Investment Returns Versus Active Income: When Work No Longer Matters

At some stage in your investing journey, you may experience a situation where your investment returns surpass your active income (non-investment income, job income). The first time this happens, you may feel excited as you imagine the possibilities. But you likely won't quit your job just in case it was a fluke.

However, after several years of your investment returns surpassing your active income, you will develop a lot more courage to do something new. After all, the S&P 500 shows a positive return ~70% of the years, and the real estate market returns a positive amount an even higher percentage of the time.

Perhaps you might finally ask for that well-deserved sabbatical without fear of your year-end bonus getting slashed. Or maybe you'll have the guts to start severance negotiation talks so you can pursue a new career.

The power of compound annual returns is why you should save aggressively and invest for the long term. It is also why you need to think twice about splurging on big-ticket items like a car you don't really need.

That $40,000 car you bought 10 years ago would be worth around $150,000 today if it was invested in the S&P 500.

Differentiate Between Investment Returns And Investment Income

Since I began working in finance in 1999, I've always had my mind set on generating investment income to eventually cover my desired living expenses. Getting into work at 5:30 am and leaving after 7:00 pm every day in a high-pressured environment for decades was not sustainable.

When I left in 2012, I had about $80,000 a year in total investment income of a total net worth of about $3 million. Back then, I dared not count on investment returns to pay for my lifestyle. We had just gone through a gut-wrenching recession and there was a chance we could go right back.

Further, counting on investment returns to fund expenses would require withdrawing principal, which I didn't want to do. A decent portion of my investments was in growth stocks that produced no dividends. I was also still in my mid-30s and believed there was further upside to risk assets.

Therefore, I wrote the post, The Ideal Withdrawal Rate In Retirement Touches No Principal. The post helped motivate me to live frugally. I wanted all of my investments to continue compounding during an emerging bull market.

I've followed this strategy since leaving work in 2012. As a result, my original retirement nest egg has grown and so has my investment income. Now it might be time to change strategies.

Time To Live Off Investment Principal?

After a 12-year bull run, the easy money has already been made. Valuations are expensive, the Fed plans to taper, and we haven't had a 10% correction in a while, until now!

Even Vanguard is estimating only a 4.02% annual return for U.S. stocks over the next 10 years. The estimate seems low, but it could certainly happen, especially given 2022 was a bear market that showed a 19.6% decline.

Therefore, it's OK to sell stocks on occasion if you've made enough to buy what you want. Otherwise, you'll never enjoy your stock investments because stocks provide zero utility.

If a stock market crash does happen, you'll be pleased to have utilized your investment returns for things and experiences. Dying with too much money would be such a shame.

Instead of just arbitrarily selling off investments to fund your retirement lifestyle, you could simply raise your safe withdrawal rate. Spent more money so you can enjoy your returns instead of lose it in an inevitable correction.

Case Study Of Living Off Investment Returns

Let's say you believe in the Financial Samurai Safe Withdrawal Rate Formula = 10-year bond yield X 80%. As a retiree, your average withdrawal rate over the past five years was 1.5% to ensure that you didn't draw down any principal. With a $3 million portfolio, you were living off $45,000 a year in gross income.

However, during these five years, your investments appreciated from $3 million to $5 million. They did so due to a 10.8% compound annual return. If you continue to withdraw at 1.5%, you will be able to live off $75,000 a year in gross income.

$75,000 is more than enough income to live a comfortable retirement lifestyle. You don't need that much money. But you're older now and feel like you might die with too much.

Given you were confident enough to retire with $3 million, the past five years feel like you've won five consecutive lotteries.

Not only have you been able to do whatever you've wanted for the last five years, but you're also $2 million richer! With five years less life to cover for, your desire to spend more has increased.

The YOLO economy is calling your name.

Cost To Fund New Initiatives

First, you want to use your lottery winnings to superfund four 529 plans to the amount of $300,000. The idea of using a 529 plan for generational wealth transfer purposes sounds like a no-brainer.

Next, you want to rent the Symphony Of The Seas Ultimate Family Suite for an around-the-world cruise. The cost? $20,000 a week for 10 weeks!

Although $200,000 is a lot of money, the suite is 1,346 square feet and large enough to comfortably accommodate your four grandkids. It would be the time of all your lives!

The total cost to fund these two items is $500,000, for a one-time withdrawal rate of 10% ($500K / $5 Million). If you consider taxes, then perhaps you really need to withdraw closer to $700,000. But let's just use $500,000 for simplicity's sake.

After the adventure is over, you're now left with $4.5 million, or still $1.5 million more than you need.

You decide after spending so much money so quickly, you should take a break and go back to normal. Therefore, you adopt the FS safe withdrawal rate formula again and withdraw at 1.1% since the 10-year bond yield has declined.

With $4.5 million left, you get to live off $49,500, which is still $4,500 a year more than you were living off five years ago. All hail the benefits of a glorious bull market!

At What Point Does Work No Longer Matter Due To Investment Returns?

As I transition back to retirement by 2024, when my youngest attends school full-time, I've been trying to justify my decision to no longer work so much. As a father of two young children, not working feels like a sin.

However, my investment returns have been greater than my active income returns for the majority of years since I retired in 2012. In addition, the active income I do make doesn't do much to stem any losses.

For example, let's say I lose 10% on a $5 million portfolio. That's a $500,000 loss. Even if I worked really hard for several months to make $50,000 online, I'd still be down $450,000. Losing $450,000 feels the same as losing $500,000. Terrible. Therefore, spending precious time to make $50,000 would make the situation even worse.

On the flip side, let's say I return 20% on a $5 million portfolio in one year. That's a $1,000,000 gain. Even if I take on some consulting projects to make $100,000, a $1,100,000 gain doesn't change our lifestyles one bit. We comfortably live on much less each year.

Therefore, there has to be some sort of crossover point where spending any amount of time making active income becomes a waste of time. The only way you would spend time making active income is if you truly loved your work. You don't care how little you get paid because you'd do it for free.

If you're a regular reader of Financial Samurai, I think you can tell I love to write and share my thoughts. Writing posts like, If You Want To Naturally Be Nicer, Get Richer, isn't going to make me money. But human behavior is an interesting topic to me so I write about it anyway.

The Investment Returns Crossover Point

There are two conditions an investor must achieve before they can drop active income due to investment returns. Again, we are differentiating between investment returns and investment income. Once you generate enough investment income to cover your desired lifestyle, you can leave immediately.

