Contrary to popular belief, the ideal retirement age isn’t as soon as possible. Retire too soon and you may feel empty for never living up to your true work potential. Retire too late and you might always be left wondering what could have been if you had changed course sooner.
For example, a 35-year-old couple making $400,000 might love their jobs. With two young kids under three, both parents might both want to work for 20 more years. This way, they can maximize their capital and support their kids through college.
Then you might have a 30-year old couple making a combined $200,000. They don’t have kids and don’t want kids. Instead of needing a 4-bedroom, 3-bathroom home, they are happy living in a 1-bedroom condo for much less. All they want to do is travel and lead a simple life. In their mind, the ideal retirement age is 40.
To minimize regret and maximize happiness, I believe the ideal retirement age range is between 41-45. For reference, I retired from banking in 2012 at age 34 and unretired by 36 because it was just too boring. Let’s go through the reasons why 41-45 is the ideal age range to retire.
The Average Retirement Age In America
To get a baseline, as you can see in the chart below, the average retirement age for retirement is between 61-65. 63% of Americans retire between the ages of 61-69.
In a quest to live a better than average life, it’s logical to conclude the ideal retirement age should be below 61-65. I think most of us would rather retire sooner, rather than later.
Average Retirement Age Trends
In terms of retirement age trends, women are working longer. Men are also starting to work longer again. Take a look at the chart below.
The trend to work longer for men since the early 1990s is probably due to changes in Social Security, pension eligibility, less strenuous work, longer and healthier lives, more educational requirements, and a decline of retiree health insurance.
The constant increase in retirement age for women is likely due to increasing workforce participation plus all the same reasons men face. In a land of equality, I suspect the average retirement ages will eventually converge at around age 65.
Now let’s look at factors involved in deciding the ideal retirement age. In my mind, the two biggest factors are life expectancy and overall health.
Factors Involved In The Ideal Retirement Age
Here are some factors to consider before deciding when to retire:
- Length of time spent in school
- Cost of education
- Student loans
- Multiple job changes in a career
- Graduate school
- Children
- Whether you rent or own
- The desire to spend time with aging parents
- Healthcare costs
- Passive income generation
- Net worth
- How much you enjoy your job
- Overall health
- Life expectancy
If you spend a fortune on your education, retiring early is a more difficult decision. The same goes for the longer you spend in college post high school. One good goal to have is to work for as many years as you’ve gone to school starting in the first grade.
In order to retire comfortably, I believe one needs about 20X your average annual household income in terms of net worth. You can retire with less, but you’ll always be looking over your shoulder wondering when the boogey man will get you.
Social Security and your passive income should help minimize your drawdown of principal. One positive thing I’ve discovered since leaving work is that you will likely need less than you think in retirement. Therefore, the fear of running out of money in retirement is overblown. You can always do something to make side income.
For those of you lucky enough to have a pension, a pension certainly counts in the equation. Here’s a post I wrote about how to calculate the value of your pension. A pension is much more valuable than you probably realize.
The Ideal Age To Retire
Let us now subjectively talk about the ideal retirement age by decade. The constant battle we will all struggle with is deciding how much money is enough since there is an endless supply. We’ve got to time it just right so that we get to enjoy our money for a long enough period in retirement, instead of die with too much.
Ages 20 – 30
Unless you’re leaving work to be an entrepreneur or a stay at home parent, this is a suboptimal age range to retire, even if you have the money. Your energy and enthusiasm will generally be the greatest at this age. To spend it on a beach doing nothing would be a darn shame.
Further, spending more time getting an education versus working sounds like a waste of an education. You’re expected to live another 50-60 more years. The ratio of learning, to work, to leisure is off. Therefore, I highly recommend not retiring before the age of 30. Retiring this young will make you feel listless. Ages 20 – 30 is not the ideal age for retirement.
Ages 31 – 35
Most people only start gaining confidence at work after they’ve hit 30. Before then, you’re mostly a cost center doing your best to learn everything you can about the business. Why else do you think there are no CEOs under 30, except for at startups that have failure rates of over 90%?
Your 30s is a time to leverage all the experience you’ve gained in your 20s to position yourself for greater rewards. Unless you have something very clearly in mind that you want to do in retirement, to retire before the age of 35 is to prematurely truncate your potential.
Even though I retired at 34, I believe 34 is too young. I went through seven years of post-high school education, three of which were done part-time for my MBA. As a result, I feel like I didn’t fully maximize my MBA. Further, it would have been nice to have a kid while working to take advantage of benefits.
Related: If I Could Retire All Over Again, These Are The Things I’d Do Differently
Ages 36 – 40
After five years of seeing what you can do in your 30s, you realize that more money and power gets old after a while. You’re still young enough to try something new, but you may be getting squeezed by a mortgage and kids.
Just as 30 was a big age for the motivationally inclined, 40 is equally big because this may seem like your last chance to change your destiny. You’re still young enough to make a big career change.
Ages 41 – 45
You’re likely in your prime earning years, making leaving your job that much harder. But after 20 years of work, you won’t feel as much shame retiring or taking things down a notch. After all, you’ve been working longer than the time you spent in school.
You’re also starting to feel that life speed is accelerating. 50 is right around the corner! You think more about your mortality because you’re probably less in shape and more injury prone. You start experiencing these random health issues that never used to appear before.
If you are blessed with kids, they are likely still living at home with you. They are growing up fast and by the time turn 18, they will have spent ~70% of their time with you already. Therefore, you may have a growing desire to spend more time with them before they build their own lives.
If you have enough passive income, then retiring by age 45 is the ideal retirement age in my opinion. If I had worked 10 more years until age 44, I would probably have at least $2 million more dollars. Further, if both my wife and I worked, we would have been able to take off 2-3 months of paternity leave for each of our two children as well!
Ages 46 – 50
The closer you are to 50, the more you may be wondering how you lasted for so long working at a job that doesn’t tickle your soul every day. Can you truly say the work you do makes a positive impact on society? You’re starting to think much more about your legacy and the purpose of life.
You may also begin to wonder how your life might have been different if you had taken the leap of faith earlier. The fear of regret becomes more prominent if you haven’t taken many risks.
