When I was 30, 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.
Now that I’m almost 41, I’m glad I didn’t wait until 40 to leave the workplace for good. Life doesn’t end once you retire. It simply morphs.
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:
1) Written a book called, How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye.
2) Traveled to 30+ new countries in Europe and Asia with my wife. Angkor Wat, Cambodia was truly amazing.
3) 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.
4) Consulted for several financial technology startups ranging from seed stage to series C.
5) Built this site into over a million organic pageviews a month with no forum.
6) Grew passive income by 2.5X.
7) Bought and remodeled a fixer.
8) Became a foster child mentor.
9) Became a high school tennis coach.
10) Became a father.
I’m excited what the future will bring!
Factors Involved In Retiring
Before we discuss the ideal age to retire, let’s take a look at what the average retirement age is in America. As you can see in the chart below, the average retirement age for men has risen to about 65 and to 63 for women, if we are to round up for 2018.
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 be the same.
Now that we have a baseline for the average retirement age in America, let’s go through some retirement age ranges and discuss where someone is probably at in their lives and whether such an age range is good for retiring.
Things to consider for the ideal retirement age include:
- 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
- How much you enjoy your job
- Overall health
- Life expectancy
In order to retire comfortably, I believe one needs at minimum 20X their average annual expenses in liquid net worth e.g. $100,000 annual spend, $2,000,000 in stocks, bonds, CDs, and cash. I don’t include your pre-tax retirement accounts like the 401(k) and IRA in this calculation due to the penalty one must incur withdrawing before age 59.5. You can retire with less, but you’ll always be looking over your shoulder wondering when the boogey man will get you.
The chart below uses 20X average income to be more conservative, since everyone who wants to retire consistently saves. Social Security and your passive income should help minimize your drawdown of principal. I continue to believe most folks overestimate their financial needs in retirement.
Suggested net worth targets by age, income, work experience
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
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.
Ages 31 – 35: Most people only start gaining confidence at work after they’ve hit 30. Before then, you’re 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.
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 or be stuck doing the same thing in the same industry for the rest of your life.
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 feel like it’s now or never to make a move.
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 may begin to wonder how your life might have been different if you had taken the leap of faith earlier. If you have kids, you may be questioning whether spending all that time away from them was truly worth it since they’ll soon be entering their own phase of independence.
Ages 51 – 60: Perhaps you’ve waited this long because you wanted your kid(s) 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 pension that keeps on paying you more for every additional year you work past 20 years. Whatever the case may be, you better have loved what you did or else you will feel regret having waited this long to retire.
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 Age Range To Retire: 41 – 45
Going through the age ranges, I believe the ideal age to retire early is between 41 – 45 years old once you’ve got at least 20X your annual expenses saved up. It’s the optimum age where you’ve put in your dues, earned a good sum, minimize regret, and still have enough energy to do something new.
If you retire at 41, you won’t be left wondering whether you wasted your 30s because you’ve already spent all of your 30s seeing what you could do as an employee or as an entrepreneur. If you retire at 45, you will feel at ease knowing that you gave 20+ years post high school or college to seeing what you could do at work. Further, if you fail at retirement, you can always go back to work.
At 41, I no longer have the enthusiasm or hunger to create and earn big bucks like I did in my early 30s. If I had used my energy to keep earning at my day job until now, I probably would have hit a bamboo ceiling because of the politics involved in getting promoted.
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 seven more years would have left me bored and a little bitter.
Instead, I used my energy between 35 – 40 to create something of my own. It is the creation of something from nothing that will give you the most satisfaction. I would choose running Financial Samurai over being the CEO of my previous firm any day.
The main reasons why I left at 34 were because I had a large severance package and a clear idea of how I wanted to spend my time. In effect, my severance package accelerated my retirement by five years because the severance was worth five years of living expenses. Without a severance package, I probably would have kept working until 40.
You Might Find Yourself Busier Than Ever In Retirement
The beauty of leaving the workforce is that you get to focus all your energy doing what you truly want to do. Because you have endless options, you tend to take up as many things as possible. You’re like a kid in a candy store with an unlimited budget. The only restraint is your energy and time.
Not only do I enjoy writing, I’ve discovered since leaving full-time work that I really enjoy working with kids. Sometimes they might tackle you too hard or tell you to “shut up,” but that’s all part of the process of being a good mentor, teacher, or coach.
What I’d love to do in the near future is teach kids about online media and entrepreneurship at the school my son plans to attend. It’s a great way to stay involved with the community while also having something meaningful to do. My son might not think it’s cool if his old man is always there, but I will!
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Life doesn’t end once you retire. It begins. (Yeah, it’s been one of those days at work.)
The age breakdown descriptions here are pretty good. I only semi-retired in my mid 40’s so I can keep my healthcare benefits.
The “life speed is accelerating” comment is especially true. It just keeps getting faster
I’ve been aiming for between 40 – 45 for several years. In addition to being at a point in life where I will have at least 20X expenses saved, all my kids will be grown when I’m 45 which adds to the “freedom score”. Having the kids for the most part out of the house and launching costs covered provides a lot of extra comfort in budgeting. At 40 – 45 I’ll still have an entire extra decade over what most people consider early retirement (55).
I should be able to retire by 35. The thing is, life requires purpose, and except for work, I’ve never had one. I wish I could find another purpose, but I doubt that will ever happen. Given that, I’d rather have a purpose, even if it’s not one I’m particularly thrilled about. So I suspect I’ll just work until I die.
It’s like running away. I’d love to run away from my life, but I have no where to run to that would be any better.
I’m in the same boat, but I’m hoping that having a lot of time and money after retirement will better position me to find a purpose. I was unemployed once, and that was completely miserable. Work is a much better alternative, and one of the only positive things going for me.
That is to say I’m not retired, but I’d like to encourage you to connect with people who are, surely there are others who have went through this thing.
I am about to turn 31 and just recently become obsessed with wanting to retire early. I think it’s because as I’ve aged I gained more hobbies and my desire to expand on those hobbies requires time. Therefore, I’d love to retire by 45. (Fingers crossed.) I suggest you start looking into hobbies and learning new traits and you may just find a new purpose. My hobbies currently include volunteering for a land preservation, camping/hiking, and bee keeping. P.S. I’m jealous you are set for 35!
I have the same problem – i’ve been writing code since i was 15 and fortunately no longer have to code for money since 45, but i’m still working at 51 because i’ve no idea what i’d do otherwise, and I still love my work! I’ve no desire to start new companies because it’s really hard work and frankly i’m out of ideas anyway.