Condition #1: At Least Three Years Of Outperformance

If your investment returns are greater than your active income for at least three years in a row or four years out of the last five years, I think you have the green light to take things down a notch.

Three years helps minimize the chances that your investment returns are not a fluke. And given bear markets (-20% sell-offs) tend to happen every 3.5-4 years, I use the benchmark of four years out of five years to account for a couple of bad years.

If your investment returns are greater than your active income for five years in a row or five out of the last seven years, you should be able to completely retire if you want to.

Once you get to an investment portfolio equal to about $250,000, that is when you'll start feeling financially free. From there, you can build a million dollar portfolio and beyond so that your investment returns really start becoming significant.

Condition #2: Investments Equal To At Least 10X Your Annual Active Income

In order for your investment returns to generate more than your active income for three years or longer, you likely need a sizable investment portfolio that is 10X or greater than your annual active income. For example, if you make $100,000 a year, you would likely need at least a $1 million portfolio for a chance to generate $101,000+.

To generate $101,000 in investment returns on a $1 million portfolio would require a 10.1% return. If your entire portfolio is in the S&P 500 and the S&P 500 returns its historical average of 10.2%, then you've got a decent chance of outperforming your active income.

However, if Vanguard's lower return assumptions for stocks and bonds come true, then you will likely need an investment portfolio at least 20X your annual income until you no longer have to work. 20X your annual income is a key metric because it is my recommended net worth target to shoot for before retiring.

Using a multiple of income is better because it keeps you motivated to save and invest more as you make more money. We all tend to make more the longer we work. Further, using a multiple of income is preferable to using a multiple of expenses because it also keeps you honest. You can't take a shortcut to financial freedom by slashing your expenses.

Once these two conditions are met, you should be able to reduce your work hours or eliminate them altogether. Further, these two conditions are scalable, no matter how much money you have.

How Long Will It Take Investment Returns To Surpass Active Income?

The length of time it will take your investment returns to surpass your active income will depend on your saving rate and your rate of return. Obviously, the higher your saving rate and rate of return, the greater your chance of succeeding.

Given I believe your capital needs to reach about 10X your annual gross income in order for your investment returns to regularly surpass your active income, let's do some math.

Example #1: 20% Saving Rate

If you start with nothing and save 20% of your annual gross income each year, in 18 years at a 10% compound annual return, you will have accumulated 10X your annual income. In the 19th year, if you continue to get a 10% return, your investment return will have surpassed your static annual income.

If your rate of return is only 5%, then you will accumulate 10X your annual income in 25 years. If a 5% rate of return continues, then unfortunately, you will have to save and work for 36 years to finally see your investment returns surpass your annual income.

Example #2: 50% Saving Rate

If you start with nothing and save 50% of your annual gross income each year, in 11 years at a 10% compound annual return, you will have accumulated a little more than 10X your annual income. In the 12th year, if you continue to get a 10% return, your investment return will surpass your static annual income.

If your rate of return is only 5%, then you will accumulate 10X your annual income in 14 years. If a 5% rate of return continues, then you will have to save and work for 22 years to finally see your investment returns surpass your annual income.

The Likely Time Range

Saving 20% of your annual gross income each year really is the minimum amount I recommend everyone shoot for. Ideally, you will eventually make enough money to get to a 50% saving rate.

With a 20% – 50% saving rate and a 5% – 10% annual return assumption, it will likely take between 11 – 25 years until your investment returns steadily surpass your active income. Of course, if your income declines towards the end, then you can achieve this milestone sooner as well.

For me, it took about 15 years to regularly earn a greater return from my investments than my last year of working.

Thankfully, we can all buy Treasury bonds now and earn over a 4.4% risk-free return nowadays. That's pretty enticing, especially if you are withdrawing in retirement at less than 4%.

Living Off Investment Income May Be Harder In Normal Times

Generating enough investment income to cover your desired living expenses may be harder than generating high enough investment returns to cover your living expenses.

For one thing, you need to accumulate a lot more capital given interest rates are lower. You've also got to be disciplined enough to not touch principal. Finally, you may have to shun many growth stocks and equity real estate investments that produce no income, but may provide a greater return.

In contrast, if there is a raging bull market, then living off investment returns may be much easier. You won't need as much capital to fund your lifestyle if your $1 million portfolio is returning 25% a year. But to generate $250,000 a year in investment income will require a $12.5 million portfolio with a 2% yield.

The reality is investment income and investment returns are intricately tied together. The logical thing many people do who no longer want to work is change their investment composition towards less risky, more stable, income-producing investments once they've reached their ideal number for retirement.

For example, ~50% of my net worth is in real estate versus ~35% in stocks. I want less volatility and more passive income. I've also got another 5% or so in individual AA-rated municipal bonds. The rest of my net worth is in private equity and private real estate investments.

When I was in my 20s and 30s, stocks accounted for 50% – 90% of my net worth. Losing 30% of my net worth in six months was OK. I could easily make up for my losses with my income. Today, not so much. Time is much more precious now that I'm older.

There Is A Level Of Capital Where Nothing Matters

Let me end by sharing a warning. There is a level of capital where you may lose all motivation to do anything.

In 2012, I was starting to get apathetic about making more money, which is one of the reasons why I left banking. At the time, my net worth equaled about 10X annual income and 40X annual expenses.

After such a long and relentless bull market, my apathy has returned. Yes, there were two massive spikes of motivation after each of our kids were born. But it has settled down now. If our investment returns were poor since 2012, I would be feeling the opposite.

Once your net worth is over 20X your annual income or 50X your annual expenses, apathy sets in. Once your net worth gets to over 40X your annual income or 100X your annual expenses, that's when you start completely checking out. You may start constantly thinking to yourself, “F this BS!”

Therefore, if you want to stay motivated, you might ironically have to keep inflating your lifestyle! It's either that or give more money away. You can always do both.

If the strong returns in risk assets continue, eventually, productivity will decline. In that case, the only people left to do the work will be non-investors and new graduates.

I'd love to hear your thoughts on how you would use investment returns as a gauge for work effort. With investment returns so strong for so many years are you getting demotivated to work as well?

Generating Greater Investment Returns With Real Estate

The combination of rising rents and rising capital values is a very powerful wealth-builder over time. As a result, real estate is my favorite asset class to build wealth. Not only is real estate less volatile, there are great tax benefits as well.

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. 

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 and higher rental yields. Due to positive demographics, growth rates tend to be higher as well. If you have a lot more capital, you can build you own diversified real estate portfolio. 