At 50, you personally know more people who have died. As a result, you may be agitating for change. Somewhere between ages 40 – 60 is the best time to start decumulating your wealth. If you’ve saved and invested for the past 20 – 40 years, you will likely die with too much. As a result, it’s best to run some numbers and spend more money while you’re still healthy.
Ages 51 – 60
Perhaps you’ve waited this long because you wanted your kids to get through college. Or maybe you just couldn’t quit the money and the prestige granted upon you after 30+ years of work. Or maybe you are lucky enough to have a nice pension waiting for you.
Whatever the case may be, you better have loved what you did or else you will feel regret having waited until 60 to retire.
After more than 30 years of saving and investing, you should feel financially secure to do whatever you want. If you’ve stayed in good shape, you may feel like now is the time to live it up.
Ages 61+
Not only do you feel a sense of accomplishment for lasting this long, you also feel a great amount of nostalgia. Where did all the time go? You wonder. Hopefully you’re done or almost done with paying for your children’s education.
Further, there just might be a healthy pension waiting for you. At the very least, you can withdraw from your pre-tax retirement accounts penalty free if you wish. Just make sure you do so in a way to minimize taxes. God willing, there should be another 20 years of life left to enjoy. You plan to make the most of it.
The Ideal Retirement Age Range: 41 – 45
Now that we’ve subjectively discussed the ideal age ranges to retire, let’s get a little more objective. I’ve used four variables in my model to come up with the ideal retirement age.
These variables are: Income, Freedom, Potential, Return On Education
The lowest score is a 1. The highest score is a 10.
Going through the variables by age, the ideal age to retire is between 41-45 years old.
If you love your job, then the ideal age range to retire is between 46-60 years old. If you hate your job, then your ideal age to retire is between 36 – 40, if you can. In each case, just make sure to have at least 20X of your annual income saved up before you leave work.
41-45 years old is the optimum retirement age range because you’ve put in your dues and still have enough energy to do something new. At the very least, you’ve minimized regret by no longer having to wonder what if.
Reviewing The Variables For The Ideal Retirement Age
Income: You will have hopefully experienced several good years of making record high income. Therefore, you will have a good idea of whether a high income makes you happier or not.
Freedom: Your freedom level at home depends on your family situation. At work, you should have more autonomy given your experience. If you do end up retiring between 41-45, you may have the best combination of capital and energy to maximize your freedom.
Potential: With ~20 years of experience, reasonably good health, financial security, and still a decent amount of energy, you have maximum potential to do many things. The more experience you have, the more people will respect you too. Further, if retirement doesn’t work out, you’re still young enough to easily get a job again.
Return On Education: Unless you finished getting your PhD in your 30s, you’ve spent enough time getting a return on your education. If you did go to college into your 30s, then the ideal retirement age is probably between 51-60. Again, a good goal is to work longer than you’ve spent in school since the first grade.
The later you retire, the more risk you take on of not doing everything you wanted to do before you die. Retiring by 45 gives you a reasonable good hedge against an early death.
The Ideal Retirement Age Can Change
When I was 30 in 2007, my goal was to retire in 2017 at the age of 40. I figured, after spending my 20s learning, I should spend my entire 30s earning, saving, and investing. Just 10 more years of work and I’d be set fo life!
I was regularly working 60+ hours a week and disliked it. If I worked until 40, I reasoned that 18 years of work after college was equivalent to 27+ years of work at a 40-hour a week job.
However, I couldn’t last until 40 because I was burned out. As a result, I retired at age 34 in 2012 with about $80,000 a year in passive income. Because I retired so young, I ended up missing out on millions of dollars of upside because a bull market ensued after.
I wish I had enjoyed my job more so I could have worked longer. Or, I wish I could have taken a 3-month sabbatical, recharged, and transferred to a new office in a different part of the country. After all, nobody retires early from a job they love.
Got Lucky Finding A Passion
Thankfully, I had found something more interesting to do. If it wasn’t for Financial Samurai, I probably would have gutted it out until at least 40. Then I would have taken at least a 6-month sabbatical to reassess my life.
I worked in a satellite office that already had two Managing Directors. The only way I’d have been able to get promoted was to move to Hong Kong or New York City. Such a move didn’t make sense due to the large drop in quality of life compared to San Francisco. Therefore, staying in the same role for at least six more years would have left me bored and a little bitter.
Instead, I left at 34 and focused my energy to create something of my own. It is the creation of something from nothing that will give you the most satisfaction.
Finally, the severance package was also a key catalyst to leave. Because my severance package provided for about five years of living expenses, it made me feel more comfortable leaving six years earlier than I had originally planned.
Ideally, I should have worked for two more years to get the perfect match. Two more years of savings plus five years of severance would bring me to the ideal retirement age range of 41-45 from a financial standpoint.
If you are unwilling to wait until 41-45 to retire, then please at least negotiate a severance. There is little downside.
What If You Don’t Have Enough Money By The Ideal Retirement Age?
In 2022 and beyond, retiring early is going to be more difficult because interest rates are low. It now requires much more capital to generate the same amount of risk-adjusted income as before.
Therefore, it’s a good idea to accumulate more capital and lower your safe withdrawal rate in retirement. Interest rates may tick up a little, but valuations for stocks are expensive. Further, real estate and other asset classes are also at all-time highs. Therefore, it’s best to stay conservative on your future investment return assumptions.
Therefore, the logical questions to ask are what if you don’t have enough capital at the ideal retirement age? Do you keep on working until you can accumulate enough capital? Or do you retire anyway because you want to minimize the regret of not pursuing your dreams?
Because time is finite and money is infinite, I think it’s better to retire by a certain age rather than after obtaining a certain amount of capital. To hedge against a disappointing life, take more chances. If things don’t work out, you can get a job again or earn supplemental retirement income.
Staying Busy In Retirement
Instead of doing nothing in retirement, you might find yourself as busy as ever. I haven’t considered myself retired in years with all the work that goes into running this site. Further, being a stay at home dad to two young is a full-time job.
The beauty of early retirement is that you get to focus all your energy doing what you truly want to do. You’re like a kid in a candy store with an unlimited budget. The only restraint is your energy and time.
Life doesn’t end once you retire. It simply morphs. You can do a lot of fun and productive things after you leave work.
