At a poker game recently, I heard one of the saddest things I've encountered in a while: “$10 million is not enough to retire early.”
Mind you, we were all sitting in San Francisco, an expensive city, but also one of the cheapest international cities in the world. So I get it, context matters. But I couldn't shake how genuinely depressing that statement was.
Nobody at the nine-person table disagreed. Only one person even questioned it before I stepped in and said what apparently needed to be said: $10 million is absolutely enough to retire early.
What struck me even more was that I'm fairly certain the majority of people at that table weren't worth anywhere close to $10 million. Which made the whole thing sadder.
Can you imagine being 200 feet underwater, lungs burning, kicking and clawing your way to the surface, finally breaking through into beautiful fresh air, and then declaring it still isn't enough? That's a tragedy.
People Throw Out Big Numbers Without Doing The Math
Here's what I think is happening. People hear “$10 million” and it sounds rich. It sounds like a number that buys you freedom. So they anchor to it without ever actually running the numbers. And because nobody around them pushes back, the myth just keeps growing. But because they also hear people with $20 million, $50 million, and $100+ million, they suddenly think $10 million is just not enough.
Let me push back.
If you have $10 million in investable assets today, you could park it in Treasury bills and generate roughly $460,000 a year in essentially risk-free, state-tax-free income. Treasuries is the floor, not the ceiling as most with $10 million would take more risk and likely outperform long term.
Could a family of four live comfortably on $460,000 a year while doing absolutely nothing to earn it? Of course they could. It would take genuinely spectacular financial incompetence not to.
My own family has lived happily on considerably less than $460,000 a year since our son was born in 2017. Even after our daughter arrived and both kids enrolled in independent language immersion school costing $90,000 a year combined after tax, we don't need anywhere near $460,000.
We could live well on $100,000 less and not feel deprived for a single day. That's still $30,000 a month.
A Realistic Budget For A FIRE Family Of Four
To make this concrete, here's a realistic annual budget I put together for a FIRE family of four living in an expensive coastal city on $360,000 in passive investment income. That's a 3.6% safe withdrawal rate on $10 million in investable assets, which is reasonable. Many people who have retired early remain reluctant to withdraw even at a 4% or 5% rate, so they can have a larger buffer.
The two biggest line items are $88,000 in private grade school tuition for two kids and $32,000 in unsubsidized health insurance. Yes, those numbers sting. But even with those costs baked in, the math works.
The home is paid off, as it should be for anyone serious about early retirement. There's room for vacations, charity, and a comfortable life. If things got tight, you could trim all three and find more affordable schooling. Public schools are just fine.
The point is, if you're generating $360,000 a year from passive investments and never have to show up to an office to earn it, your life is objectively good. And if you ever needed more, you could do some consulting, pick up part-time work, or monetize a hobby. The options don't disappear just because you stopped working full-time.
Thankfully, at today's risk-free rate of return, $10 million can generate $100,000 more than $360,000. That's an extra ~$70,000 after taxes to do as you wish. That's not scraping by. That's thriving!
The Real Problem Is The Desire For More
So why can't I convince a single person in real life to actually FIRE?
It's not the math. The math is easy once you do it. Once again, it's the desire for more, and more specifically, the desire to keep up with the people around them.
When you live in cities like San Francisco or New York, your peer group consists of tech executives, successful founders, and finance professionals, warping your baseline for “normal.” The houses get bigger. The cars get nicer. The private school waitlists get more competitive. And suddenly $10 million starts to feel inadequate because you're comparing yourself to people worth more.
Lifestyle inflation is insidious because it doesn't feel like inflation. It just feels like progress. It feels like you're finally living the way you've always deserved to live. And by the time you realize the goalposts have moved again, you're committed to a lifestyle that requires you to keep working.
Reaching $10 Million Should Feel Like Winning
Reaching a $10 million net worth puts you almost in the top 1% of American households. The threshold for the top 1% is somewhere between $11 and $13 million depending on the source, so $10 million gets you close.
And yet people with $10 million are still telling themselves it's not enough. Meanwhile, people without $10 million are nodding along in agreement. Everyone loses.
Once you reach $10 million, especially if the bulk of it is in investable assets rather than tied up in your primary residence, you no longer need to grind. In bull market years with double-digit percentage returns, the money starts working harder than you ever could.