I have so far invested $953,000 in real estate crowdfunding. Currently, my real estate holdings generate about $150,000 a year in passive/semi-passive income so we can live free.

Invest In Private Growth Companies

In addition, consider investing in private growth companies through a fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment.

One of the most interesting funds I'm allocating new capital toward is the Innovation Fund. The Innovation fund invests in:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. In addition, you can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments. It's almost like investment arbitrage.

Here's my hour-long conversation with Ben Miller, CEO and Founder of Fundrise about AI and investing in private growth companies. Feel free to subscribe to my podcast on Apple or Spotify.

For more personal finance content, join 60,000+ others and subscribe to my free weekly newsletter. We'll talk about investment returns, spending money wisely, and more since 2009. Let's get your investment returns to surpass your active income once and for all!

98 thoughts on “Investment Returns Versus Active Income: When Work No Longer Matters”

  1. Thank you. This information is very useful. We’re 41, 2M mostly in PE and 400k one income. It seems silly for the other parent to work and be taxed at 50+%. Fortunately this has given us time to pursue more lucrative and deferred taxed opportunities. Tax policy incentivizes quitting.

  2. Sam: I am a 52 yrs Old Man. I have $40,000 in 401K, I am way behind on retirement. What can I do. I earn $65,000 Yr and am running out of time. Please advise.

    1. Reaching retirement is a 3 legged stool:

      -Save more
      -Spend less
      -Work longer

      Unfortunately there is no magic formula here and taking on excessive amounts of risk to catch up is precarious, to say the least. Perhaps coming up with a financial plan so you have a roadmap of what you need to do to achieve your goals would be a good start.

  3. At some point in your life you come to the realization that time is short. You blink and your kids are no longer children. Not to mention your health is a precious blessing.

    While investing and transferring wealth to your future generations is an admirable goal, no amount of money can make up for the time you spend with them. There’s some balance to be struck between preparing for tomorrow and enjoying the present.

  4. Givemeadvicetoo

    One way to prevent your income from becoming irrelevant is to compound it alongside your investments. This can be done by diversifying take-home income sources as well as growth of an income source ie. business growth, real estate rental increases, stock dividend increases via splits, enhancing income tax deferral/deductions, geographic arbitrage, etc.

    My active income now, halfway thru my career, is 10 fold what it was at the start of my career. It still matters as it ups the ante towards the goal of a 25x income NW, albeit less than it once did relative to NW appreciation thru passive income/asset appreciation. My NW is currently over 100x my 6 figure starter income, but it is not yet over 25x my current 7 figure annual active income.

  5. Hi Sam
    I’ve been reading your blog for almost 5 years now and have learned so much. Thanks for everything !

    Question – Should portfolio withdrawals be included in the 20x income in a semi-retired household? My husband received a considerable sum about 14 years ago (tragic circumstances) and since then we’ve continued to work, but now want to focus on developing income doing what we love. A few years ago he quit his job to start something new and now that his income is up to a healthy amount, I am ready to leave my job and do the same.

    Neither of us want to retire in the traditional sense; we just want the freedom to make less money while perusing our interests. We live in an expensive city in Canada and withdraw about 40k annually from our portfolio. Our income, including our rental property, the portfolio withdrawal, and day jobs, is around 180-190K. Net worth is sitting around 3.6-4m including our principal residence which puts us at 20x income. Our net worth growth has also exceeded our income for the last 5 years.

    I’m taking the plunge either way, but it I’ve never gone without a paycheck! it’s quite a bizarre experience for me. We have a toddler and another on the way, and thankfully were also able to save up a year of expenses in cash, but giving up a solid paycheck with two young kids sometimes keeps me up at night. We are both mid 30’s.


    1. Hi Kevin,

      Nice to hear from you. Portfolio withdrawals shouldn’t be considered income. But portfolio income should be considered income (passive income).

      It sounds like you guys are living relatively frugally for your net worth. So I wouldn’t have any problems taking a leap of faith and doing something else you enjoy doing that doesn’t pay as much.

      Further, to be able to spend more time with your little ones before they go to school full-time is really a blessing. Hard work, but the time goes by quick. I just dropped off my 4 yo at preschool. I asked him whether he wanted to walk around the block and see some garage doors before going in and spend more time with me, and he declined. He was so excited to go to school!



  6. Sam: when you say 20x active income, I assume you mean 20x pretax wage/income too? Also a friend recently reminds me that my so-called “net assets” is still subject to ~30% tax when I sell them, so even our liquid portfolio is ~$10M, it’s really $7M because we have to pay 20% long term capital gain, plus ~10% California income tax.

    Also our $10M was merely ~$5M 3 years ago thanks to the recent monetary policy. For people who won’t retire in 10-20 years it probably doesn’t matter, but since we’re planning to retire in 1-4 years, I feel at least we need to set aside 2-3 years cash for living expense so we don’t have to sell if the market falls 40%.

  7. I’m experiencing a bit of this apathy already and I don’t have those numbers. I can’t imagine what it will be like when our investment values are high enough to really not care.

    I think it really does come down to workers getting more wise to the notion of ‘why am I killing myself for these people?’ at work. I do good work, and we’re short staffed like everyone else. My current apathy stems from the notion of, what are they going to do, fire me? Someone else will certainly want me if that happens. I can’t be bothered to care too much. I’ll just keep doing my job and investing for our future.

  8. Hi Sam, does your savings rate of 30-40% of gross income include mortgage payments since this is in essence saving/contributing to an appreciating asset? If not, how could someone save 40% of their gross income if they have a 15 yr. $750K mortgage which you’ve previously indicated is the ideal mortgage unless they make roughly $1M/yr?

  9. Sam, i really enjoy reading all of your articles. In one of your articles you mentioned that someone could retire comfortably if they had assets that equal 50x annual expenses. Are these only investable assets or could they also includes equity in their personal residence. I am 53 and my investable assets are about 40x annual expenses and my home equity is about 10x annual expenses. Thanks for all the great info.

  10. I relate to this article so much. I actually quit my job recently in my late 20s after the NW hit 20X annual income because I just couldn’t care less about it anymore. Sometimes I wish I kept the job just to have more income to buy more assets, but I also know I’d be hating life a lot more. Grass is always greener syndrome.

      1. I’m working on a website that will hopefully serve as regular income down the line (altho as I’m sure you know it takes a while before you see much traction). Also watching for new investment opps. Still getting used to not receiving a regular paycheck – it certainly is one of the more addicting things in this world.