Most friends who retired earlier (in their 30s, 40s) came back to work in some capacity. A friend who’s retired and watch youtube all day long always admonish me to retire immediately, so go figure. Also didn’t help is our kid is still in schools, so basically we’re stuck until he goes to college anyway.
i’ve set a new goal of retiring when 55 and when our kid goes to college, until then, we donate our income to charity and travel whenever we can as a consolation price.
There are plenty of people out there who could use help. I am absolutely positive that you can find more purpose if you feel comfortable enough to leave work.
Thanks Sam: there’s dearth of book for people who are already financially independent (FI) whether to continue working or retire early (RE), especially for those in their 30s, 40s, 50s. For me, FI is relatively easy (due to luck, not ability), but RE is the hardest part for me.
It seems in our society, only athletes and a lucky few have similar experiences, and most of them don’t just sit home and watch sports, but what do they do then? If you write such book I’ll buy it :)
Hi, Sam, after re-reading many other comments and give RE another though, I figure out my excuse: “social”. I know, I know, this is just an excuse, but nevertheless, “social” is the real excuse.
You see, i’m an immigrant coming to bay area, leaving all my friends and families behind. I realized the lack of opportunities to social is a real fear and is the driving reason behind me still working after FI (liquid net worth ~50x annual expense). Conversely, the people I know who retired with much less or much younger, are either autistic (many software engineers are clinically anti-social), or those who were born here and have families around. Many of my friends who didn’t immigrate to US can retire w/ much less, because they never deserted their social network by coming to USA. My fear of staying home and do nothing and watching YouTube all day is the reason that prevent me from RE.
Now that I figure out “social” is the real reason, I can address that by trying to build a social network *outside* of work. This will take time but at least I feel it’s the right step forward.
Eric, you raised a point I’ve been thinking of lately:
“My fear of staying home and do nothing and watching YouTube all day is the reason that prevent me from RE.”
Is it really so bad to you use your time goofing off if you can?
The other day I was watching a mantis on one of my plants. I wanted to stay and watch and see if he would catch something but I had to dash off to do something else because my weekend is only so many hours and I have to prep for the week.
Which got me thinking, so what if I RE and spend my time bumming on the couch or luxuriating in laziness or just reading endless trivia on the net? It’s what I want to do with my time. I figure as long as I’m not bored and take care of my health by eating right and getting out several times a week I should be ok. (I do plan to write, keep bees, garden (a proper self sustaining eco-friendly garden is my dream) and travel.)
Am I wrong? Should someone who’s FIRE do more just because? Is it not enough to want to just sit and watch butterflies?
I actually have a friend who RE @50 and watch youtube all day long. He’s also alcoholic and single. Humans are social animals, we are genetically designed to be social, just watch our own kids and see how easily they make friends, etc…
Incidentally I also know someone who RE and declare he’ll spend most of his day meditating, then he wrote a book, became NYT best sellers, he go around the world teach people how to do meditation, build an institute on being mindful, etc.. You get it, he’s not really sitting home by himself meditating 12 hours, he’s out and about building and socializing with his tribe.
I think RE require work, and the work is to find the tribe that you can socialize with after RE. Once you have that, like your church, charity, local schools, etc.. RE is doable. A friend who retired @50 advise me to find something to run to, not run away from. Being alone at home sucks, even my wife who’s been a at home mom constantly was out of the house and doing things with her friends. Since all my friends are working, I need to find a solution for myself.
Sam has his tribe here in this blog, this is why he can RE and I cannot, not yet.
Hmm, maybe it boils down to personality. I have a theory, people are wolves; so there’s pack animals and lone wolves. I think I’m a lone wolf. I’ve never been big on the social scene. I prefer the company of maybe four friends. I don’t drink or smoke. I’m single. I’ve stayed at home for weeks on end (during the holidays, avoiding crowds), enjoyed it and have never been bored. In fact, I wonder at how glorious it feels and how I wish I could do it everyday.
I wake up late (my body’s natural rhythm), enjoy the solace over breakfast with my thoughts. Then I plan my day and tackle the tasks that I’ve scribbled on my chalkboard. I write in the evening/night when my creative juices are going and drift to sleep feeling satisfied. There’s always something for me to do, learn, try, read (my reading backlog is appalling), research or write. I’m just one of those people who is never bored.
I think my creativity and fulfilling all the things I’ve wanted to do will keep me going in retirement because I don’t need to try to fill the hours. I already do. And when I have the money, I will travel and explore.
I wish there was more data collected on RE people. I wonder if there’s any out there like me (personality wise)?
Assuming you can afford to retire—and only you know if you can—here are some thoughts from having left a corporate job at 48 without knowing what was next (but knowing there had to be more to life than working 9 to 8. I am 57 today).
Searching for your purpose? Here are some great questions to ask yourself re: figuring out your passion and purpose: http://amorebeautifulquestion.com/find-passion-8-thought-provoking-questions/
Not sure you’re built for one big purpose? It may be easier to consider creating a portfolio of pursuits after you leave/retire. As an example, my portfolio at one point consisted of: create something original that goes out into the world every week; contribute regularly to at least one good cause; try to build up an independent venture that’s mine (not working for someone else); do one weekly thing to build/strengthen personal connections; and always be planning my next “memorable experience”—whether a big trip or doing some fun with a local friend.
You’ll be amazed where a portfolio of pursuits leads you (yes, often to “purpose,”) and because money isn’t your #1 objective, the best part is at any point you can say, “Okay, enough of THAT,” and move on.
Wondering what you have of value to offer to the world? I took me a while to learn that my past work and hobbies had given me some skills that I just took for granted. So, now I share with friends this piece of career advice, which I saw in a Comments thread like this once upon a time. I think it works for early retirees, as well:
“If you find that there’s something that takes very little effort from you, but seems to be appreciated by those in positions of power, don’t assume that everyone else is just too stupid if they can’t do it as well as you do, or as easily. Odds are, it’s a particular talent you have, and that’s why it seems so easy and natural to you. If you find that happening, congratulations—now all you have to do is figure out how to leverage that skill.”
I’m 39 and very much looking forward to retirement, but I know I’m not ready for it yet. I enjoy what I do, I just know that I don’t want to do it forever and I want to have the flexibility to work on my own terms, not because I need the money. I want to travel a lot after retirement so that is a big motivation for me to retire when I’m young enough to make that happen.
A good idea is to take a sabbatical, either paid or unpaid to test out the waters.