Your $10 Million Will Likely Continue To Grow
And here's another thing. Even if you withdraw at 4%, your net worth will likely continue to grow given historical returns are greater. In 10 years, at an 8% annual return, your $10 million would turn into roughly $21.6 million — more than double — even after withdrawing $400,000 a year the entire time.
So if you're fortunate enough to reach that level, give yourself permission to enjoy it. FIRE doesn't mean doing nothing. It means having the freedom to choose what you do with your time. That is the whole point.
And if $10 million feels out of reach right now, that's fine too. You can retire on far less with the right budget and the right mindset. Most people already could. They just haven't done the math.
Do the math.
Readers, why do you think people with less than $10 million believe it's still not enough to retire early? Have we been so thoroughly brainwashed that a top 2% net worth feels inadequate? And how much of that dissatisfaction comes down to constantly comparing ourselves to the people one rung above us on the wealth ladder?
For background, I retired in 2012 with about $3 million in net worth, equivalent to roughly $5 million today after adjusting for inflation. At the time it felt like more than enough, and it turned out to be, largely thanks to investment growth and supplemental retirement income I earned along the way. What I can tell you from 14 years of experience is this: you will adjust. Financial needs and circumstances change, and you will change with them.
Know Exactly Where You Stand Financially
If you're debating whether $10 million is enough to retire, the first step is knowing precisely what you actually have. Sign up for Empower, my favorite free financial tool. I ran my 401(k) through its investment analyzer and discovered I was quietly paying thousands a year in unnecessary fees on active funds.
I switched most of the portfolio to ETFs and have saved over $50,000 in fees since. If you're grinding away at a job you dislike while bleeding money in hidden fees, that's a painful combination you can fix today for free.
This is also the last month I'll be sending signed copies of my USA Today bestseller, Millionaire Milestones. If you'd like a copy, sign up for a free financial review with Empower after linking over $100,000 in investable assets. Full details and instructions are in this post.
What if I want a $20M yacht, a $50M waterfront mansion in hawaii, a $30M getaway in Aspen and a fleet of helicopters and a 200 car garage full of exotic vehicles? Even $1B is nowhere close to enough. I’d need $5B+ to even consider retiring, and if I had it, I wouldn’t retire, I’d spend that time building new companies instead because it’s most fun to get to the top of the leaderboard, not sit around like a loser playing games all day
You just have to keep on going then. How much does your current yacht and mansion cost now? And how do you think large larger ones would improve your life?
Depends on your age and family situation , you can 2.5x more at 25m vs 10m lol. For me (NW 18-20 million) I’m still in my 30s and kids are under 5 so working and staying mentally active had more bearing than a certain number in mind to retire. If I was 50 and my kids had more extracurricular activities, my thought process would be completely different.
$25MM allows you to worry less about a substantial and prolonged market downturn impacting your withdrawal plans if you’re in HCOL.
Although based on my own experience of several painful market resets, your gut always says “spend less for a little while” and “adjust your lifestyle temporarily”. It takes a strong stomach to keep living large when you’re watching day after day and week after week of new lows.
A lot depends on whether you like your job or not. A typical $10 million person that has plateaued and spends $200k-$300k won’t want to endure the add’l time/effort it takes to get there.
From many comments, I think one difference is probably add’l personal use real estate. $10 million safely covers a lot of peoples’ spending but not much more. in contrast, another $100k-$200k on goods and stuff probably isn’t that different (although it can be absorbed without caring).
$25-$35 million is certainly different, as is $100 million vs. $25/$35 million (there’s always someone that can say your level is peanuts, why are you talking so big?). Again, I think it depends on whether one has reasonable/viable path to these figures.
Technically, I could retire today. I don’t really have the desire for more status or position. If I quit, I give up a job I like with a pension I can’t go back to. My issue is how final the move would be.
Any advice on stepping off the dock a little more gently?
I recommend 3 things to anyone who ever asks me:
1. Start early…like under age 25….under 21 is better…. Getting “rich” was the easiest thing I ever did, but it did take over 20 years to do (for me ages 21-44).
2. Saving rate trumps rate of return, 100% of the time. I don’t care if your portfolio is making 3% or 30%, regardless of risk, if there is no money in it, who cares. save big until it hurts….seriously….big is 30-40-50%+ annually.