  11. Wade Shanley

    “Once your net worth is over 20X your annual income or 50X your annual expenses, tremendous apathy begins to take over.” I’m close with my investments= 18x annual income, 45x annual expenses. I wouldn’t say tremendous apathy, but I do know that if I told most at work how much money I had they would absolutely say, ‘what the hell are you doing here dealing with this crap.” Part of my answer is mental stimulation. I like the challenge of the work and I haven’t quite found anything compelling to replace it, at least not yet. Only thing right now that would compel me to retire is the freedom to travel more, but you know Covid, not impossible but more inconvenient. But im also realisitc, there is only so much travel I can do before I’d be back home and then “what next?”. I don’t have the what next figured out so I keep working.

  12. Really love this post and very timely as I was just bringing this subject up with my wife during one of our nightly walks. Including this year we will have made more in investment returns over the last 4 of 5 years. The last 3 being the biggest.

    Current NW is about 30X expenses. Time to think about changing gears… :)

  13. I agree with the 20X income and 40X expense rule. It just feels right and let’s me sleep at night if I retired. We’re around that level right now but are still allocating 85% in risk assets. In the bad scenario, we can live off of half of what we have. Hoping for sufficient upside in the next 5-10 years that we can buy a house as nice as yours, Sam, and vacation first class all the time.

  14. I have 20 times income and 60 times expenses in investment accounts excluding equity in residences. But a huge chunk of that money is in pretax/ deferred accounts that will be taxed. Not feeling secure enough to retire quite yet as a result. Came from nothing and NW over $30M but still worried. Crazy.

    1. If you’re still worried, then you’ve just got to keep grinding, especially if your work provides meaning.

      At what level net worth do you think you’d stop worrying? How old are the kids now?

    2. Wait a sec Jeff, I slept on your post to make sure it was what I thought I read the night before…, so based on your ratio your income is 1.5M, expenses is 500k on your NW of 30M?

      Unless mine or your math is incorrect you need to take a serious look at your lifestyle and spend requirements to live very comfortably anywhere in the world. Perhaps you are supporting several families, maybe you need your 8k sq ft house in Newport Harbor and 6 cars to be happy. 1 vacation home isn’t enough, you need 3 at a 3M price tag each.

      Anyway I slice your numbers, you’re ready financially. Perhaps reevaluate yourself not your finances…

      1. Don’t disagree. Annual spending not quite $500k because NW number includes personal residences. So closer to $400k. Clearly have a nice but not crazy extravagant lifestyle. All expenses for 2 admittedly nice homes runs $100k. 2 newer German luxury cars, a horse that runs close to $30k, dining out a lot, 3-4 luxury vacations a year, helping out the kids etc. All adds up. We pretty much always fly coach, don’t own any toys like a boat, and i shop at Costco for clothes. Yes my wife does like nicer clothes. Not complaining and realize i spend way more than most but if you met me you’d never guess. Consider myself a regular guy who’s done ok. But not filthy rich. I guess if i lived in the midwest i might feel that way. But fit in with my friends and know plenty who have more.

        1. Don’t be afraid to quit while you’re ahead. I’ve known folks who have bought RVs and boats just because they felt like they were the only ones on the street who didn’t have one and wanted to fit in. There’s a lot to be said for deciding that you’ve got enough and that you want to spend time with friends and family, or working somewhere you couldn’t have otherwise.

  15. Sam, thank you for all you do, I appreciate your work and really value these posts.

    My NW is currently greater than 50x annual expenses based on an average of the last four years of expense tracking. That said, I like your advice of using income rather than expenses as a NW target.

    As a small biz owner, my income has varied over the years. This year I’ll make half of what I did last year. What I am struggling with is how to determine an appropriate income baseline with such variable income amounts:

    For example, my current NW is:
    • 16x this year’s projected income from work
    • 8x last year’s
    • 12x the average of the last 5 years
    • 9x the average of the last 13 years
    • 48x my base salary (before profits)
    • 32x what anyone else would pay me to work for them (if I’m lucky)

    My investment returns have not exceeded my income from work once in the last five years, though it’s ahead so far this year. My average income returns since 2017 have been 2x expenses.

    I plan to keep working, but start slowing down more, and just doing what I enjoy more, so the big earning years are likely behind me.

    Any advice would be appreciated.

    1. Hi MD,

      Best to make a best guesstimate for what your income will be over the next three years. Using the average of the last 5 years is good. But I would also forecast a realistic estimate income for the next 3 years too.

      How many years have you be earning income and what business are you in? Can you save and invest more given your multiples are pretty strong right now?

      It took me about 15 years to get to the regular Investment Returns Crossover Point. And I was VERY aggressive in saving and investing.


      1. Thanks Sam. I appreciate it. I’ll use my past 5-year average as a starting point and also think about my 3-year projection and factor that in. I’ve been working in tech since 98 and after 13 years of running a business my energy level is dwindling. Still, there is more I can do to save and invest, and hope to get to the crossover point too some day. Thanks again!

  16. When it comes to the 40x annual expenses rule of thumb, do you count healthcare costs post retirement? Makes a big difference because if I assume an annual cost of about 24k, that would come out to an additional $1M needed.

  17. What I find amazing and concerning, is those on here who are well off are concerned about healthcare costs. What does that say for the average Joe’s and Jane’s out there?

      1. I believe Scott is referencing cost in general, regardless of subsidized healthcare. An individual can “afford” a subsidized healthcare plan (or various Medicare plan(s)) and still not be able to afford their copays, coinsurance, deductibles and/or out-of-pocket maximums. In those events, there is sometimes charity care coverage at an institutional level depending on the individual’s/family’s finances. Otherwise, inability to pay will result in enrollment payment plans or being sent to collections.

  18. As someone who is still a bit away from my FIRE goals, I definitely am looking forward to the day of “apathy” where I get to 40X my annual income.

    At that point, I feel like I wouldn’t be “apathetic” per se, but I’d probably attack new hobbies (whether they make money or not).

  19. Hi Sam – I’ve been a long time reader but this is my first time posting. Very interesting article. I’m wondering what you think about our situation. My wife and I are 41 and we’re striving to retire by 45 (though I’ll probably work longer because I really enjoy my job, at least I do now). Our current net worth is only 7x income but 30x expenses (2.1M, 300K p.a., 70K p.a.). We have no debt, no kids and have good incomes so our expenses are low compared to income.

    1. Hi Justin, I would shoot for at least 10X income if you plan to have no kids and keep expenses the same or less.

      But I would really encourage everyone to get to 20X income, like stated in the article.