That is a good idea. Thanks for the suggestion. I’ll have to keep that in mind when the time comes.
I ‘retired’ at 29, when my job at the local radio station ended. I took my web design freelancing business and ran with it, since there was nothing to do in the media business anymore in my city. I’m now kinda retired (I work about 1-2 hours/day) and just enjoy life. Retiring at an older age is OK, but it also comes up with a lot of health issues. Ideally, we should get some ‘me’ time earlier in life.
I might die tomorrow. Sorry to be so morbid, but who knows? I could. I might live to be 120, but that’s unlikely.
As of today, here is the “average number of additional years” I can expect to live when I reach a specified age (via: ssa.gov/oact/population/longevity.html):
– Today = 48.4
– If I make it to 62 = 23.6
– If I make to 67 = 19.7
– If I make it to 70 = 17.4
Overall, I just don’t know.
Re: retirement age, the short answer would seem to be as soon as possible if one is looking at it solely from a number of years perspective. However, considering other factors such as the items you highlighted, I’d think the answer would be 50. Why? It’s somewhere still in the middle but on the likely “second half” of the game.
Ultimately, it comes down to (1) what defines retirement and (2) whether or not you’re enjoying the ride along the way.
The hedge against an early death is a big one, especially if you don’t really love what you do. I don’t think more than 10% of people who work can actually say they truly love what they do. Maybe they can say they like work most of the time, but if you build enough savings, I believe people should gravitate towards loving what they do. There’s going to be a lot of regret if you look back and realize you spent 40 years doing something that was ho hum.
Retirement is a loaded word. As you have proven Sam, it really means leave someone elses set of rules and agenda and set your own! I say the sooner, the better! I was layed off at 35 and started my own real estate investment company. I just turned 50 and loving every minute!
Thank you Sam for your excellent perspectives.
That’s great to hear! At 50, you are truly blessed to love what you do.
I’m thinking 41-45 (mostly because that is what I am projecting for my retirement date).
I also think it is a good time because my kids will be more grown up and we can go on lots of trips together without having keep as close of an eye on them. It also means I did a healthy amount of work to be proud of for my life and I am still young enough where I can do something else.
How awesome would it be to live abroad for two or three months during summer vacations, and go travel for three weeks during the winter with your children given that you are retired or have an Internet business? I’ll be writing about that in the future and I think it’s going to be a blast.
:| Best. Plan. Ever.
I love reading the sites where they retire abroad or do extended traveling. Makes me long for a sooner retirement date!
I didn’t FIRE until I was 52, but I think the ideal retirement age for me would have been around 45. That’s about the time when I started to dislike my career as a software developer.
I voted for 46-50, in case there are market downturns and/or financial mistakes were made early on. I am slightly older than this, and still working, since I took a professional degree, and love my work. I foresee working only 3 days/week instead of 5, in the very near future.
I’m on track to “retire” at 55. Why so late? I want to wait until the kids are done with college, the house is paid off and I can get lifetime health insurance from the office. Also, my current job is not too soul-crushing and on most days I actually like it!
Once “retired” I’ll probably be busier than I am now. Big plans for the blog, maybe write a few books, etc… Overall, I’m trying to enjoy the ride as well as looking forward to the destination.
This question is SO individual. I didn’t retire until age 62 because I loved my work as a registered nurse. I was FI decades ago but truly enjoyed working. I retired when I did because traffic became a drain on my soul and hubby, who had been retired for a long time, was impatient for me to have more time to play. Two years later I still look longingly at some part time nursing jobs and haven’t ruled out going back to work in a limited role. I’ve gradually learn to appreciate free time during the day though and yesterday went to a fabulous Zumba class and today will attend a hobby craft meeting that I would have skipped if I still worked.
The ideal age to retire is when YOU want to and not according to someone else’s timeline.
No doubt, hence the survey question and asking people to share their experiences.
But for folks who are seriously contemplating retiring earlier, it’s good to gain different perspectives just in case.
And I assume folks who retire after the age of 45 reading this post will be more agitated than those who leave before 45. I’m looking forward to the reactions!
Barb, I agree completely!
Being a home owner and financially free from the need to work by age 40 is exceptionally rare and, to be honest, is more a matter of having extreme amounts of luck rather than financial acumen. Few Americans are making several hundred thousand dollars in their 20s and 30s, and folks dont usually reach financial independence at such an early age without either an inheritance or some other source of unearned wealth.
The tone of this article seems to suggest that almost anyone can simply decide to retire at 40 (or earlier) with just a simple financial plan in place. Though this is an interesting story, it is ridiculously unrealistic for the vast majority of us working stiffs.
That’s why I use the word “ideal.”
But I thought it would be impossible to leave work before 40 as well until one day I had an idea and got to work on Financial Samurai and really focused on building passive income.
You just never know until you try. What have you tried lately?
I could retire now (44), but that would mean downsizing slightly and selling a newly invested rental property that has strong upside potential but where the income doesn’t cover the mortgage just yet. I forecast things to turn the other way in 3 years and then I’m off. Hard to be so close yet not quite there yet. I always thought 45 was my “ideal” age and now it looks like it’ll be 47. I don’t think 2 years off the target is that bad in terms of forecast accuracy.
Perhaps you’ll enjoy this post: Overcoming The One More Year Syndrome To Do Something New
Hey, it looks like I’m nailing, Sam! I’ll be quitting my job at the end of next year at the age of 44.
Personally, I think 35-40 would have been a better age group for me to retire, but that might just be me. My daughter was born when I was 35 and I hated leaving for work everyday after that. That’s what helped me discover the idea of FIRE and getting the hell out! ;-) It’s just taking me until 44 to reach financial independence.
— Jim
Well done! Hope you actually make the move. It gets a little tricky and nerve wracking once you decide that’s it. Lots of doubt goes into your mind. But if you can negotiate a severance package, it becomes much, MUCH easier to leave, so please try at least. If you decided to leave already, there is no downside in asking.
My boy recently turned one and I think it would be so hard to leave him to go to a job I didn’t absolutely love 5 days a week. I’m prepared to not work for at least another 4-5 years until he goes to kindergarten.
Related: Career Or Family? You Only Have To Sacrifice For Five Years
I voted 20-30.
Women just don’t look at me the same way as they did back then. Had I had the retirement time to pursue relationships then maybe I wouldn’t be alone ya know. But hey I choose to go to class instead.