3. Model out every year of your financial future right now. People act like the future is unknowable, that’s ridiculous. The most you are going to live is 100 years, so you only need 100 data points to map your whole life forward from birth. I can tell you with remarkable accuracy, what my asset base (net-worth), annual income, annual income taxes, and most expenses will be every single year for the rest of my life today. Grab your spreadsheets, clean up your budget, save your butt off, and then model it out….all the way. The only questions I have left are the two things I have zero control over….what will US tax brackets be in 20, 30, 40 years, and when will I die. And on both of those issues, I believe I can get damn close. Everything else is locked in, known, and predictable. I do not care what the stock market does, I don’t care what inflation does, when you reach $10M, build an AA+ rated bond ladder and let it run, I only care that the US Government and the FDIC make good on their promises to back what they said they will back, I have more sovereign risk than anything else honestly.
Anyone who thinks they cannot retire on $10M, cannot retire on any number, or, they have never once seriously sat down and looked at it.
Accept it…. YOU ARE NOT EVER FLYING PRIVATE…once you accept that one thing, you will be much better off.
I reached $10M @ ~50yrs old….I “retired” from the job that I believed I had to have and moved myself into a passion job that I am lucky to have, at 44yo. I am +/- locked in at a 4.497% (Taxable Equivalent Yield) fixed income return (from bonds, CDs, USTs, etc…) for the very very….very long run, and 40% of that is coming from tax free municipal bonds. I hold a material amount of real estate (not counting my ~$600k primary residence). I have absolutely zero desire to wear stock market risk at all, but I do maintain a 15% equity allocation out of habit, and because it just “feels like I should”. That 15% pisses me off far more than it ever makes me happy or feel good, and by age 60 I will not own any stocks at all. We (wife & I) spend about half of our income and we let the rest compound…forever. We live a ridiculous lifestyle, mathematically we cannot run out of money, mathematically I do not care about inflation. Visually, we look just like every other upper-middle class couple in the world. I manage 100% of my own assets.
A couple of observations if I may….(For context, I know many people in all levels of the wealth spectrum, from the top 10%, to the top 1.0% and I have hung out with and gotten to know 4 individuals in the top .01%, who are actual billionaires, on the list.)
First, delusional lifestyle creep is in your head. This is thanks to TV, movies, and social media. The reality is, media portrays the top 0.01% as if they were the top 1.00% and then pushes it hard for views (or even implies the top 5% is living like the top 0.01% if you listen to the news), and that’s like comparing Earth to Mars. They have NOTHING in common. The top 1% generally do not fly private or own jets (or any plane), they do not own large yachts or private islands, they don’t even own penthouse apartments. The top 1% live extremely well, but they still fly with Southwest Airlines domestically, United and Delta internationally, and not on NetJets. I believe unrealistic expectations, set by the media, our parents, and people’s own ignorance of math (just as Sam has alluded to) is the real thief of joy. When you get to $1M, you think wow, I have done something here! When you get to $5M you start to realize that the “multi-millionaire lifestyle” that you have had in your head for 20-50 years (jets, yachts, waterfront mansions) is simply never going to pencil out in your favor. Finally at $10M you hit a fork in the road….You either accept that you are lucky AF, and that you can do virtually anything you want, anytime you want, with anyone you want (which is the single best definition of rich I have ever read), OR, you lose your mind, believe that you are somehow smarter than everyone else, and decide to prove it, by deciding to gamble big with far more risk than could ever possibly be necessary, or that you have even calculated correctly, and “go for the big money”. The choice will be 100% yours to make.
The top 10%’ers that I know and the top 1%’ers that I know all sound, look, and behave exactly the same. The top 10% are overspending, and the top 1% are underspending, to live effectively identical lives/lifestyles. Sure, this house or that house, this car or that car….but no one cares about your house or your car, except for you.
The top 0.01%, spend 100% of their time working, regardless of their age. I know a billionaire in their very early 40s and one that is 70+, I knew one that has died, and one that is in the middle of that age range. All they do (or did) is work, right up until the end. Yes, they fly private, they own everything that can be owned (yachts, jets, houses, companies…). They have family offices and have huge home and office staffs (including multiple pilots on the payroll), that require salaries, benefits, and mountains of work to maintain. They have zero minutes of peace & quiet, and their phones and emails never stop, even with multiple personal assistants screening everything. Yes, they live large, yes it’s pretty incredible, and yes it’s hard to believe that their only limit is their own imagination, but I will tell you know right now, I have no interest in that lifestyle. It looks and feels exhausting, and I have no idea how or why, any of them do it.