    2. Justin,

      Medical will cost about $1,200-1,500 per month, so your expenses may go up. Plus this is a high deductible plan that comes with, well, high deductibles and high out of pocket.

  20. Usually I answer your questions at the end but I can’t resist a different angle. If you haven’t yet (or maybe I missed it in the article) maybe you should book the Symphony Of The Seas Ultimate Family Suite. :)

  21. I noticed many of your recent articles encourage us to spend more. It’s hard to do that given most of us have a save and invest first mindset. Whenever people like us think about dropping a lot of money somewhere, we like to check all aspects of that expense first and afterwards may (or may not) have a feeling of remorse if the product, service or experience wasn’t as we’d imagined it to be.

    I still have a long way to go and am hoping growth assets can continue to fly (realistically maybe not as high as times past).

    1. The way I see it, if we aren’t going to spend money during a pandemic and a raging bull market, when will we ever spend money? Now is the time to spend money on a better life.

      How have your investment returns been compared to income?

      1. Yeah, we’re planning to go to Puerto Rico for a few days this fall – much needed!

        They’ve exceeding my our joint income, no question year to year has been crazy, an anomaly one could argue.

  22. This post made me feel better. I’ve been stressed at work recently, but when I step back and think about it I’m already at 20x income in terms of my NW (more if I count home equity and 529). So why stress… especially about stuff that i have no control over.

  23. Yep, been getting more in the portfolio than we collect in wages from work for several years now, but these have been unusual years so I don’t trust that too much.

    Also, my wife and I can’t begin collecting our pensions (without a big penalty) for a few more years. At that point, so far as I can tell (unless one considers the end of any further retirement plan contributions), continuing to work would actually cost us money. Time to hit the road and see (more of) the world.

    The only thing is that, after decades of building my skills and knowledge in a very technical field (has to do with programming and databases) it will feel strange to just walk away from it. Especially as those skills will begin to become obsolete the moment I stop keeping them up.

    1. It’s hard to leave, even if you hate your job. So if you feel fulfilled at your job, it makes a lot of sense to keep working IMO. It’s a bull market where returns are massive and innovation is good.

  24. Looking4FIRE

    Thanks for the great article. Can you clarify how you calculate Net Worth in the context of this article? Does it include pretax 401K and real estate equity as well?

  25. Bay Area Retiree

    Sam, I’m curious what you think these numbers should be for a person that lives in a high cost of living location like the Bay Area. At close to 40yo, we (my partner and I and two kids) are making >$1M (closer to $2M with stock and bull market but we can’t always count on this kind of income) and our net worth is close to $10M but it feels like we would need closer to $15M or $20M to retire safely in this area. And by safely, I mean having no fears about a downturn or not being overly concerned about taking expensive vacations or not worrying about healthcare if someone gets sick, etc. I’ve read your article on $10M as the ideal net worth for retirement but am I paranoid to think it’s not enough in SF or NY? Thanks for your writing—always helpful, well written, and informative!

    1. You’ll have to also share your expenses, when you want to retire, and whether you enjoy your work. Making at least $1 million a year is great even if work is just so so.

      But your directional feeling is correct. 20X annual income continues to be my target net worth for retirement. Therefore, for you guys, I would say $20 million is about right.

      Every investor is getting richer given the markets. Therefore, things should be getting more and more expensive overtime.

      I will try to work for another 3-5 more years. Hopefully, if the markets continue to do well, then you can really be done.

      But at currently 10X annual income, you should also feel free to start taking things down if you don’t like the work.

  26. Thank you for this thought provoking and extremely well written article. I imagine a lot of us are thinking through these issues given the impending “return to office” for white collar workers and the increase in many people’s net worth during the bull market.

    For me, I am 40 years old and my net worth is about 10x income and 30x expenses and I have felt myself becoming less engaged with work, particularly given the endless work from home environment. I am starting a new job soon and I’m hopeful that I will love it. My goal is to retire by Age 45 but I’m hoping I can make it as soon as Age 43 if the bull market continues. If I love my job, I may stay beyond that but if I don’t, then I will have the freedom to do something else.

    I wish that I had known about FIRE sooner – despite having an Economics degree, it never even occurred to me that one could live off of their investment income (or investment returns). I came from a working class background and this was not something anyone ever talked about or even imagined being able to do. It’s crazy how little financial literacy is taught in school or even in economics classes.

    My first year of work was 2006 and my Roth IRA and 401(k) lost ~40% of their value in the 2008 crash. While I continued to invest my 401(k) and IRAs in stocks, this experience scared me away from investing my after-tax investments in stocks until 2013. I wish I could go back in time and invest in equities sooner, but I was scared and didn’t even know FIRE was an option. I feel fortunate that things still worked out mostly okay and I am grateful that I am hopefully on track towards having financial options in the future.

    Thank you for your blog and all of the terrific information, advice, and for sharing your personal experiences

    1. You’re welcome! And I hope you really enjoy your new job as well.

      One of the great things about aiming for a certain age to retire is that you more clearly see the finish line. And when you more clearly see the finish line, it becomes easier to bear difficult work situations.

      I think shooting to retire by a certain age, not by a certain financial figure is a worthwhile goal and some thing I wrote about in the past.


    2. Taylor, your comment “I came from a working class background and this was not something anyone ever talked about or even imagined being able to do. It’s crazy how little financial literacy is taught in school or even in economics classes.”, really drives home the point. If a large swath of young people were financially and investment literate and pursuing FIRE, who would be left to do the lifelong grind work to fund SSI and the other entitlements. Seems like this is by design. Keep em dumb and working.

  27. It’s amazing to me. I’m 40 and I just reached a point where my investment income is 2 times my living expenses, but only about half of my working income. I know I have several years to go, but I’m loving the journey.

    1. Congrats! 2X expenses is great. I would encourage you to start doing the passive income versus expenses calculation now as well. Or at least calculate what your highest passive income potential is with your existing Portfolio if you were to change your portfolio composition.

  28. Canadian Reader

    Once your net worth gets to over 40X your annual income or 100X your annual expenses, that’s when you start completely checking out. You may start constantly thinking to yourself, “F this BS!”

    Pretty much. I suppose lifestyle could be inflated to stay motivated, but what if you already feel a bit overwhelmed? Most of the time I feel like I have no business running in the league I find myself.

    Sometimes I try to convince myself to go back to my old work just so I can feel normal again. But it just won’t be the same.