Here are some things I’ve done post-retirement:
- Traveled to 30+ new countries in Europe and Asia with my wife. Angkor Wat, Cambodia was truly amazing.
- Gotten my USTA tennis ranking up from 4.5 to 5.0. This would have not been possible without all the newly found time to practice.
- Consulted for several financial technology startups ranging from seed stage to series C. Got a surprising financial windfall from one.
- Became a high school tennis coach and won two NCS titles.
- Grew passive income high enough to provide for a family of four.
- Became a father to two children.
- Wrote a traditionally published book with Portfolio, a Penguin Random House imprint. The book is entitled Buy This, Not That: How To Spend Your Way To Wealth And Freedom. It took two years to write and I think you’ll love it. If you’re looking for the best retirement book, pre-order a copy today through Amazon! It is already a #1 new release and #1 best seller.
Don’t think about retirement in the traditional sense. Think about retirement as a new adventure once working for money and status is over.
To minimize regret and maximize happiness, work on doing things you want to do every day. It is much more likely you will regret forsaking time for money than forsaking money for time.
Once you reach your 40s, you will start to feel the importance of making every moment count. Even with a family to support, money depreciates in value while time appreciates in value. Find the point where the lines intersect and you will find your ideal retirement age.
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Retire Earlier With Real Estate
The ideal retirement age requires building enough passive income streams. In my opinion, real estate is one of the best ways to generate passive income. Real estate is a tangible asset that is less volatile, provides utility, and generates income.
By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate around $200,000 a year in retirement income.
In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the easiest way to gain real estate exposure in a less volatile way.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio.
The Ideal Retirement Age To Minimize Regret and Maximize Happiness is a Financial Samurai original post. FS is one of the largest independently-owned personal finance sites online. All posts are written based off firsthand experience. Sign up for my newsletter below.
Glad I found this article/sight at this moment in time. Wife and I are looking to retire in next few months at 46 and everyone we know seems to think we’re crazy. Glad to see others see the light too. Going to experience expat life in the Dominican Republic.
This is one of the best articles I have ever read. I started this article wondering if retirement was right for me. I was hesitating and I found the reasons why in this article. Now I know retirement is RIGHT FOR ME NOW! Thanks so much! I am a total fan!
Glad this article has helped you make a decision! And I believe you’ll love my new book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom as well.
Having the COURAGE to act and improve upon a suboptimal situation is key!
Dear Sam,
Thank you for all of your posts. They have been extremely helpful to me. I have been talking about retiring at age 50, since I was about 40. I am known for this with my friends and family. This is the age that I set where I would get lifetime medical for my family from my company, as well as achieve the level of financial security that I felt comfortable with. My job in Corporate Finance for the last 30 years has been extremely stressful and consumes all of me. I have regrets with missed time with my two children, family, and friends. Here I am at age 52.5, and I am still working! I have firmly narrowed my retirement date to 6-18 months from now (53-54 years old.) Which date to choose now consumes all of me. I am mostly over the fact that my career has been such a big part of my identity, but I am worried that I will be bored and feel that I made a mistake. And, you can always have a little more money for cushion. I am 100% sure that once I leave Corporate America, I will never ever go back. I am anxious to retire to find my purpose, and get back to being myself around my family and friends without all of the very extreme stress. I read your points about 1-2 years being a good timeline to retire, which all make complete sense to me. I am just not sure that I can endure the stress any longer and have it consume all of me. Yes, it is true that once you’ve decided to retire, you are less stressed, but 18 months feels like too long to keep up this “act.” Any advice?
PS. My son is looking to go to William and Mary for Business, and to run track. Fantastic college. Congratulations on all that you’ve achieved and on being such an inspiration to others.
Best regards,
Tammy
I am 40 and finally make real money ($300k this year and next in a relatively LCOL area.) My plan at 35 was to retire at 40, or at least be able to (thanks MMM). I didn’t make over $100k until age 36.
Now I realize that this kind of money doesn’t grow on trees and I can’t walk away for the time being. I do like my job, but it is very stressful / demanding (not always in a bad way.) My new goal is to retire at 45 and at least double my NW in the next 5 years (40-50% savings rate). Certainly I will move on to something else at that point rather than just leisure. I am a banker and could easily semi-retire at a low salary in a small town while still covering expenses since my savings will be completed by then. This may be the smart plan at least until my kids are done with college at age 50. Just need to find a spot where they’re happy to have me for about $85-100k and nobody sweats my attendance or plummeting golf handicap. That’s the dream and I feel its attainable in this industry.
All that said, I agree fully with 40-45 being ideal. I suspect I will have a hard time walking away from the money and opportunity of executive management in 5 years, but I really would rather not work at all and I don’t care TOO much about status and prestige. My family spending remains relatively lean which gives me options, but “the big house” purchase looms as a want.
Either way, I find solace in the grind by mentally planning to walk away “soon.”
Hi.
I’m new to your blog. I’m in the beginning stage of a remodel and loved your percentage breakdowns of the rooms in a home. Very helpful. So, my question on retirement. At 58, I was forced into retirement by Covid. I’m cool with it. As a single mom/divorced woman, I feel pretty pleased that my net worth is about a million. I’m doing the remodel to strategically increase that. Hopefully by 200-300k. The problem is all my money is in my house. I have alimony which pays my basic expenses and SS coming in a few years. Everybody tells me to sell, invest in stocks, travel and enjoy myself. What are your thoughts?
Hi Emily,
If all your money/net worth is in stocks, then you should diversify and boost liquidity just in case the value of your house decreases.
If you can remodel/expand for a profit, go for it and then sell. If you are remodeling for your own comfort, you won’t be able to capitalize the value of you remodel. You will end up concentrating even more of your net worth in your house.
The value of cash flow has gone way up b/c interest rates have gone way down.
Hi,
I am in a pretty similar boat to Emily but own a house in San Francisco. I am thinking about legalizing my in-law unit to add square footage for sale. I was originally planning to hold onto the property and rent it out but due to all going on with COVID/work from home, I am thinking about selling before my value drops. Do you think it would be better to sell or rent out the house now? Thanks Sadie
Not sure where you live and what property you own. But in general, I think cash flow is very available now, which is why I want to buy rental properties.