For me personally, less responsibility = more happiness. More responsibility = less happiness. Having 30 people on your personal staff is a mountain of responsibility, regardless of costs or resources (if you have a soul). Same for jets, yachts, houses, etc….everything is impermanent, everything you will ever purchase is future garbage.
Second, people seem to have zero idea, at all, of how to convert assets & wealth into actual “spendable” income. So they achieve a huge net-worth number and then act like they have no money to live on because they refuse to spend their capital, because they cannot stand to see their net-worth number go down a single dollar. My bond portfolio came into existence 100% specifically to convert savings/assets into “spendable income”. Rent collection is the other income people seem to be able to understand, but those same people seem to have zero idea what it takes to own and manage rental income. You only keep what’s left after expenses people, and there is nothing passive about it. Hence, the bond ladder/bond book/bond portfolio…..call it what you want…..on a risk adjusted basis & after taxes….I am killing it. Go on investor.gov, play with the compounding calculator, figure it out. That’s the best advice I can give. Everything I own is Aa+ rated or better. I hate risk, I love stability, I love predictability.
Lastly, I recommend 3 things to anyone who ever asks:
1. START EALRY….like under age 25….under 21 is better…. Getting “rich” was the easiest thing I ever did, but it did take over 20 years to do it (for me ages 21-44).
2. SAVINGS RATE trumps rate of return, 100% of the time. I don’t care if your portfolio is making 3% or 30%, regardless of risk, if there is no money in it, who cares. SAVE BIG UNTIL IT HURTS….seriously….big is 30-40-50%+ annually.
3. MODEL EVERY YEAR OF YOUR FINANCICAL FUTURE, RIGHT NOW. People act like the future is unknowable, that’s ridiculous. The MOST you are going to live is 100 years. You only need 100 data points to map your whole life forward from birth. I can tell you with remarkable accuracy, what my asset base (net-worth), annual income, annual income taxes, and most expenses will be every single year for the rest of my life today. Grab your spreadsheets, clean up your budget, save your ass off, and then model it out….all the way. The only questions I have left are the two things I have zero control over….where will US tax brackets be in 20, 30, 40 years, and when will I die. And on both of those issues, I believe I can get damn close. Everything else is locked in, known, and predictable. I do not care what the stock market does or how it performs. I only care that the US Government and the FDIC make good on their promises to back what they said they will back, I have more sovereign risk than anything else honestly.
Anyone who thinks they cannot retire on $10M, cannot retire on ANY NUMBER or, they have never once seriously sat down and looked at it.
I guess we can call that my manifesto….cheers.
Gotta disagree with the opening statement. Get a PPL and a piston single and you can fly private on most days and at a way lower net worth # than $10 million. Accept that you’re not flying on a private jet, yes. But that falls under the “most people want more” trap, as noted in the article. Flying your own plane is an absolute pleasure and a life hack that 95% of people will never unlock.
Great post and great advice. I figured this out, once you stop thinking about private jets and yachts… everything becomes more clear, fulfilling and relaxing. I’m 38 with over 3 mil in stocks and cash. Over a million in real estate equity. Hoping to reach that 10 million mark by 50 yo. I’ve already let off the gas at work so I can focus on enjoying my young kids and stay healthy. What’s the difference at the end of the day if you have 10, 12, 14 million? I’d rather have my family and health than chase a few more million that won’t really buy be any more freedom. Great job on reaching such great goals!
best guest post ever.
Love it! Thanks for sharing.
“The top 10%’ers that I know and the top 1%’ers that I know all sound, look, and behave exactly the same. The top 10% are overspending, and the top 1% are underspending, to live effectively identical lives/lifestyles. Sure, this house or that house, this car or that car….but no one cares about your house or your car, except for you.”
That’s true. And if the top 10% er is psychological stable, then actually, they live the same lifestyles and the top 10% is doing it right I say!
This topic reminds me of the old Chris Rock joke: “If Bill Gates work up with Oprah’s money, he’d jump out the window.” Comparison truly is the thief of joy! Objectively I am doing well – somewhere near top 1%. Then I read a story about some 30 year who sold a startup for $100 million, and suddenly feel less successful, anchoring myself to the highlight reel filling my feed. But all I really need to do is drive through an average street in my city or walk the aisles of a grocery store to see my fellow shoppers and realize I am indeed fortunate. Many — maybe even most – people struggle to make ends meet let alone save for any meaningful retirement. Extraordinary success starts to seem “normal” and ordinary success feels inadequate.