    I hope you keep writing because you’re talented and your ideas are good. You are giving sound financial advice, and providing an echo-chamber for everyday lifestyle issues. It sounds like you have crossed the threshold, so I will remain grateful for whatever content you CHOOSE to produce!

    1. If you’re feeling a little bit overwhelmed already, like many of us are, I would use more money for more help. Weather is childcare help, housecare help, etc.

      Part of my message for this post, using the examples of super funding and the world cruise ship, is to encourage people to spend more and live a better life with there a tremendous investment returns.

      I’m getting close to complete apathy. I have two business deals that I have completely ignored for the past couple of weeks. But something also happened to a friend of mine, which is giving me the motivation to do these deals so I can donate all the money to his family.

  29. I must say your posts are quite thought-provoking, but I would venture a guess, no one is going to go on a spending spree after 30+ years of saving so diligently in your hypothetical scenario unless the doctor tells you you have only six months to live.

    I commented in another post that I would spend 2% of my principal each year. My goal is to earn 2% + the rate of inflation. If I can do that, then I don’t have to spend down principal. Of course, that may be easier said than done during a bear market. I have 4.5 million (not counting my home.). I like your idea of not touching principal.

    I am 67 now and at 70 plan to collect Social Security. You have stated try your SWR method for the first years of retirement. Actually, I will probably only need the 2% in the initial years of retirement as I await that magical age of 70. That would be my crossover point.

    Once I reach age 70, I can go to your method of 80% times the ten year yield since my wife and I will both be receiving social security. At age 70, that will amount to 60K between the two of us.

    1. Well, let me introduce you to the first person who went on a spending spree after decades of saving and investing: me!

      I splurged on a new home last year and we have been spending more each month this year.

      To stay on topic, are your investment returns enough to cover your expenses? And if so, how do you view the dynamic?

      From you bio: “ I involuntarily retired in my late 40s due to a rare neurological disorder called Episodic Ataxia.”

      How has the last 20 years of retirement been? And does your wife really want to still work with your household’s overall net worth?

      1. To answer your question, yes I am already receiving social security, which at one point was disability. I am part of that 15% you mentioned in a previous post. I left the workforce in my late 40s. My wife is the one who will wait until she is 70 to receive social security. She is looking at retirement next year. So, we will have a bridge to cover until she reaches age 70. My returns have been in the neighborhood of around 6%-8% a year. I had a disability pension until age 65. I always knew that I might have to go on disability. Ironically, that forced me to save. During my working career, we were saving 40% of our income. We still manage to save 25% of our income.

        I currently receive 24K in Social Security and about 6k in pension income. That leaves me with about 70K shortfall of the 100K of expenses we need. I am quite anal when it comes to tracking my expenses. I go through my expenses line item by line item. I can tell you what we spend on groceries in a particular month. When I do my retirement budget. I do include a line item for travel and other expenses we might incur. That is why I figure 2% of 4.5 million is 90K, above my 70K shortfall. My wife will receive 41K in social security at age 70, so discounting inflation that would be a 30k shortfall, and at that point, we would only need 3 million dollars to follow your SWR. So, I am beginning to like your SWR. It has always been my intention to leave a legacy to my children.

        My investment returns have covered my expenses for the most part since I left the workforce except for a few bad years like 2008. I mention in ESI’s millionaire interview #82. I remember the year when my investment returns first hit 100K.

        Now, I tend to be more conservative as I age. I only keep 30% in stocks. I have derisked substantially. In the 80s I was 100% invested in stocks, but I still have managed to earn 200k or more annually on my portfolio.

        I have to admit the current environment in which we live of zero interest rates and QE makes me nervous.

        Oh, on my wife wanting to work. She actually wanted to quit awhile ago, but when COVID hit, she was able to work at home, (no more hr and a half commute) so she figured why quit.

        On a side note there is a calculation I do every year. I do a present value calculation of how much money I would need with a 3% inflation rate (taking social security into account) with no growth to cover my expenses for a 30 year period, and I came up with about 2 million dollars. That is the amount I decided to dedicate to bonds. I don’t know if that might be too conservative, but I figured if everything went to hell in a hand basket, that would bail me out.

        1. Really glad to hear you are getting Social Security and disability payments. It’s good that system is there to be used as intended.

          I have to imagine that the idea of spending a lot more money than usual is very difficult. I have had a difficult time doing this myself. However, I have no difficulty in spending more money on my children if it encourages their growth and health. So this is where rampant tuition inflation gets us. Price inelasticity.

          Your experience is much appreciated!

  30. Thanks Sam,
    This explains my growing apathy. I’m also in banking and each day I feel what little joy I may have being sucked out of me.
    We’re sitting at about 20 times earnings and 50 times our expenses. I just can’t seem to let go of the security blanket of losing my identity, having something to do and the fear of making a wrong decision to retire when I’m only 50.
    Any more insight about overcoming the fear of retirement and ego.

    1. Correction, I meant to say not knowing what to do i.e. finding something else as interesting and challenging to do.

      1. I hear you, and congratulations for getting to 20 times your annual income. The identity part of work is important and not to be taken lightly.

        It was a weird transition for me the first year. It really takes time to let go of your identity after a lifetime of working at something.

        If I were you, I would just start some thing on the side and have a whole Lotta fun with it. Given money is no longer a worry, you can be as bold as you want. You can also pretend that you don’t have a day job while doing something on the side to try to re-create that feeling of excitement of no Safetynet.

        1. Peter Horsfield

          I hear you. I’m just waiting for the international boarders to reopen so I can get back to Japan and then back over to Hawaii. Then I might start feeling my mojo coming back.
          We live in Cairns Australia which is surrounded by the Great barrier Reef and the Daintree Rainforest. Its paradise to live here, however one can get board eating peanut sandwiches every day , so the cange and travel will be welcomed.
          Keep up te great blogs and sending love to you and your family. Stay strong!

  31. Great post. I like how you quantify a very difficult and subjective question.

    In theory, NW is just assets minus liabilities, but I’ve seen people calculate it differently:
    When you add up NW, do you include 529s, 401ks, IRAs, home equity in primary home, value of your business, boats, cars, etc?
    Do you include just the home equity of your physical real estate or do you include the full market value of the properties?
    Do you exclude any taxes payable on your capital gains (whether they are payable on stocks or real estate)?

    In terms of aiming for your criteria of 10X annual income, that can be very tough for highly paid people on the coasts. It is very common for a couple in tech in SF to be earning 800k-1m in total W2 income, but given HCOL, building a 10m NW could take a long time, perhaps even 30-40 years!