See: https://www.financialsamurai.com/san-francisco-real-estate-prices/
Hello there,
In general do you believe in real estate or stock market for investment?
Thanks,
Sheri
Hey Sam – love the site. However, I must point out that the Boeing retirement age vs death age is chart which you shared is not factual. I too made the mistake of sending those numbers around before I quit the company for the first time. Look around a bit online (since I can’t provide links) and you’ll see what I mean.
Cheers!
While this age of charts to retire is great, this gradual increase every year, I feel like this doesn’t take into account things that happen to many people in first world countries:
1) Career change – Some people just hate their first career and switch to a second lower paying one, that is less stressful, but still a career that is not a hobby.
2) Time off – People suffer from burn out or take time off to raise their kids until they go to kindergarten. I meet so many women who have done this. Of course, this puts them behind in the work force when they come back.
3) Divorce – If you were a two income household with equal contribution from both partners, it could completely set you back. And no one ever plans to get divorced when they get married… Of course, if you remarry, this might put you back on track, depending on who you marry..
4) Health – People get injured for a period of time and cannot work.
Yes, life happens to us all. I’m trying to figurer out the ideal retirement age. But of course, getting to the ideal age can be difficult. I missed the mark by 7 years because I was burned out and simply couldn’t last.
It would have been great if I loved my job.
Sam, you mention 20x your income in NW before you retire. You also recently had a 0.5% withdrawal rate for retirement recently. So if someone make 100k and they have 2 million saved, they can withdraw 10k per year?
If someone makes 500k per year and have 10 million NW, they can withdraw 50k per year?
10k per year seems low to live on, although maybe not assuming you don’t have a mortgage. Do you think the 20x rule and the 0.5% withdrawal rule are at odds with each other?
They are not at odds with each other, they are on the same plane.
20X income comes first. Once you get there, I think you can retire or consider yourself financially independent. Once there, I would first start withdrawing nothing or up to 0.5% if needed. And then adjust accordingly after one or two years.
The message I’m trying to tell everybody is to build supplemental retirement income in the form of passive income or active income. If we face structural declines, Having a low withdrawal rate will be worth it.
What do you mean by withdraw nothing? How would you pay the groceries if you had no income at all? I think I am missing something here.
I mean withdraw no principal worst case. Live solely off the dividends, but better yet, live off supplemental retirement income you generate in retirement and then start living off the investment income if necessary.
I think 50 is the perfect age for most people if you don’t have to worry about money.
Any younger and there is still a lot of doubt about if the money will last.
However, you don’t have to retire 100%. Going to part-time is a great option.
Semi retirement is another story. Then, the earlier the better. 40 is the perfect age for semi retirement. ;)
100% agree with you. Retiring in your 40s is the sweet spot. We hit lean FI in 2016 at 34, but plan to keep working & building till about 45.
I’m going to go out on a limb here and assume you made roughly $800,000 the year prior to retirement. 20x of that is 16 million. You’ve told us you had about 3 million at your retirement age. 20x just seems a bit extreme in a career like investment banking, maybe I’m mistaken but when if i work until age 50 in IB I doubt I’ll be at 40 million net worth by then (20x income on assumed 2 million compensation by then). It’s a very aspirational number, I just don’t see it happening unless I find a way to achieve 15%+ returns on my investments. Do you think i could find a way to get 15%, real estate probably gets that right? Thanks for all you do. Super interesting stuff.
I had a base salary of $250k when I retired (mentioned in the post). So if I followed my net worth target, I should have left with at least $5M, but I didn’t. Another reason why I should have worked for a couple years more. 34 is not the ideal retirement age.
I think you’ll be surprised at how many investment opportunities there will be to help you get to the $40 million number if you’re making $2 million of year regularly by age 50.
That said, The higher net worth, the more conservative you want to be. For example, if you had a $20 million net worth and lost 30% in March and the stock market, you probably wouldn’t be feeling very happy at that time.
Ages 20-30 retirement: “To spend it on a beach doing nothing would be a darn shame.”
Why?
Mostly because we spend 13 years in school starting at age 5. Then if you go to college, that’s another 2-4 years.
OK,
I missed all bullets on your chart.
At the the tender age of 42 I just started making good money. I was my third career move.
Despite the fact that I can live on 12 th/y( mmm, I miss my felling being rich like a king on minimum wage income) – I don’t want to do it any more.
Sam, I enjoy reading your FS more then my FT job.
However, only@65 with no reduction for the age my pension will give me sweet *20.
So let’s say I was retired twice before and now I am just digging gold in El Dorado.
I think you should change the title of this post to: Ideal age to quit the job you do not like and do the job you do like. The concept of retirement is not the same as people understand it in its true sense (GM union labourer retirees, sits at home and watches TV). Most of the reader, yourself included, simply substituted a job that they did not like and was too demanding, for a job that they enjoy (for now) and is less demanding in their eyes (although it is also debatable). This is not retirement but a career adjustment. And furthermore, after quitting the job you do not like, I wander if you would do another task (website, teaching finance, etc) is it was pro bono? I guess not for long or you would not do it with zeal and diligence. So the statement that “I am retiring” in this context is nothing more than mental masturbation.
Sure, happy to do so in a new post. I haven’t said I’ve been retired in many years now because I’m a full-time parent and spend about 20 to 25 hours a week on this site. But I will say that running Financial Samurai is 90% easier and 100% more fun than my previous day job.
If I stop doing anything, I will have personal retirement income of about $265,000 a year. That provides for a comfortable retirement, but not outlandish given I am a family of four.
My goal is to go to at least $300,000 a year and consistent passive income before I retire again.
Thanks for posting this, very interesting. I’m 40 married 2kids10/13. We own our home, cars etc no payments. We have saved and invested 1 m in the market 80% equity’s. 1m in 401 k , 300k in cash. I’d like to retire at 46 any advice ?
