
-Food: 100/month
-Miscellaneous: 30/month
*Note there is no budget for transportation. If you’re living on minimum wage you’re walking or biking to work, no questions asked.

So…this means total monthly income of $870 and total monthly expenses of $530, leaving an annual savings of $4140 which is equivalent to a 40% savings rate!! Now, before you start saying HOW COULD ANYONE LIVE ON $530 PER MONTH?????? Let me tell you that I did it for four years in college. In fact I probably spent less than that. My monthly rent was indeed 350/month, granted it was sharing an apartment with 2 other people but we each had our own room and it was a decent place. At a 40% savings rate, according to the retirement calculator on networthify.com you could be retired in 21.6 years. Not too shabby. Don’t get me wrong here, you certainly won’t be “rich” but you won’t be dead broke struggling paycheck to paycheck either. In fact, you’d have enough saved up and invested that you’d be able to maintain the same level of spending you had for the past 20 years without having to work again. And if you work anywhere for 20+ years and you don’t get promoted or given a raise at least once then there’s something wrong. Not to mention, there are plenty of fairly easy ways to earn much more than minimum wage in America. The point here is just to show that even at the lowest end of the income level you can slowly make yourself wealthy.

1 Response

  1. Interesting thought experiment. The reality is actually a bit better than you predict, because the minimum wage earner will not be paying federal income tax. Yes, there will be FICA and possibly some small state income tax, but nowhere near 25%.

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