    Cheers, and looking forward to seeing an occasional post when you re-retire!

    1. Yes, add up all equity that is worth something to come up with your net worth.

      10X could be harder for folks in expensive areas, or it may not be due to more growth and investment opportunities.

      I think it’s a relatively the same for most income levels: not easy. But doable in 11-25 years as my post states. It’s just math!


      1. Got it. Your NW calculation makes sense, include all equity in any assets you have and include retirement and 529s.
        I agree with your math given the assumptions. It hasn’t however worked out for me quite the same. 20 years of working, my income has constantly gone up and my investment income even in phenomenal years has not taken over my active/W-2 income. This is with returns of 5-6% over the 20 years. 40-50% income taxes on average throughout didn’t help. If my income stays high or keeps going up, I don’t see my investment income ever catching up without really ramping up my portfolio risk – I guess I’ll have to work forever!

        1. Not a bad problem to have! Especially if you live on way less than your income.

          However, 5-6% annual returns is relatively low over the past 20 years. Worth speaking to someone about portfolio composition.

          1. Yes, a good problem to have, but also keeps me locked in to continue working. At some point if investment income exceeds annual expenses consistently by a wide margin, I’d be inclined to dial down. I am also not afraid to draw down on some of the principal.
            As for the low returns, I admit those are low, they are after tax returns on my portfolio (net of taxes on capital gains and dividends), and I was deliberately playing it safe due to my inherently risky career. Vanguard Balanced Index for the last 20 years has returned about 7.5% annualized.
            Again, thank you for the interesting discussion.

        2. Just out of curiosity, why do I see so many people with high NW talking about the taxes in their earning states and feeling like it’s like that every where? if you have the desire to pull back but the west coast is holding you back with the taxes why don’t you look elsewhere to where you would have a better life outside the west coast taxes when thinking of retiring ? I’m just stumped on reading posts where people seem to feel stuck in states getting taxed the most when they have a solid NW that would give them a beautiful life in many places. In my head you pivot to where the money and quality of life will flourish just like graduating college … look outside the box if you will.

  32. I really enjoy thought provoking articles like this one in the context of lifestyle design and time management. When i think about how people want to expend their limited time on this planet in relation to their financial lives and personal circumstance there needs to be a framework for weighing decisions. In general terms i find that actively earning money is a continuum of effort that both fuels your energy/wellbeing and at other times depletes it. As I age and my available time on the planet slowly expires my tolerance for money generating activity that depletes my wellbeing becomes less (especially if the marginal increased earnings does not move the needle in relation to something that i value like being debt free, paying for a child’s eduction, eating quality food, having excellent healthcare, exercise, etc.) The challenge is identifying the metrics and having a plan to change behavior so you do not underutilize your precious limited time on this planet. In practical terms the tradeoff for your readers likely amounts to opting for lower stress work or passion projects with unpredictable earnings in exchange for giving up ‘known’ maximum income. Thank you for another set of metrics and parameters to weigh in this equation.

    1. “ actively earning money is a continuum of effort that both fuels your energy/wellbeing and at other times depletes it.”

      Yes indeed! GL finding that balance which we are all looking for.

  33. I’ve got one of those jobs that is so enjoyable that I’d do it for free, so although we’re on track for early retirement, the fact that what I’d want to do in retirement is what I’m getting paid six figures to do now makes the motivation to “retire” somewhat redundant. The best part of this is not being antsy about leaving my career, or trying to reinvent myself and figure out what I’d want to do next.

    1. That is cool that you fly private jets for a living! Do you and your family have any benefits where you can fly private for free?

      I’ve heard many situations where you might have to fly an empty plane to a particular destination. So if that destinations is a good one, maybe you can have your friends or family hop on board anyway?

      1. When I was in the charter side of the business, we could sometimes put friends and family on the plane for an “empty” (or repositioning, as we call it) leg. I did that once from L.A. to Maui. That was certainly fun. Nowadays the IRS is cracking down on even that. You can take people along on a repo leg but even then there are taxes that have to be paid. It’s more of a hassle than it’s worth for many charter operators, so they’ve just nixed the friends & family thing completely.

        At my current job (which is a corporate gig for a Fortune 50), we ironically fly a lot more empty legs, but the nature of the job doesn’t allow for taking family or friends along. Nevertheless, we build up an awful lot of rental car and hotel (Marriott) points from all the traveling, so when the family does want to vacation, we get free rental cars and hotel stays. I don’t mind paying for the airline.

  34. Fantastic thought-provoking article! I love how you think. I haven’t come across any other blogger or journalist who writes at your level of depth, originality, and resourcefulness. I never thought about looking at my investment returns in this way but it really does make so much sense now that I think about it. Thank you!

    1. No problem! It’s just some thing I’m feeling now given things have been going so well. I’m assuming others are feeling the same way.

      Let’s count our blessings and hug our children every day!

  35. I am long time reader and been thinking about this a lot recently. I’ve always been saver, in my early 20s there were several years I saved half of my income. There were years were I saved much less too.

    The last few years my income has sky rocketed where we will probably add a few million to our savings this year. My old net worth goal of 5m we passed around the beginning of the year. Often I feel bad about our spending, we eat out everyday. On the other hand I am 34, my wife is 32 is and we no kinds. It is something we want in the future, but we are also trying to figure out what we want to do with life. I don’t know what I would do if I did not work as it has become my life. Posts like this help me stay on the big picture goal as I can get caught up in the weeds or distracted by things that do not really matter.

    1. That’s the beauty of using Income, not Expenses, as a multiple for net worth targets. Keeps you focused and disciplined as your income grows, which generally happens to most working people.

      Too easy to “cheat” by slashing expenses. And cheating is not as fun!

    2. Aaron, not to be rude, do you mind sharing your total annual compensation? How did you manage to save so much at such a young age? You and your partner both! Kudos!

  36. Hi Financial Samurai
    Excellent article. I focus a lot on investment income (dividends), but generating these cash flows indeed may be harder and requires much more capital than generate investment returns. In particular seeing such bull markets.
    That’s why I like also to have tech growth stocks etc.

  37. Sam –

    If Vanguard is correct and we may possibly be looking at 4% returns for US that makes it hard on everyone.

    However Vanguard is also projecting much higher returns for international investments. You may want to consider pulling that into the article.

    A balanced portfolio is the best strategy.


    1. Sounds good. What percentage are they projecting for international investments? And which international investments?

      For the past 10 years almost, international investments have severely lagged U.S. investments.