To say that $265,000 a year provides for a comfortable retirement seems like a pretty big understatement. Assuming a paid-for house, I’m trying imagine how I would spend that much in a year. If it’s not too personal, would you mind sharing your yearly itemized spending? I’m not asking facetiously or in order to judge you on your spending choices. But you lay out some pretty big numbers in terms of overall retirement savings goals and seeing a break-down of your annual budget would give me (and others, I’m guessing) some idea of how our own retirement spending expectations compare to yours. If you’ve already done this in a previous post, I’d be interested to read it. Thank you for your website. I enjoy it very much.
Sure. And please tell me about your financial situation and budget as well. Where do you live and how many children do you have at what age?
It’s always good to share and get an idea of where readers are coming from.
Check out this post with budget for a $300,000 gross income household:
https://www.financialsamurai.com/living-a-middle-class-lifestyle-on-300000-year-expensive-city/
There are plenty of 65+ that retired and spend some of their time working at a supermarket bagging groceries so they have something to do and can socialize. Would you say they are not retired? Retirement can happen if you are financially independent. Just because you like doing things that happen to make money doesn’t mean you are not retired if you do not need to do those things.
Saying being retired means you have to sit at home and do nothing productive is an extremely limited view of an amazing time in people’s lives.
i would love to sit at home and do nothing but i will never have the money to do that
Like Sam’s parents, I too was in the Foreign Service and retired at 53. I could and should have retired at age 50 when I was eligible. In today’s world, I understand that few Americans will have a traditional pension. In today’s world of near zero interest rates, I know I am lucky to have a pension that also increases with inflation.
Since I retired 6 years ago, I have yet to touch my savings and investments. In fact I have yet to even spend one half of my pension in a year on living expenses.
Since college, international travel was my passion and has continued to be until the pandemic began (I was actually traveling up until April 1st when it became obvious it would be better to settle down in one place).
The Foreign Service was the perfect lifestyle to see the world and now that I’m retired I can visit all of those countries that my employment would have prohibited (for example, North Korea). I wanted to point out my experience because there are many of us who do not have the highest paying jobs but have learned to make the best of the experience and flourish. Using Sam’s .5% withdrawal rate, my pension is now worth more than many retirement investment portfolios.
Definitely, the foreign service lifestyle is pretty nice. And with the pension, that’s great. I am off and trying to encourage my parents to spend more money given they also have a pension after 30+ years of service.
Broad habits die hard. If you haven’t touched any of your principal and don’t even spend 100% of your pension over the past six years, I encourage you to spend more money.
What is the fear in spending 100% of your pension each month if it is never going to run out? And you have other savings and investments too?
This one has been on my mind since the first day I started working. Initially thought of 55 based off thinking that was earliest to access retirement accounts. The it changed to 42 using Roth IRA ladders. The it became 42 but with two independent strategies through Roth IRA ladders and real estate investment where both strategy would support independently. Now I’m thinking about 38 given how the real estate path is going. I’m trying to balance how fat of FIRE we want, how many nice toys we want (ex. Tesla CyberTruck), having 0, 1, or 2 kids, and career burnout and potential. This article really hit home on the thought process I’m currently going through!
Glad you’re thinking about the process! I have a feeling that many do not and then they wake up 45 years old wondering were their life and their money went.
I like the analysis you did in that table on the best age to retire. It helps to look at the different aspects of your life, career, income, and education to take it all in. Retirement definitely is a personal choice. I think one’s 40s are a great time to retire, or take it down a notch at least if possible.
But we’re all different of course. I know two physicians, both with incredible careers, working in their 70s and 80s, happy as clams being able to help pediatric patients. One of them finally retired this August after a couple years of reduced hours. He almost retired last year but then changed his mind. I think COVID finally gave him the nudge to finally pull the trigger.
The other physician I know is 81 and is the most dedicated doctor I’ve ever met. He’s got the most incredible bedside manner, knowledge and experience beyond what I could ever imagine, so kind, has the best energy and sense of humor, and is so happy doing what he does.
I certainly don’t think many people would still be happy working like he does at 81, but I also think a lot of people aren’t doing jobs that they truly love. And of course health also has a huge impact to one’s happiness and ability to work in those upper years.
I hope I’m as healthy and energetic as he is in his 80s! I’m going to go work out now and eat some vegetables ;)
Those positions are blessed because they truly have found what they love to do and it gives them pride and a sense of community. The income doesn’t hurt either.
I wish I loved my job to do it for another 10 years. But it started getting boring after 13 years. It really is a blessing to find work that you feel is really making a positive impact to the world.
Being a Doctor Who could help others heal Hass to be one of those professions. And this is why it’s sad to see so many doctors retire early In the personal finance community.
And the other side to consider because of the focus on a daily purpose that benefits others: ucsd.edu/feature/still_connected_after_all_these_years
Agree with T – “focus on a daily purpose that benefits others”. I retired at age 55 from a fantastic job from which few people retire early – college professor. I retired for the freedom to do some international humanitarian work. Have so far been involved in polio vaccine distribution, repairing cleft lips, and education of indigenous (Maya) youth in Guatemala. (Amigos de Guatemala). Started at age 55 and now 81 and still going strong. Recommendation — if you retire early, do something to help others. The time will fly by and it will keep you “young”. Find your purpose and go for it!
Sam, you have obviously found your purpose in being a father, tennis and Financial Samurai. You’re doing a GREAT job. Thanks.
You seem like a good apple Robert. Thanks for the insight.
I feel 41 is a good retirement age; most people who retire that young are industrious so it is very likely that they will monetize their hobbies; who knows, perhaps their hobbies will be more lucrative than their job. I unwillfully retired at 39, two months ago, after laid off due to Covid. I realized that I am spending about half of what I predicted and that I have way more than 20x yearly expenses (something like 100x). I am not lying but I think I will spend $10,000 per year thanks to good financial decisions:
– I bought a house in the country with five acres, I have an ag exemption and taxes are dirt chep..I am not lying ok… $500 per year! I paid my mortgage sooo long ago. house was cheap to (I built most of it in 4 years btw). I bought/built the house five years ago and now the land is very close to the city limit which made my land be worth 2x of what I paid for (but I am not selling)
– I am into house flipping so my home maintenance expenses are like maybe $1000 per year
– Of course paid off car, something that I found is that; since I drive like twice a week, the risk of having an accident is so low that I could cancelled comprehensive coverage.