Its just this great big obligation, say ya gotta work so you can’t go see your family members in the hospital before they pass. Feels bad, ya know? Retire earliest ya can.
I’m not sure how compounding works, but retirement compounds on itself ya? Say if ya retire at 20 and start looking for a life purpose you’re more likely to know what it is at 40 then if you work until 40 and then start looking for it. Same with health, if ya gots the time to work out for 20 years you’ll be so much healthier…and a 20 year relationship with a soul mate would be better than a 0 year and starting relationship…
Getting the growth started earliest is most important. (I guess, I’m not there yet but it is a dream of mine).
I retired once in my 40s for 4 years, only to go back to being a corporate soldier for another 3 years do to my competitive nature. Im 1.5 years into my second retirement and I dont plan to go back. Those 3 years confirmed that it isnt worth the additional money and stress when Ive already have my nut covered.
I have friends who admire what Im doing, and clearly have the means to follow me but cant. Its a mental thing more than anything. They cant give up high paying sales jobs and cushy benefits, even though they hate what they are doing. My advice to then is go for it!
Im writing a different narrative for the second half of my life, where I call all the shots:) You row your own boat in life!
My 2 cents
Good stuff! I hear you man. It’s impossible to stay retired if you retire early. There’s just too much stuff one can do! Like a kid in the candy store with an unlimited budget.
I went the part-time consulting route at fintech startup companies. It was a blast to experience the startup culture and learn more about digital marketing. But after a couple years, I also grew weary. I hate commuting too.
GL!
Cool, sounds like a great experience. I did a start up in early 2000s, for little software company out of Boston. Dotbomb era:) It was fun, but soon found out all the folks making big bucks were on Executive team. I had to move on:)
I’m shooting for 45. That goal is based on when I think I’ll hit my 25x number. I calculated it based on projected returns on current assets plus new savings. The new savings goals are not aggressive because we want to live for today while we save for tomorrow. The timeline feels balanced to me.
I never considered some of the other factors related to age you mention above. For example, say I won the lottery at 22. I would not care if I wasted my college education. I may want to do something productive with my time but I’m pretty sure I won’t spend any time with the exact goal of maximizing my earned income or using my education.
41-45 is just about the right balance. Unless there are other issues at work or opportunities outside of work. Then a bit earlier is good too.
I think waiting to 65 to retire is a terrible idea. By then, you won’t have as much energy to do what you want. After 5 years, you’ll be 70 and traveling isn’t much fun at that point.
Anyway, I think 30x is much safer. 20x is cutting it very close unless you plan to work part time after early retirement.
Don’t write off the old because you’re not there yet. I retired at 70 and over the summer drove to both Pacific and Atlantic Oceans – so did coast to coast, but not without a break. Then I spent six months in Europe. Had a great time.
So travelling may be great fun at any age. Obviously one needs to be healthy. If you need an argument in favour of going earlier, say ‘you can’t be sure your health will last till [age]’. But one can have fun at just about any age. I do.
It’s just based on personal family history. My parents are getting older and they don’t enjoy traveling anymore. Too many health issues. I don’t have good genes so earlier is better for me.
Yes, I’m trying to live healthy now, but not sure if that can overcome genetic.
Great to hear you’re doing well and enjoying life.
Joe, I tend to agree with you on the 30X. Too much volatility and uncertainty in this world to cut the cord without more of a buffer. And I don’t think if you are out of work for 5+ years and feel you need to go back, it will be as easy as one might think so having that extra buffer may help avoid that consideration.
From my perspective, however longs it takes to save up 30X is the ideal retirement age.
Enjoyed my job, then pushed into management, was still ok but not as fulfilling. Coworkers same age as me started passing. Then, my older son died at 22. Big change in perspective. Retired less than a year later.
You never know what’s around the corner.
Sorry to hear about your son. One of my good friends died when I was 13 years old. Here today, gone tomorrow. And maybe that’s why I’ve always had a decision to try to live best life possible as soon as possible. Yes, it takes a lot of initial hard work in savings and risk, but it’s worth it.
Sam,
From what will soon be a year of experience as a busy-as-heck early “retiree”… I agree on ideal age ;)
I would love to hear you expand just a bit on 20x annual expenses. This doesn’t seem to jive with your previous recommendation of having enough to generate the risk-free-rate of return.
Is it simply that, with 20x, you’ve got enough breathing room to create something – a practice or a product or more – that generates income at some point?
Thank you sir!
Hi Eric, my initial proposal was 20 times average annual gross income for the last three years of Work. By using gross income, it’s a more conservative way to go and a more aggressive objective for people to shoot for.
When I proposed this multiple, there was such an uproar that it was unrealistic to get to that level of wealth (see comments after you click the chart). The people against this multiple focused on a multiple of expenses since that was their easier way out (being super frugal). I saw their point So that’s why I highlighted it here as the minimum amount once you have before considering leaving work. But I still believe in the minimum 20 times annual gross income instead.
The risk-free rate of return would currently indicate about a 33 times expense multiple. Which is not too far off 20 times annual gross income if you’re able to save 35% of your salary.
The earlier One retires, the higher the potential for other sources of income streams because we tend to just focus on doing what we love to do. And since are so enthusiastic about our new Activities, we tend to make money from it.
The multiple also depends on when you plan to retire. Retiring on 20X expenses at 30 years old is much more risky than retiring on 20 X expenses at 50 years old.
Personally, I haven’t touched a dollar of retirement principal since I left work in 2012 at the age of 34 1/2. I don’t plan to touch principal maybe forever actually.
Excellent explanation.
This is an article in and of itself!
Thank you!
Retired is when you truly are not working. Most people here are still active with a part time work or a web site activity or an active rental management role. Truly retired is all passive income with no management activities. Ideally with 20 times income to net worth. Best would be 25 to 30 times.
If you are still with a gig for health care reason, you are not retired. You are just in a better position than someone working 8 to 5 for those same benefits.
Even Sam is not retired yet (but getting there). But he is and has been financially independent for a while. He has been since he quit his W2 income for 1099’s.
The next step is to trade the 1099 for the K1. Which is what he did with the realtyshare investments.
So the question I have for Sam:
When will you reach retirement age for truly passive income. A big reason the boook sale works is the web site. Fees from personal capital is the active web site.
Assuming a sale of the web site, how much longer do you need to work or keep certain benefits from your working spouse?
Hopefully you have hit that magic number already.
FranceUSA
Agree with your description. There are the working `cause I have to, the working `cause I love it and need the money, Financially Independent but actively involved in making money (me, Sam) and the full time golf, shuffle board, perpetual vacationing retirees living off of dividends, pensions and annuities.