I am constantly amazed to see how expensive life in the USA is compared to Germany. To maintain the standard of living outlined in your calculations, one would need only 2.5 million euros in my hometown of Berlin (excluding the purchase price of one’s primary residence). A high-quality education for children—covering both school and university—is free of charge. Property taxes are extremely low (a house or apartment valued at 1 million euros incurs an annual property tax of just 2,000 to 4,000 euros).
Excellent health insurance coverage for two adults and two children is available for 20,000 euros. All other expenses listed in your calculations are also more affordable here; consequently, out of the 252,000 euros you calculated, one would need only about 100,000 euros here.
From a tax perspective, there is the added advantage that one pays hardly any taxes here if, for example, one withdraws 4% annually from a 3-million-euro stock or ETF portfolio by selling shares. If, for instance, the portfolio shows an average gain of 50% (meaning 2 million euros invested and 1 million euros in unrealized gains), an annual withdrawal of 120,000 euros would require paying taxes only on the profit portion—amounting to 40,000 euros. For a household consisting of two adults and two children, one would not have to pay any taxes at all on this amount. Taxing only the profit component of the withdrawal would—even with significantly higher withdrawal amounts—result in these withdrawals being entirely tax-free for a family of four, or at most subject to a tax rate of less than 10%.
When it comes to enjoying a good life with substantial assets in a safe, prosperous, and culturally rich environment, Europe is truly the place to be. :-)
Indeed. Hard to get rich in Europe, so the plan is to get rich in America then retire and enjoy life in Europe. Many Americans have done so so far!
Or, as I did, build a company in Europe -> sell to an American buyer.
Don’t you have the “FIFO” method of accounting for CGT in Germany? That usually makes the tax calculation not quite as amazing if you’ve had a substantial increase in asset values.
Constant comparison is truly the reason most people won’t find happiness even when they have plenty of money.
I agree with Kevin O’Leary, aka Mr. Wonderful from Shark Tank, that $5M is enough to be okay financially. So double that at $10M should be fiscal euphoria.
Thanks,
Miriam
Thanks for writing this article Sam. I’ve definitely felt the fomo creep in the last year or so. Hearing you say $10m is enough don’t be crazy, gives a lot of confidence.
Hi Sam,
This is a great post and I enjoy seeing the detailed budget as I’ve been using one since college- and still have all the data going back that far! I want to thank you for including a line item for charitable contributions. While we give a ton of our time to our community, charitable organizations need financial support to keep doing what they do. I hope it brings you joy.
One question – at first I was taken aback by how much life insurance you had. I’d think if you are FIRE, you’d be leaving enough money behind. However, being FIRE suggests there are a lot of things you do for your family that would still cost a good deal of money to replace. Wondering about the level of insurance you think you need to accomplish this. Having younger kids likely factors in a lot.
Finally, I also think inertia has a lot to do with people just continuing to accumulate more. They don’t know how else to live. Stepping away from working for money and transitioning to another phase of life takes a lot of reflection and courage.
Thank you for your blog!
Life insurance is partly about friction minimization. You don’t want to have to be forced to sell assets at an inopportune time. You also want to give the survivors time to breathe.
So even if you are FIRE with say $3 million, if you have a life insurance policy that can pay out $500K tax freeand keep your family afloat for 2 years without having to do anything, that is a HUGE mental relief for the person who dies, and for the surviving family.
Life insurance is an act of love. I hope everybody gets something. We use Policygenius.
3 years trying to buy a house, 7% interest lowers purchase power, and living in the East of NYC makes impossible buying anything for under 200k, my pre-approval letter value.
For a year I don’t need to fill up a tank, as I sold my car due to paying more for transportation than housing.
And yes, investments are up. What they tell me is that the time to leave this high inflation, unfriendly area is coming. Thank God for multiple citizenships
As of the accumulation of money, no mater how much I make, 10-25% goes to donations: to support parents going through hardship, to siblings to help with schooling, to hospitals, non-profits that feed and shelter people around the world. Having more than I need means I have more than enough to share, and for that I’m happier.