– Driving two times per week reduced my gas consumption to about $50 per month.
– When I built my house I insulated the crap out of it so my electrical is about $50 per month.
– No HOA (smart), No gas (everything electric), Internet is $35 /month, Phone is $15 /month.
– house insurance is about $1000 per year, I have it just because I have like 15 trees that can fall on the house and we get tornadoes where I live. Still, I am actively looking into how to reduce this bill.
– We decided not to have kids.
– My girlfriend carries some of her own weight and she is really not a spender.
– I shop at Aldis, I was thinking of $200 per month on food but we have a really hard time spending that much, we are averaging like $100/month.
I am sacrificing a little bit just as a precaution until markets stabilize; Mainly not dinning out.
In short, I found out that you actually spend less than what you were considering when you retire.
Very cool. I agree about spending much less than expected in retirement, especially when we are younger and healthier. Hope you at least got a severance.
Enjoy!
I’m on track to become financially independent at 35, but I’m still not sure if I would actually retire. Even though I work a lot of overtime at my job now at 24, I could work a lot less at any point in my career if I no longer wanted promotions. My job is already low stress enough working overtime, so without working overtime I would feel like I’m on vacation. I already make quite a good income at my age, and my living expenses are very low for my income range. I only spend 20k a year in total, and I could easily drop to 10k/year if I wanted to accelerate FI. I also have decided I never want kids or a wife, so I would have a very low expenses throughout retirement.
Where exactly do you live or how do you afford to spend 10k/year? I think this sounds like lean FIRE which is not what I want to do, but I respect everyone’s own decision :)
My sister-in-law just retired and I’ve wondered when would be a good time for me to retire. It is interesting that many people take up as many things as possible to stay busy. I may consider consulting with a financial planner to see what I should have prepared before retirement.
I like what you said about how the 41-45 years old is the best time to retire because you’ve earned a good amount of money and minimize regret. This would be really helpful for my dad to know because he is thinking of retiring. It would be really nice if he could get a professional to help him figure out when he should retire with his income.
After reading a few of your posts, I realize that your not retired at all. You are trading your time tending this site for money – sounds like a job to me. To thine own self be true FS. I realize that this is what makes you happy, and that’s great! However, its misleading to call it retirement.
Agree. See the third paragraph of this post:
“Although I no longer consider myself retired with all the work that goes into running this site and being a stay at home dad, here are some things that have happened since 2012:”
I should probably BOLD it to help clarify.
See also this post: A Day In The Life Of Two Stay At Home Parents Who Also Work
I have not met one interesting retiree. They are impossible to talk to as they have nothing to say. Honestly, most don’t do anything of interest. No one says let’s invite the grandparents to dinner and hear about their adventures.
I think that says more about the people you mingle with than anything. I’ve never met an uninteresting early retiree or a person with an otherwise unconventional lifestyle. My grandparents took the more traditional route, and they still have many stories to share, most are not work-related. Also, to me, this seems to further motivate a person’s goal to retire earlier rather than later, as you can DO more. Finally, most work-related stories are insanely boring, unless you work in the healthcare field as I do; then I would love to hear your stories. Otherwise, I do not want to hear your boring complaints about your job.
People don’t understand that the new concept of retirement is doing whatever you want. I am sure you really enjoy running financialsamurai.com and what is best is that, if you wanted to, you could shut down the website or sell it tomorrow and spend your life sailing or running or jumping.
I feel people are fixating in the literal meaning of the word “retirement” which is you are too old to continue working so you leave the workforce to wait for your death.
Keep the good work! love your website.
I like that. I’ve started to map my date of FI rather than retirement. It incentivizes me to keep expenses low, pay off the mortgage sooner, AND save/invest… rather than just save/invest.
I love the quantitative post. Appeals to the scientist in me. We will consider start toying with the idea at 41-42 and consider it over 5 years. Part of the reason is all the things youve gotten into other than your old 9-5 job. That is a big part of RE. I can be hard as a physician to graduate late and leave during the peak earning years, but docs can move around when young and make lots of money to pay debt and nestegg without having 10-20 years experience due to our training so 40s may be low earning years for some.
Hi Sam.
Worked in middle east as oil and gas engineer for 13 years ..was laid off last year in oil downturn..at age 46 ..thanks to frugal savings habit ..networth of 1.2M minus staying house..distributed almost 1/3 in stocks bonds andRE
now at home since last 1.5y..when I was working ..had urge to retire early..now at home..feel like going back to work..grass is greener on other side..
current annual expenses are 20000 pa..
my only concern is 2 kids are small grade 5 and 2…so have to constantly think about their future college costs etc..
I like the idea of 20x yearly spending OUTSIDE of IRA type money, I think it misses a couple things however like planning for one offs you know are going to happen. For example you may sock away some money in a 529 for college but how are you going to pay for the incidentals like summer abroad or spring break or air plane rides home? My solution was to chuck 20K into a UGTM funded in equities and let it grow for 20 years. When college came I had 4 years of ready cash and when my daughter graduated we had enough left over in that fund to get a car. College never touched my cash flow. 70% of that money was interest.
Another example is Roth conversion, you can plan for that as well. I did an analysis and it appears Roth conversion is best done over a number of years (4-6) just prior to RMD. It is best done while living off of cash. The cash comes from saving into a fund ear marked to be spent down into cash at the commencement of conversion, plus you need some money to pay the taxes. Having this buffer fund helps protect against SORR. Save 30K into this fund when you are 25 and at 65 when you start to Roth convert you will have enough to cash out 88K per year to live on for conversion. 90% of that money will be interest.
Good post
I like the numbers you put up. As a physician, I think the long time in training pushes the chart out 10 years. I was financially ready to retire at 50 and pulled the trigger at 54 after slowing down for three years. I switched to a new career of writing and teaching personal finance to doctors. I think it is better to retire with a purpose and not just quit working. So instead of saying I retired, I like to say I repurposed. My retirement story can be found in my book, The Doctors Guide to Smart Career Alternatives and Retirement. We will all be happiest if we retire to something rather than from something.
Dr. Cory S. Fawcett
Prescription for Financial Success
I agree. It’s fun to take a year or two off to realize the travel dreams, but living with purpose bring meaning to so called retirement. And, it could be as simple as Teaching ESL as a retirment career in order to travel the world.