If your spouse works cause ya need the healthcare, you are not financially independent or retired. If you have a pension and little cash, you are not financially independent `cause you are still living paycheck to paycheck.
As far as the 20x, 25x, 30x my parents retired on MUCH less and traveled. They had a small pension (<1K a month) and under 500K of investments and NO DEBT. Two cars, villa on a golf course, eat out on occasion, some foreign travel lots of visits to kids and grand kids.
To Sam's 100K comment. He's going to have the range of comments from that's not enough to you can live like a king. The more comments he gets and more provocative the statement, the more hits! We live in NC and, we have no debt, spend half of that and travel domestically and live well.
Agree. Check out the third paragraph 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.”
Early retirement was fun for about a year, but I decided to get back to work and try new things. Being a stay at home dad is at least a 50 hour a week job.
Not sure what your question is asking. Are you asking when I should have my wife go back to work to get company healthcare for us? She hasn’t worked a day job since 2015. We pay for health insurance directly.
See: https://www.financialsamurai.com/achieving-the-two-spouse-early-retirement-household/
Or, are you saying that my current passive income of about $200,000 a year is not enough for me, and I have to eventually find a day job again once I sell this site?
Although I agree with you that $200,000 a year is not a large amount to provide for a family in SF, we are pretty frugal people and that’s the amount that we’ve determined is enough to not go back to work. Hopefully I can continue to build on this passive income stream as well.
See: https://www.financialsamurai.com/financial-samurai-passive-income-update-2018/
How about you? How old are you and what age do you plan to retire with what target liquid net worth? What do you plan to do when you retire?
It seems that using a conservative 3% draw for safety since you are younger and your desire for $300k a year, a $9M liquid net worth would be your goal.
Moving to Hawaii is not going to reduce that target. My bet is you will achieve over $10M sooner than you think.
I am concerned about net worth. First I was worried about getting our 1st $1M. Then the 2nd one was there quicker…. (I hope the Government does not cap Qualified accounts to $3M). That is still working for up to 5 years to we can move from a 4% draw to a 3% draw.
As your next diversification step I think you do need a self directed Roth with a 50/50 partnership for which you do not get a salary. You are so close to tech start ups you should be able to do it much better than me.
Hawaii is much cheaper than San Francisco in housing (30% cheaper), education (50% cheaper), and property taxes (65% cheaper). Pretty pumped. Once you have housing done, life is pretty inexpensive in general if you have your healthcare.
Hopefully I can get a higher than 3% return on my investments, but I won’t count on it.
You should retire from a 9-5, but don’t ever retire from making money excitement. I think of business, life, and making money as a game and I like winning.
That’s one impressive list of accomplishments you’ve done since 2012! I think the way you’ve described the age brackets with career and retiring motivating factors makes a lot of sense. I’m glad I grinded through the workforce in my 20s and most of my 30s when I had the energy and drive. It also allowed me to save well and get my 401k account a solid foundation from which to grow. I count my blessings every day that I was able to leave the mainstream workforce when I did to focus on self employment and now being a sahm.
I’m aiming for 40, but I don’t think I’ll be really retired. There will always be something going on, and some cool new things to get involved in. I also quite seriously fancy an attempt on all the countries in the world, and that involves some serious planning and work.
How did you arrive at a minimum of 20X average annual expenses to retire comfortably?
Sam, I just read an article on Yahoo Finance the other day about Jack Welch formerly CEO of GE saying that we should banish the word retirement from our vocabularies. :-) Just thought that’d be a great jumping off point for one of your future posts and fairly relevant to this article.
I am currently not in the mode of thinking about retirement with the coming birth of my son. I do think that late 40’s feels about right for retirement. It’s more or less based on the age my son will be more than about my financial situation. I would love to stay home with my wife and raise my son as a retired person. It’s because I want to give my son a solidly middle-class upbringing that I am committed to working for a steady paycheck, a growing 401k and other investments, and extremely importantly healthcare coverage. I do believe that once I near the cusp of retirement I would prefer to retire earlier with less of a solid financial position than to grind out due largely to ability to enjoy life with my wife and family. Obviously the ideal is get a side business going and have both.
Awesome to hear about your son! I wish you and your partner best of luck in delivery and health.
One of the things that I guessed I would hate is having to go to work if I had a baby. My guess was that my heart would feel so torn and so guilty to leave him. Hence, the decision was to build up enough income to be a stay at home dad with my wife.
I felt a tremendous amount of guilt every time I left the house for more than two hours during the first six months of life. But as he grew older and I could see that his mom was sleeping a little bit better and more confident, that guilt slowly faded. But I still love to see him and spend at least four hours with him every single day. And now that he just turned one, I’m excited to take him to the zoo and play :-)
This is a post worth reading: https://www.financialsamurai.com/career-family-give-5-years-life/
Is this a trick question! :) I think it’s the earliest one can afford and be comfortable/still do everything they want with their life.
I love the line “your life morphs after retirement” and I’ve heard from other bloggers that they were busier after retirement but it didn’t feel like a bad thing because it was everything that they wanted to do. I love it!
I put 36-40 as the ideal time to retire. I can’t say why…but I think that’s when my husband will retire which means….the correct answer is whenever you can afford to and be comfortable! Hehe.
“You Might Find Yourself Busier Than Ever In Retirement
The beauty of leaving the workforce is that you get to focus all your energy doing what you truly want to do. ”
Absolutely True! I stopped working, and while I was busy when I worked, I am busier now because I am doing what I want to do, not what some corporate objective needed me to do.
The important thing is to have things you want to do when retired. Goals and hobbies you are happy about are essential. (There is nothing more depressing than a retired person who doen’t know what to do with themselves.)
I’m in my early 30’s and after a short time away from work, I want to go back. I’m not looking for “ordinary”. That means working for a world-class employer with a position that is multi-faceted and brings a lot of challenges to the table. Going to school, working, and getting certified took a ton of my time in my 20’s. I owe it to myself now, and to my future, to work to my max before I close the book entirely. I completely relate to this post and finding the right time to call it quits for good.