$10 million is not enough if the person holding this money only think about themselves and their kin. We are all brothers and sisters, we would never be here without other peoples help.
To believe having lots of money can guarantee anything in the future comes from fear and scarcity mindset.
By sharing the peace and joy that having essential needs met beats having millions in investments accounts for me, any day..
4% growth per year–an 8% return together with withdrawing 4%–gives $14.8 million after 10 years, not $21.6 million. Anyway, this isn’t the right way to look at the problem, just as investing everything in treasuries and spending all the interest will see your buying power decline each year..
Worrying about your buying power dropping when are are already in the top 1% makes you look really out of touch. You are gonna die and be forgotten soon enough, stop worrying so much and live life a little. It’s all over in a blink of the eye.
I think the whole distinction has to do with cash flow, and you pointed it out Sam. 10 million can generate 460k, or more, ONLY if they are in liquid assets. And I mean not tied to your residence and most likely not tied to a business interest, at least if that level of liquidity isn’t available. I don’t know if counting only liquid assets is the solution, because also that is partial. But in any case, the true measure is cash flow.
I was thinking about this issue recently. If I had enough passive income to call it quits, for good. I guess because I grew up extremely fearful of poverty, I always had the mindset of saving as much as I could. And apparently, I have been pretty good at it. What cleared my mind was consulting with ChatGPT and others for a more rational take. At my current level, I have more than enough to retire tonight. For one, I don’t spend much money because I get joy from things that don’t necessarily cost very much (like pickleball and coffee). Secondly, my passive income alone is already at 3-4X what I spend in a year. So yes, I can retire, and I am sure anyone with 5 million could as well. So the 10 million question is mostly an emotionally irrational one. Instead of “retiring”, which I probably will never do anyway, I am thinking of getting everything ready to pass on to my kid and to charities I care about. I have to update my living trust, set up a trust fund, and possibly a 501(c) for my money to make sense. Because at this point, assets are going to continue to compound, and I want my work to have a meaningful impact in this world. I guess what started as a “me” issue has become a quest for contribution to the greater good.
Loved this edition, Sam!
I’ve been thinking about how to stop keeping up with the Jones’.
Made millions off of selling my company and at times never felt more poor! I think it’s definitely the cash flow thing. My company was such a cash cow that we got used to a lot of frivolous spending.
Going to build two ADUs on our double lot for max cash flow. Along with our rental, this will make us feel at ease.
I definitely agree with the cash flow point SP. However, if you already made millions, why bother with rentals? Just curious; I’m trying to sell my rentals, too much hassle after a certain net worth. And quite boring
Appreciate the post and the sentiment that the goalposts keep moving as you accumulate–and if you are surrounded by others that accumulate.
I am confused though: a year or two ago I thought you were advocating that 4% was outdated and that safe withdrawal rates should be closer to 1.5-2 percent (or lower) based on then 10-year T-bill rates at that time.
The SWR obviously has an enormous impact on the target amount for FIRE. Are you now suggesting 3.5-4+% is an ok target? What if the T-bill rates go back down?
For me personally, the target amount requires estimating:
divide 2 by 1 and you get a target number.
Needless to say, the number changes pretty dramatically when you make the SWR under 1%, which is why it kinda freaked me out when you were advocating for that. am I misunderstanding or has your advice evolved?
Hi John,
I recommend a dynamic safe withdrawal rate. Take 80% of the 10-year bond yield, which is at 4.6% now. So we’re at about 4%.
It’s an elegant solution as economic conditions change.
I was actually thinking about your “Proper Safe Withdrawal Rate” post too, which includes a table advocating a 0.4% safe rate when 10-year bonds are yielding 0.5%. If rates drop this low again, would you then recommend a $100 million net worth, or is there an absolute number above which safe withdrawal rates are no longer relevant?
I have this same question! When is enough definitely “enough”? I’m a proponent of the idea of the dynamic safe withdrawal rate in practice, but in terms of identifying when you actually have enough to retire it’s not very helpful, as what it indicates is enough will vary based on the rate of the 10-year bond rate at that moment in time.
I realize that you can always generate income through side hustles, etc., but for me the freedom and peace of mind from retirement is knowing that you don’t NEED to do that.
So what SWR should one consider when deciding what “enough” is to actually quit the grind?
Great Article – how do you generate “$460,000 a year in essentially risk-free, state-tax-free income”? Is this via Munis? (currently Treasuries are around 3.6%)
10-year Treasury bond.