As someone who has age 46 targeted for myself for now (barring any windfalls, which would only advance this date), I like this scale.
Those Actuarial numbers are harrowing. Where is that table from? It should be posted in every workplace everywhere.
Below is my historical ratio of Networth to Gross Salary, so based on Sam’s very original ratio should be 20. My retirement age could have started at age 49. However, more than half my assets are in non-liquid assets (e.g. property) and I still have two kids age 10 and 12. There seems to be an underlying theme most people can retire once the kids finish college. My best guess I’ll retire before I’m 60.
Age NW: Salary
37 4.88
38 4.15
39 5.00
40 4.44
41 5.00
42 5.85
43 5.69
44 12.39
45 12.04
46 13.08
47 14.55
48 14.96
49 19.08
50 16.84
51 19.66
52 22.1
As a side note Sam’s blog was timely as I was recently unhappy at the office this past week…I work for a very famous financial service company and with each passing year I become more jaded as to how “white dominant” the organization is (despite 15% of its workforce are people of color). But then I’m at an age which I shouldn’t care about this corporate bs inequity…why go through the corporate grind…it’s just not worth it now. So if my 5 layers of white bosses are reading this post … your Diversity and Inclusion pep talks are worthless…show it in action.
Just turned 54. 5 months ago I left a very a world famous fintech company (cushy, comfortable, and secure job) to join a bank. A decision I now regret, the bank is making me work very hard and I ‘m not enjoying the work. While i’m very disappointed I made the decision to leave the fintech firm, BUT the reason I left is that it was a white dominated org. My boss during my annual review basically implied that white males have privilege (I’m thinking of suing the company, I have his statement on audio). Futhermore, for the past 3 years the boss has screwed me on bonus and pay increase – he keeps on telling me that I’m the highest paid team member, which I hate how he compares my skills to my peers b/c I move mountains, others do not. BTW: My boss is a punk ass young white guy who is 16 years younger than me (at one point I was making more money than him) and deep down I knew he wouldn’t do a damn thing for my career progression. While the Bank job pays more than Fintech…it’s just not worth it – I’m stressed out, not working out, and worst of all I’ve become horribly grumpy with my family. It’s taking a toll on my mental well being
Now that I’m miserable with my new job, I’m thinking that I give retirement/ semi retirement a trial run or look for a job I can enjoy. I think I’m FI, I have two kids 13, and 15, and a wife who doesn’t work. But most of my NW is real estate. I’m estimating that my passive income (bonds, equities, rent, options, insurance) can give a cash flow of about USd150k a year.
My NW: Income ratio history is:
Age 37: 4.9
Age 38: 4.15
Age 39: 4.44
Age 41: 5.0
Age 42: 5.85
Age 43: 5.69
Age 44: 12.04
Age 45: 13.08
Age 47: 14.55
Age 48: 14.96
Age 49: 19.08
Age 50: 16.84
Age 51: 19.66
Age 52: 23.29
Age 53: 25.12
You sound a lot like my situation
My definition of retire is the ability to live a life style you want and not need the income of a “job”. When you get to this point, it is not considered work. It is considered doing what you want. If it is not what you want, you tell the boss you are finished with your career and then do what you want. I retired at 52, but I was not at the financial point I wanted. I am still employed, but now I am at that point. I do not have to hold back my thoughts to the boss anymore and fear being fired. I think I would actually like to have being fired on my bucket list. I actually told the president of the company he was stupid with others on the phone and didn’t get fired. That is what I call being retired.
I retired “early” at age 55. I thought that was pretty late based upon the FIRE blogs I’ve been reading the last six (?) years. So it was good to see a total score of 32 for the 51 – 60 age range, which is not too far off from the total scores for the “blue zone” optimal retirement age ranges.
I semi-retired at 44 (transitioned from c-suite level position to part time role with same company in same functional area – finance) where I continued to work until fully retiring nine years later at 53. In semi-retirement, standard work schedule was 3 days per week (Tues-Thurs) although I frequently worked a 4th or 5th day during the week when things were busy or they needed more of my time. I stayed on as an employee and received ful benefits (although I was unemcumbered by the day to day bs like goal setting and performance reviews and managing staff).
That period allowed me to continue to build my nest egg, setting my DW and I up for an enriching retirement.
We travel quite a bit (target 60 nights away from home, spread over around 8 trips per year). I do not consult or work in any capacity – have zero interest in doing anything like that.
Retirement has been everything I hoped it would be and more. It’s truly exceeded my every expectation.
Very cool. What do you think the right age was to retire? Do you ever wish you retired earlier?
I think the right age is 50 – if you can afford to do it (which means being able to do the things you want – and not having to live frugally). This provides a very long period of “go-go” years, in which to experience lots of different things.
I think 44 would have been too early to be fully retired (for me). I am glad I stayed on part time so we can afford to do what we are doing now.
Having said that, I suppose if I had the money at 44 I have now then maybe my answer would be different – although realistically I would probably need more just due to the longer retirement period:-)
Everyone is different, thank goodness! Some spend and experience when they are young, working later in life. Some save when young and experience later in life. Some choose to have many children, cherishing all and working long to support them. Some choose to have no children and live to serve their own desires alone. Some don’t save at all and live off of the rest of us…these I tend to loathe. Point is that you can’t distill all of this down to a score…IMHO.
But, a thought provoking post! Cheers!
Congrats on the nice number.
You’ll have to quantify “not a big spender”. It’s all about understanding your expenses now and the future. Many folks retire with much less.
If “not a big spender” requires 600K a year, then you are not going to make it. If it only requires 100K a year it should not be a problem.
How much does your house cost to keep? Taxes, insurance, maintenance…
Do you have kid(s) to send to college? You going to send them to public, private college. Will they get scholarships? Where do you want to travel to, how often do you want to eat out and at what level?
I have no dependents.
Taxes, insurance and maintenance on my paid off house is about $20k a year.
Probably spend about $150-175k a year total.
I am healthy.
It is the unknown that makes it hard to know what is a safe number to feel secure in retiring.