I love your blog. On this one I have a couple of questions as I am trying to plan for early retirement (although not as early as you suggest is optimal). When you say 20x your annual expenditures are you counting taxes or just spending pattern? My pre-tax need is much different than my post tax need. Although I recognize that taxes will be different once I’m retired, selling stocks to use for cash will bring with it capital gains taxes. That brings me to my next question – 20 times your liquid assets – does that include the savings in your retirement plans (401ks/IRA/Roth)? I don’t know whether to really consider those liquid although it is cash and stocks because you can’t access it until a certain age without penalty. I’m just trying to figure out whether you would recommend that I amass 20x my spending in non-retirement liquid assets or whether I can count those assets. The answer would make a big difference in timing for me. I would love to retire early but I have no plans to decrease my spending. I would love to travel and attend concerts and go wine tasting (and buying) – all things that will continue to drain the pocketbook. Not all of us have great passive income streams like you do. What would you suggest?
Good questions, which I will clarify in the post. I’m talking about 20 times the money you actually spend after taxes. But this is the minimum, the absolute minimum where I feel that people can take the leap of faith. And that amount does not include pretax retirement accounts. Only accounts which you can readily access without penalty.
But if you’re 50 years old, and you only have 9 1/2 years until you can access your 401(k) penalty free, you have to just calculate the gap just in case.
I am in my early 30s with essentially $2M saved, which is roughly equivalent to 20X my annual expenses. Additionally, my wife plans on working for quite some time and she makes a modest $65K annually. Despite having 20X in savings and her income I could never think about retiring at this point. We are about to be parents for the first time and have no idea what our expenses will look like years from now. We don’t own a home and have no idea what large expenses are associated with having a child.I guess I still don’t know what type of life I want. I could presumably kick it in now and live a very modest lifestyle, but I can’t imagine an environment where that would happen. My guess… I will continue to grind it out for another decadeish and reevaluate.
Cool. I believe your life will change once you become a parent and once you turn 40. You start trying to decide between making more money or spending more time with your kid. The more money you have, the less valuable it is to spend time making money.
At the same time, you want to see what you can do and make the most of your education and potential. That’s why am 10 years, you might be singing a different tune as you’ll Be in the window of 41 to 45 years old.
Our expense before child and after child increase to become 2X, then 3X. It ballooned from $4K/month, to $8K, then $12K per month, and we only have 1 child and he goes to public schools!
The main increases are as follows: $20K per year from tutoring, $20K/yr travel: before you have child you can travel in low seasons and paid 50% less, after child you travel in high seasons and pay 2-3x more. Finally it’s the food/restaurants: before child you can cook easily and even restaurant meals left-overs become the next meal, but not after you have a teenager who eats like a horse. Also you need 2 cars now even with a stay home wife, etc… Of course you can drop the tutoring, music lessons, etc.. but that’s what every other kids do in bay area.
These expenses will go away once our kid graduated from college, but the 2x, 3x expense increase is real.
Eric,
You can spend as much as you want on your kids. You are choosing to tutor rather than do it yourself. You are choosing to travel to expensive places. You are choosing to eat out.
Both my boys were district and state level musicians, one on alto sax which is arguably the hardest instrument to get into these bands. Private lessons were $2k a year. Travel soccer was $1K a year.
Who cares what the Jones are doing? You shouldn’t if you want to FIRE.
Be weird be different be financially free. I can assure you, the Jones across the street are not, that is, unless you live across the street from me!
Sam,
How would you adjust your multiplier for passive income?
-Mike
I keep it the same. Because the passive income you generate is largely from your after-tax investment accounts that you have accumulated.
And the most wonderful thing is that once you generate a large enough not, you can just live off the passive income and never have to touch principal.
51-55 here. I guess I’m the sicko that enjoys my job. I want to leave by 55 only to allow me time to tax optimize my tax advantaged cash flows.
“Work sucks I know”
-Blink 182
I think you are spot on with your age ranges. I think “retiring” how you did it is the way to go. You can retire from the “job” but still focus on what you enjoy doing. It feels good to earn and be a part of something.
I think that working brings people an important aspect of life. Those who ONLY focus on earning I do think are making a mistake. There is oh so much more to this wonderful world then money.
I hope to never retire, and be fortunate enough to work on projects I care about my whole life.
Sam,
Perfect timing with this post. I been thinking and planning our retirement since age 30. I wiill be 54 this year. This year I attended funerals of 3 co-workers! They were aged 46, 65 and 50.
Totally agree with you that retiring 41-45 is the best age. I wanted to retire at age 43 but did not know how to generate passive income or even factor in healthcare cost back then. I just didn’t think about medical coverage when I was young and healthy. Medical for a couple is 20-22K. That is what my 2 uncles will pay this year.
We started making 19K each in the late 80’s as computer programmers. With small 1.5-3% raises and few promotions I broke 100K in our late 30’s. It took us many years to save money. It was when we learned about future layoffs that motivated us to generate passive income. Thank goodness that a good family friend introduced us to NY muni bonds in 2010 and we reached base line FI at age 49/50 in 2014 by using our life savings to buy individual muni bonds.
We will be 53/54 this year and our passive income from tax free munis and wife’s pension covers 2x expenses. I just have 17 more months to double my pension to 70K and to get 8K (not taxable) for healthcare at age 55. These are my golden handcuffs. At age 55 when I collect my pension, our passive incomes will cover 2.6x expenses. When we collect our 401K and social security at age 62, our after taxed (Blockbuster FI) passive income should cover 3.8x expenses.
Why do we need/want so much money? During retirement, our expenses will rise. We want to travel more and renting a nice place in Hawaii will cost a min of 5K a month. I want enough money so that I will never worry about inflation. I never want to work again. I have no writing skills and I don’t want to start my own website nor a side hustle.
I know I can walk out now and be financially OK but since I am just 17 months away from 55 why walk away from all that free money? We got investable assets including 401Ks 58x expenses after taxes. Since healthcare is very important to me, I want to reach 55 to get 8K for company retiree medical. If I leave before 55 then I get nothing for medical. I work 5-10 hours a week from home and I keep a low profile at work. Sometimes it can be stressful being on my own when there are problems. I have been in the same company for 31 years and I hate my job but the money is good. My boss likes me and gave me a better raise and bonus this year. He and mgmt are afraid of me leaving since I am the only one that supports the IT systems. They want me to stay another 5-8 years. No way!
Adam
Waiting another 17 more months is a no-brainer to double your pension. After that, I would definitely leave since you have been planning for retirement since age 30!