Comparison is the thief of joy
Hi Sam, hope all is well. Enjoy reading your articles as always. I really like how you create budgets and create some context for folks to see how the numbers play out. Even if they aren’t spot-on, a reader can take your line items and plug and replace and come up with something tangible on paper to plan with instead of just making up numbers and throwing out something like I need $10MM to retire on.
That being said, I think today’s post and your newsletter today are showing that living in SF has really skewed your view of what the everyday, average American is struggling with. This is an excerpt from today’s newsletter.
“For example, I went on a Girl Scouts field trip yesterday, and a dad told me he feels like he’s falling behind despite owning a primary residence, a rental property, a commercial property, and stocks. That was a surprise, but maybe not, because he also said this was the first year he had to pay for two private school tuitions, amounting to about $88,000 a year after tax.
Sure, spending an extra $44,000 a year is a lot. But is it really that much compared to the assets he owns and the raises he’s gotten? I’m not sure.”
The $88,000 in private school tuition would be close to the average person’s salary. Also, a lot of that expensive budget is discretionary in nature. I was blessed to live in SF and Oakland from 1996-2024, bought and sold a home, invested in residential rental property out of state and have had an average career in finance and banking for about 25 years. I’m 52 now and looking forward to having more of my time lived independently. My constructive criticism is that surrounding yourself with only folks from SF and having this “keeping up with the Jones’ mentality” based on that circle of friends is completely alienating to most of the rest of the country. The social conversations you describe are starting to look more closely like the HBO show “Your Friends & Neighbors” : )
I have a finance background so I’m able to digest the material in your posts and understand how I can apply it to my situation. However, to the average American I think they may view conversations about having $5MM or $10MM as slightly elitist. I am completely happy in my station of life and am embarking on moving into one of my out-of-state rental properties soon. This coming from a lifelong Californian.
I think if you want to increase your readership (and help a wider range of people) then, it would be good to present financial planning and budgeting stories that are more in line with regular folks. Otherwise, you run the risk of “having conversations” with only the top 10%.
Bryan
Hi Bryan, happy to accept a guest post from you on your circumstance. Always good to take action and be the change you want to see in the world.
People are free to read or not read Financial Samurai. That’s the beauty of freedom and it being free. People will naturally gravitate towards situations that speak to them the most.
Have you retired as well? If so, what net worth did you retire with? And if not, what are you shooting for and why?
The best thing you can do and other readers is to share your perspectives and your numbers if you want to help others. Don’t be shy!
I agree with your view, somewhat. But then again, most of the audience for this website is really into keeping and growing money, so it’s not an “average” audience to begin with and is most likely towards the higher end of the financial spectrum. I started visiting many years ago to check what other people who were similar to me financially were doing. And after all these years of reading Sam’s articles and other people’s comments, it has helped me realize what I had been doing all along. So, personally, I think the content attracts the intended audience, despite being considerably “out of touch” with the average Joe.
Hi Sam for someone like me once I considered $625K enough to retire so $10m blows my mind. I am a nurse in NZ and when I started my nursing career in 2008 I only understood budgets and savings account. Then I learnt about real estate and invested in a do upper house @ 23yrs age and lived in 1 room and had flatmates to supplement the mortgage. Eventually in the next 4 years I bought 2 more rental properties and by 2014 I thought I was set for retirement and started to enjoy myself with my primary income with holidays etc. 2018 I needed 3 surgeries and ended up staying at home that whole year and had to sell one of the rentals to cover costs as my insurance wont. That’s when I found about FIRE and share markets and many financial blogs incl yours and I consolidated to 1 house and invested the rest in ETFs. I sold my property in 2022 and invested a total of $625k for a 4% return of $25,000 which at that time was what my expenses total to as a single person. Alas, another medical event (insurance covered costs) sidelined me for 1 yr. I lived on my returns, but it was hard especially covering extra medical and rehab costs which were not covered by insurance. I returned to work 2023, bought another house to live in while I recalculated my numbers and at same time you also wrote about going back to work. I realised I needed a bigger buffer to cover myself, so I don’t have to return to work prematurely when I FIRE. I now aim to retire in 2029 at age 45 with around $1.1m to slow travel south east Asia and a spending of $35,000/yr. My illness has decreased the number of days I can work weekly but if everything goes well, I will still reach my goal maybe even earlier. With an estimated average yearly 6% returns and spending at 3%, my net worth will continue to increase.