      1. I’ve gotten similar advice from my advisor. The thinking from them (and maybe Vanguard too) is that “international” underperforms for 10-12 year cycles vs. S&P and then overperforms for a similar cycle. There are a lot of nuances so just a general macro comment.

      2. Hi Sam –

        Vanguard has diversified out their target portfolio to include:
        * Stocks – 40% to international and 60% US. This has increased over the years from 20% to 30% and now 40%. The recommended fund is Total International Stock.

        * Bonds – 30% of bonds to international and 70% to US. This has increased from 20% years ago. Notably the recommended fund, Total International Bond, is hedged to US dollars.

        The theory is history has shown when US is outperforming international, it eventually reverses. Essentially they recommend diversification as the only “free lunch”.

        I read an interesting article the other day that if theoretically US stocks keep outperforming, they would end up as 100% of the stock markets and we know mathematically that can not happen. I never looked at it this way.

        I would not be surprised if at some point Vanguard simply 50% US and 50% International for stocks and bonds. At that point, the only “decision” an investor would make is the overall asset allocation between stocks and bonds based on risk tolerance, goals, and timeframe.

        My thoughts……

        1. Tony,

          The theory is that international and US returns will be about the same over long periods of time. I am still waiting for that. IMO – it is doubtful that international returns will equal US returns. US has a much more dynamic economy. US demographics, geography and business culture are aligned to have faster growth, more efficient companies and innovation. Regulation and demographics are a drag on europe, and South america. China and Japan – poor demographics (these are aging nations). Stay mostly in US. The biggest US companies have plenty of international exposure. This is my opinion, not professional advice. Stay with US and keep it simple

  38. Oh boy – this is timely for me. I started to fade when my investments got to 10x active income. Now they are even higher and my NW is close to 20x active income. The pandemic has made me reflect about if I *LOVE* what I’m doing – and the answer is not really – so I am looking to make a change in what I do rather than retire.

    I keep thinking that if I can work another 7-10 years my liquid net worth will probably have doubled….THEN I can think about retiring.

    The other thing I do is play with this WEALTH ranking calculator. It’s a year or two out of date but it’s probably pretty accurate still.

    I’m a pretty competitive person so I like to see where I stack up. At some point you realize that unless you are going to massively increase your net worth substantially working the next 5, 10, 15 years you aren’t going to move the needle in your ranking.

    It had 2 impacts for me: (1) do I really care about if I’m in the top .5 of the 1% vs the top .4 of the 1%?; (2) if not, what do I want to do where I am making less money where my engagement and time is making maximum impact.

    For some that’s retirement I suppose – for me it’s finding something more meaningful and purpose drive.

  39. Rahul Banerjee

    While I agree with the {20X Annual income} number, it is a tough scale to get to if you live in the more expensive parts of the country. There are a few items that do need to be clarified and perhaps an alternate way of making this work.

    Does this only include post-tax investable assets? Or should one include their primary residence and amounts in their 401(k) / IRAs in this (which form a part of their net worth)? I have to assume it is the former.

    My hypothesis is that assuming a person wants to walk away say at age 55, one should have income generating assets of about 10X to 15X of annual income at age 55. With the FS safe withdrawal rate principle, this can hold between the ages of 55 and 65.

    Withdrawals from 401(k) / IRAs (after taxes) + Social Security can make up the balance income after age 65 (just as an example) to take the income to the thresholds required at that age / time.

    In essence, a step / ladder approach can reduce the pressure of getting to a 20X core investable asset foundation.

    Curious what others think of this model !

    1. I think the step ladder approach is the right thing to do. Baby steps that get bolder and bolder as we have less and less time to live.

      The split between after-tax and pre-tax investments is complicated. But I’ve been 95% focused on building an after-tax portfolio to generate passive income. Once you work and automate your maximum 401k/IRA contribution, there’s not much else left to do.

      Related: After-Tax Investment Amounts By Age To Comfortably Retire

  40. My motivation to work as waning as well. I make about $400,000 a year from my job and made $900,000 in investment returns last year.

    This year I will probably make $600,000 in investment returns.

    One more year of great investment returns and I’m negotiating a severance!

  41. I’m curious in your current and previous analysis how do you account for your wife’s income? I know that now you are both retired in a sense, but before there was a period when you had set sail, she was still grinding. In either time period, do you count covering the family income, or those of the solo income? Are you truly 10X solo income or household, and similar 30-40-50x family expenses? It makes sense that the latter is likely true, because it’s not as if you could not be paying for your house, food, school, etc. However, when looking at the true apathy trigger is it 10-20-30-40x, solo or collective income/net worth? If you are already pulling in 10-20X, and your wife also has replaced her salary 10-20xwith funds, then you are definitely on the path to island cocktails.

    I always think we need to combine the efforts, because we are a team. So, getting 10-20x net worth over our collective income will be a tall order but maybe just the approach to take. Surely, if we hit 20X, I’d think we could step away from it all.

    One last thought… In your original calculations you again were comparing to income. Do you not include any of the fringe that you are giving up or need to replace as well. Health care, bonus, matches, etc. Was your initial math against 10x base income?

    1. You can do either. And I think you should do both. Challenge each other to get to 10X+ annual income. Then you can look at the entire net worth amount and live accordingly.

      In general, I like to make things harder on myself e.g. survive on one income to care for family, growth a large enough net worth to generate enough returns or income to care for family etc. Then partner income wealth is a bonus.

      Everything is included in the multiple to take things down.

      1. Same.

        I challenge myself to run calculations based on just my income, retirement accounts, brokerage accounts, real estate, etc. I ignore home equity since it’s shared and tied up. I assume funding college is 100% on me since I’m the only one who cared enough to setup the accounts at birth.

        I could never afford our current lifestyle on my own, but I will be able to afford to retire comfortably some day and pay for 100% of the costs of both kids going to college even if my husband gets hit by a bus after letting his life insurance policy lapse and his will left all of his estate to someone else, and probably even if we get an unforeseeable divorce, too (who knows on that one, other than maybe family law experts).

        In any case, I prefer to focus on the things I can control. Partner income and investments are icing on the cake, but I’m not counting on them for the things that matter most to me. Trust issues, maybe. lol.

  42. I like the cross-over points. Those are good goals for people who are working full-time.
    I only work part-time so those are easy goals to meet.
    It’s also related to age. Once you’re older, you’re less motivated to work just for money.
    You need to find something you like to do so you can keep busy and continue to earn income.
    I don’t think I’ll stop working completely until I’m way older.

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