I vote for 41-45. I think most people start earning competitive wages in their late 20s or early 30s, and if they save and invest aggressively for a decade or so, with some luck they should be able to retire or become financial independent. Healthcare is a big question mark though. So is the topic of how many times average expenses you need to save. You say 20, but many say 30 or even 40 times. If you were retiring very very early (say 30-35) you could say perhaps 50 as you don’t even know how many kids you will have, how your health will turn out, etc. As for me, I am 40. My expenses in NYC are about 200-250k a year (without private school for my kids!). Based on your criteria I could ‘retire’ but that is scary for me. Of course, I wouldn’t retire in NYC, I would move to somewhere I can lower my costs and have a good quality of life with good weather and schools. Even then, I can’t think of many places you can live an upper middle class lifestyle for less than 150k including housing costs, or 100k if your housing is fully paid and RE taxes are minimal.
Yes, 20 times annual expenses is the minimum. I hope readers see the word “minimum.”
I personally think using 20 times your annual gross income is more appropriate.
I think about your step in for a bit. Are you really afraid to leave work having a net worth of $5 million? Run the numbers and see how long you will last given your net worth can easily generate hundred $50,000 a year in risk-free income.
I can understand the 20 times annual gross for a conservative estimate for the average American family.
Most of the FIRE community are, humorously, “below” average. That is, they spend much less than they make to have high enough savings rates to retire early.
My personal example, before leaving mega corp and top floor corner office (lots of buildings and lots of corners on each building) but still director-ish level. Salary plus bonus was 300K, adding another 100K in stock and passive income of at the time over 200K. If we simply consider gross income at a 20x multiple, 600Kx20, $12M. OK, so lets back off on the passive `cause that’s what I’ll live off of and call it $400K at 20x is still $8M.
We have no real debt (well investment properties only at 200K), no car payments, no house payments, no boat payments, no credit card payments, no student loans… and we live well on $50K in a non coastal city (NC). Having 20x 50K or $1M, I agree is risky. A happy medium based on expenses not gross income seems more realistic. Someone who spends more than their gross income, will have the opposite problem. This is why, I prefer expense based calculations.
You are right to consider age in the discussion, the older ya are the less you need. Most multiples don’t consider Social Security kicking in at 60 something. Consider that if you’re 60 and need 50K and know that you will receive 30K at 67 from your previous contributions to SS, do you really need to generate 50K for 30+ years? It’s a charged subject about SS being there or not. In this case is $1M too much? If you are 60, hate your job but think that you’ll need $1M and you’re only at $700K, is it worth it? 7 years pulling out 50K or less then down to 20K withdrawal? Take it early and not pull as much out of savings early but have more to replace later?
Perhaps the analogous question is, why not treat SS like a pension you are eligible for at 62 and the longer you hold out the larger it becomes? What is your rule for pensions? Multiply and use as savings, reduce from the needed income, ignore, other?
fireCalc shows us at fatFIRE possibly moFIRE (rentals other passive income), so, I’m not rationalizing my case for getting out, just that for super savers, 20x gross seems kinda fat.
Yes I don’t think gross income multiples make sense in all situations. Our average income is probably $1M in the past few years, which means we should have $20M saved up? Given my current expenses, taxes, I can save 250k a year. At that rate it would take me a long time to save $20M. And $20M compared to 250k or so in expenses is too much, and even more stark if our expenses are lowered to 150k or even 100k. Personally, like many people on here, I’d rather not rely on any income outside of passive income in retirement. I have no desire to do any other sort of work in my retirement. The good news is I like my work currently and it’s low stress with great hours and plenty of family time. I think $8M-$10M would be very comfortable at 45 with a nice cushion, anything more I’m not sure what purpose that money would survive.
One reason to get to $20M is bc you can pass on $22M tax free now as a couple to your lucky kids.
I wish there was a similar age breakdown for women because the timeline is certainly different for women with shorter biological clock + the gap in time off caring for children and potential loss of income. Would your wife be interested in writing a similar timeline break down but for women instead?
Probably not. She’s too busy being a mother :-)
We have been on the same page since we were college students. She left work by the age of 35 just like I did.
I retired/career breaked at 45 and couldn’t be happier. It seems to be about the right age. You are right that it is possible that in another couple of years once the kids are a bit older i might want to go back to the work place and or acquire some extra skills and education.
I went quite a bit younger than most people (31-35).
If we assume the limiting factor is money, and you have the money, then I think that’s a good time.
You have more drive and energy when you’re younger. That’s energy that can be turned to things far more beneficial to humanity than working for someone else’s company. With financial freedom handled, you could help the homeless, teach/mentor children, or start a business with more on the bottom line than simply dollars.
I didn’t pick the younger ages because I think you need some baseline wisdom to do those things. That much time and force directed toward a problem has to be handled in the right way. Those problems need life experience as opposed to a job that generally just requires showing up and completing simple duties. They’re much more complex and no one will stop you when you’re doing everything wrong.
Cool. What are some of the things you have done since retiring?
Sam,
How do you count pensions into the retirement equation or do you recommend 20X regardless of how much pension you earned.
Check this post out: https://www.financialsamurai.com/how-do-i-calculate-the-value-of-my-pension/
In fact, search any topic in my search box and I think you’ll find an answer.
Or use Google and then type “Financial Samurai “after the search term.
Value of a pension is amazing. Don’t know underestimate it!
Great post. It’s really impressive to see how many people thinks that retired people don’t do anything. Most of the people I know are busier after retirement than before. You are a great example of that! It’s just a way of spending time in the best possible way.
Personally, I think that between 45 and 50 is the best age to retire for most people. I would like to retire a bit earlier (around 40), but probably won’t be able too (time will tell).
The variables you mentioned in your post are all so important. Think you probably covered them all. As most commenters have stated, retirement is personal and different for everyone.
As an older reader who has 3 adult children, let me touch on their personal stories. Child #1 graduated at 22, from Yale. Cost us $200,000. No graduate school,very bright, and upon graduation was earning 6 figures at an investment bank. Now is early 30s and earning a huge income, has millions, owns a vacation home, loves his job, not married, and not even nearing “burnout”. Don’t see him retiring “early”.
Child #2, attended college, no graduate school (his education was less, about $150,000 plus private school for 8 years, at $100,000). Late 20s,works in entertainment field, loves what he does, would WORK FOR FREE, and I don’t think he will ever voluntarily retire. Not married, don’t think he ever will. His job is his life.
Child #3, the expensive one. Graduated from Ivy College, ($240,000), worked in commercial banking for 2 years, hated every minute, decided he wanted to be a physician, was able to do a complete career switch in 2 years, just accepted to a great medical school. He is now mid-20s. Will be 30 when he graduates, and probably 34ish when done with a residency (depending on what field he chooses). No way he is retiring anytime before he hits 60. My husband wants to pay for this, so now, at the age of 61, he is going to spend $80,000 a year for next 4 years to pay for school/living costs.