I FIRE’D about a year ago at 45, although my wife is still working as she finds purpose in her job as a nurse. For me I sought independence as I saw it akin to what you mention Sam, honoring my spirit of my dreams of younger years to be an artist. I recently came upon a quote from Denzel Washington, which was very resonant, “in the first third of your life you learn, the next third you earn and in the last you return”. I’m happy to have made it this far after some close calls to experience this chapter. Personally the returning or retiring part but in adulthood, has been at first complex, like a puppy let lose from a house, kind of directionless and enticed by all manner of stimulation for the freedom, but I’m finding my feet now and a much more relaxed daily attitude. I retired with approximately 10m in investable assets, an embarrassingly amount of which is safe harbor treasuries, as I did not in my learning years understand investing in markets, etc., although I had enough of a business mind to earn. I also have to start to turn into the market at this scary elevated point and also sell some fixed assets like art I acquired, to achieve a better 60/40 safe/riskier asset pool as inflation is real. That said while inflation draws down buying power, if you think about 3% inflation on a $100 expense, over the period of 10 years that same item may cost $130, not a life changing amount when you have such a strong financial foundation, where you are essentially covering your living expenses and are likely able to leave your children with a healthy head start in life. Someone one can only realize after they retire at least at an earlier stage is it does allow ample time to consult, start a business and identify ways to continue earning or understanding financial decisions or opportunities but at ones own pace. Taking the decision to retire early was complex and I often think about the $ left on the table of my former job. I can see how the decision would be challenging as from an American’s perspective, our society takes or awards fewer vacation days than many other Western advanced economies. I think the fear of the unknown, the fear of judgement of others and judgement of oneself and an alignment of self worth to net worth are issues at play for those who want to retire but find it difficult. Money also offers a dopamine rush or kind of a psychological validation, something that many parts of our society can all agree on, just as it is flaunted, the cool car, palatial home, the elegance and success.
I really appreciate you taking the time to post this. I usually learn something in these comment sections and this one is no exception. Thanks!
Great comment. Comparing to others, chasing more, fear of loss of identity, ego, it becomes more psychological than financial at these levels.
its a double edged sword, the pursuit of more.
I have a coworker in his early 60s that shared they have $40m and yet he continues to grind it out. To me that was crazy, but it’s what he wants to do.
we are well past $10m, and blessed to be involved in AI. It’s hard to stop when the money is so good, even though I have long passed my FIRE goals. I hope for a downturn sometimes, if only to give me a push.
as good as we are doing, we have friends that are even more fortunate. It’s work to keep perspective.
i think the solution is moving. We are in the Bay Area and while it’s been a great place to live the endless competition and workaholic tendencies are not conducive to a FIRE mindset. It’s a great place to gain FI, not so great to enjoy RE.
The problem with a downturn, giving you a push to change your life is that once a downturn comes, you may start feeling like you need to work harder to make up those paper losses. Again, it’s never ending until you force it to end.
I agree with you on San Francisco being a grinding culture that makes it harder to retire earlier and kick back. It’s one of the reasons why I want to relocate to Honolulu.
That said, it’s nice to be given opportunities to make money and witness so much change and innovation.
Sometimes I think the only people that read this blog are the top .01%, or those that pretend to be. I’m thankful for this blog because it pushed me to save and invest, so my families finances are in the top 10%. Nowhere near the levels of most of this blog’s readers. Only if I had made a couple clicks of the mouse differently 5 years ago and invested more in Carvana, NVDA and Tesla I’d be in the same echelon. My wife and I plan to retire early, by selling our big city home and moving to a lower cost of living place. We never really developed deep roots in the city and both came from humble beginnings. We have an only child, so we don’t have to split up visiting and ideally move close to where she settles down later in life. I really want to garden, exercise more and have a few dogs to take care of.. live a simple existence. Don’t need $10 million for that.
I wish I clicked some buttons and bought Caravan under $5 and more NVDA and Teslas as well! When investments hit, it is ALWAYS the same feeling of “wish I had invested more.”
I’ve been thinking this way for my VCX investment. I could have invested $500,000 more, and would have. But didn’t realize they would list so quickly. Oh well. I’ll just have to wait another 25 years maybe for the next great investment.