I am 51 and have about 6 million saved in investment accounts, a mix of taxable and nontaxable investment accounts. I paid off my 3 million dollar house. I have no debt. I want to retire and worry I do not have enough. I am not a big spender. Thoughts?
If your expenses are 150K-175K per year and you have 6M invested, then your drawdown only needs to be 2.5%-3% per year to cover your expenses. Assuming your investments average at least 3% growth and another 2% in dividends, then your principal amount theoretically never changes as you cover your expenses in portfolio appreciation and the inflation in dividends. Getting a total average annual return of at least 5% on your assets seems reasonable, particularly over longer periods of time so I’d say you are just fine to retire anytime you want.
Based on all the factors you laid out, I’m going with around the mid-Forties as the sweet spot.
However, I think this can completely change over time as your life evolved. I craved early retirement in my late 20’s, but started to really enjoy my work and found a good balance in life, and so now at forty am not in a huge hurry to retire at all.
Ask me again 5 years from now though whether I still feel the same…
Wow, Sam, you’ve accomplished so much five years post-retirement. I retired when I was 42 and have only traveled to about three countries in five years. You’re right about being retired from 9-5 work but not retired with all the work that you’ve done and still doing. That’s exactly how I feel. I’m just getting started with running a blog and hope to be able to accomplish at least 40% of what you’ve done with yours. Let me congratulate you for all your accomplishments.
Again, great topic and spot on with the ranges. I’d love to get your opinion on the comment about the retirement amount in cash or cash equivalents. We tend to be heavy in RE. I’ve read your post https://www.financialsamurai.com/real-estate-will-always-desirable-stocks/ and agree with a lot of it. Not that one asset class is any “better” than another, but more about what you are more comfortable with. We’ve been doing RE for many years now and it is just our comfort investment.
Anyway, if our rentals are yielding similar to long term market rates, on average over the long term after expenses, how would you count those properties towards the 20X multiple? I typically use the total equity as part of our NW calculation.
I think our long term plan will be to consolidate all our props into a few large, multi-unit properties and “retire” on the income. We are light on equities, but that’s by choice.
And to tie it all back to the topic, I am shooting for 45-50, with the idea of going into academia for retirement. What the hell is all this education for if I don’t give some of it back?
You are usually spot on with what you write, so I thought I’d get your opinion on this.
Thanks for keeping us focused! – FS
What about using 72t to access your pre-tax funds penalty free? Think you had an article on that a while ago.
Sure.
See: The Rule of 72(t) To Withdraw Money Penalty Free
But it’s best not to draw from these pre-tax accounts. Treat them as bonus money that you don’t count on and you don’t need.
I don’t think that I will ever truly retire at any age, because I want to feel like I am contributing to something outside of myself. If money were no object I would go back to school to make me better in my current field and to learn more and be better able to apply it to the issues of humanity.
My only real goal is to be able to provide a good balance for it all. To be able to leave at noon each day would be ideal. You really only work so many hours a day anyway, before your ability to focus and your productivity drops off.
Sam, if to retire comfortably you believe one needs at minimum 20X their annual expenses in liquid POST-TAX net worth (so no PRE-TAX retirement accounts like 401k), aren’t you then saying pretty much no one will have enough money to retire much before 59.5yo?
By your own math in articles like “The Average Net Worth for the Above Average Person” https://www.financialsamurai.com/the-average-net-worth-for-the-above-average-person/, in your POST-TAX savings guide, the high end estimate maxes out at $400k at 60yo. If that person had (in your example here) 100k in annual expenses, that person would only have 4X expenses at 60yo and at no younger age in the POST-TAX savings guide would the person have a higher ratio than that of savings to expenses. Additionally, in your Average Net Worth of the Above Average person chart, for the 60yo with a ~2.2M total net worth, that person has 72% of their net worth in PRE-TAX savings and 28% in POST-TAX savings.
I get your point of focusing on POST-TAX savings to retire early, but I think 20X POST-TAX savings (and disregarding PRE-TAX savings) is 1) unachievable for most people and 2) overemphasizes the value POST-TAX savings at the expense of PRE-TAX savings.
Great article! I’ve seen you reference 20x annual expenses in other articles as well, but curious how came up with that? (Would represent a relatively high 5% withdrawal rate unless i’m misunderstanding some of the assumptions).
I’m 43 and recently switched careers and cities in an attempt to find a more sustainable/enjoyable path. While things are somewhat better, I’m realizing that there’s still a lot of corporate BS to deal with. Plus, frankly, I just don’t like dealing with (most) people.
Luckily, I definitely meet the 20x rule (even more depending on what/how I count it) and have really been considering truly retiring. In my case, I think i’d spend my time being a dad, doing household chores, etc. I have absolutely 0 desire (or even idea) for starting a business, though, so am a bit hesitant to pull the trigger (i’d want to have 99% confidence that I could support myself and my family for the rest of my life on passive income alone).
I emphasize 20X annual gross income, w/ 20X annual expenses at the minimum.
A 5% withdrawal rate is high, but it’s really only a 2.2% withdrawal rate if you invest your entire liquid assets in a 10-year government bond that provides a risk-free 2.8% rate of return.
Practically everyone I know who left the workforce early has found something else to do that brings in some change.
Interesting – thanks for the clarification. Wouldn’t inflation eat into that too though (roughly ~2-3% a year)? Other articles I’ve read on safe withdrawal rates seem to factor in annual inflation adjustments (so, you’d want your portfolio to average maybe 6% so that you can average a 3% real return).
I guess 20x gross income could likely end closer to 25x-30x post-work expenses when you factor in a) no need to save anymore b) likely a lower tax bracket c) no payroll taxes. Or, if you think it’s highly likely that you’ll end up finding a way to earn some money in retirement.
In doing some research on withdrawal rates, I found this article. Seems well-researched and kind of interesting. They came up with 2.8% as a conservative withdraw rate for a 45 year old (assuming annual adjustments for inflation) on a 604/40 portfolio with 95% confidence.
https://www.americanfunds.com/ria/insights/can-i-retire-at-40.html
Sorry – for all the questions. I vacillate between giddiness (at the thought of retiring this year) and despair (thought of 10 more years to get to 35x annual expenses plus trying to convince my wife that this isn’t nuts).