Luckily we can afford to cash flow the tuition, will just be a lot less going into savings, and my husband is planning on retiring in 2 years. He has a full pension waiting him at 63, so he wants to stay until then. Plus he actually enjoys his work.
So yeah, depending on how many years of education you put into a career, salary, life choices, satisfaction, health, etc. retirement looks different for each person. I also think there is something about not “working” that makes you seem irrelevant to a lot of society.
As you age, your perspective changes, wait.
Thanks for sharing. And congratulations for the kids making it out.
I was actually going to give your recommendation at the end of your comment to your kids! When they hit 40, I’d love to know how their view of work has changed at all.
In our 20s and early 30s, it’s full of excitement. And then after a while, the desire for money wanes and the desire for freedom rises. I don’t know many people who continue to be interested in what they Do after 20 years.
Would love to hear your kid’s thoughts directly.
Well I can say my husband still enjoys medicine after 30 years- didn’t begin his real doctor life until she 31. Now at almost 61 still leaves at 6:00 am and does some night and weekends every month. He has outside interests but still likes what he’s doing. But yeah , he may be unusual.
That’s great! To ophthalmologist I’ve seen are in their 70s. And so is our pediatrician.
How about you? What do you do or how has your career changed over the years?
I have a law degree but only worked for a few years in the field until my first child came along. Had 3 kids over 8 years and with s husband who was never around I stayed home. Over the years I have taught religious school and done a lot of volunteering. But I regret not staying in work force- by the time I would have felt comfortable leaving my youngest I was already 41- so just remained “mom”.
Gotcha. Do you regret more not staying in the work force or regret getting a law degree?
I have friends who tell me they regret getting an MBA because they ended up being a stay at home parent three years later etc.
After getting my MBA in 2006, I only leveraged it in the workplace until 2012, so that was somewhat of a regret. I don’t think I needed the degree to get paid and promoted. That said, I feel proud to have gotten a graduate degree, and it helped me think about how to best run a business.
Regret both; getting the law degree and leaving the work force.
I don’t think there is some broadly applicable “ideal” retirement age. It depends on your personality and how much you enjoy the game.
I’m an old soul. If money were not the limiting factor, I would have happily left all forms of gainful employment behind back when I hit 30. For me, that was the age when the rewards from working hard started diminishing. Instead, getting ahead began to require ever increasing amounts of luck (right place, right time), politics (firmly apply lips to boss’s butt), and self-destructive sacrifice (pack it all up and start over in a new city — again….).
On the other hand, we recently got some new department heads. By my guess, they are in their late 50s and are loving the game. The stuff I can’t stand dealing with, they revel in. They’ll probably never retire – maybe only when their wives finally force them to move some place warmer.
This is my limited view from corporate life. I would expect people working in nonprofits, or who are self employed, or whatever, to have totally different outlooks on the ideal retirement age.
How does a pension figure into the 20x annual expenses rule-of-thumb? Let’s say my annual expenses are $100k, but I only have $1M saved up. However, let’s say if I retire I could immediately start drawing a pension of $40k/year. Using a 4% withdrawal rule, it would seem a $40k pension is the equivalent of another $1M, or maybe better since it’s not subject to market vagaries. My numbers are similar to the above example, and I’m wondering if I should take the plunge. I’m 55 going on 56 so I’ve already missed my chance to retire at the ideal age!
One can retire 3 to 10 years after becoming a millionaire. That’s the approximate amount of time that it takes to become a multi-millionaire. That’s the basic time horizon that’s in my head.
The questions I have about this post relate to definitions. “Retire” traditionally has meant stop working or pursuing an income. In the context of this post, retire seems to mean leaving a w-2 or guaranteed income. Is that fair?
I still work 40+ hours a week, but I left a w-2 job for my own business in 2007. Maybe i’ve been “retired” for over 10 years and didn’t know it. :)
Don’t think you are retired.
Wikipedia
“Retirement is the withdrawal from one’s position or occupation or from one’s active working life.[1] A person may also semi-retire by reducing work hours.”
Sam, I love this site. My goal, someday is to write this well.
Okay, that aside, I’m targetting 45 as an outside date to make a decision, with three options:
1. Leave before that to start a business
2. Take on a position as a President of a Company
3. FI and pivot at that date
Regardless, after 45, I don’t plan to ever report to anyone within the Company I’m in.
I’m six years away and fingers are crossed that things keep working out and we hit our numbers.
Though, like you say, given my background, and my wife, we actually should be able to hit our spending number quite easily, if needed, so there isn’t much that should hold us back from that target date.
Regardless, I will never stop working in my life, I will simply choose, when, what, and how I work.
It would great to hear more about how people achieve 20x expenses at such a young age especially with children. My wife and I have an annual income ~$300K+ in our early 30’s with networth of <$1M. We save aggressively but live in a high cost area.
The idea of an ideal retirement age is nice but if it is not achievable without significant career success/extreme frugal living is it really achievable?
I just submitted my retirement notice, age 49. Could have retired many years ago based on 25x expenses, etc. For example, at age 41 net worth was around $5mm. 8 years later it’s over $20mm due to $15mm in gross earnings over that timeframe. Sure glad I didn’t. Now it feels like ‘enough is enough’. Less job satisfaction is definitely another reason. Let’s see how I do in the next chapter…
What stopped you from shooting for $50 million?
Your blog convinced me there is no incremental happiness to be gained… in a $800k/year vs $2mm/year withdrawal rate. Unless you were just being facetious
Gotcha. I def wasn’t being facetious. I have a close friend worth $350 million, and he wants to grind it out to see if he can get to $1 billion. I keep telling him to stop and smell the roses more, but he refuses.
El – thanks for sharing. Genuine question: I can see how 5mm vs 20mm is a huge difference and worth 8 more years, but was there any earlier point that you think might have been just as good or possibly better? For example, would 45 with $12.5 million of NW have been as good as 49 with $20 million? I ask cause I’m in a similar situation. Thanks
It really had to due with the professional opportunity. Big job, $2mm+ /year for last four years, living in a great global city, etc. Too good to walk away from. Now for personal reasons elderly parents, kids in college, etc it feels like the right time.
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).
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.
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.
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.
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
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.
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…
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.
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.
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!
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:-)
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.
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.
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.
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.
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 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
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 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.
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