On Friday, after volunteering to help with setup and enjoying a Thanksgiving meal at my children’s school, I headed to the pickleball courts from 1:30 p.m. to 4 p.m. The courts were packed! In my group, two players were in their mid-20s, and one looked to be about 35.
It’s clear that the downshift is underway, as more people prioritize play over work. This time of year was always my favorite when I had a traditional job. It felt like everyone was in unspoken agreement to ease up, with holiday parties and a more relaxed pace all around.
Inspired by this mindset, I wrote a new post called Return On Effort (ROE): Your Key to a Happier Life. The central idea is that by the time you’re around 45, you should start working less—whether times are good or bad—to improve your ROE.
Working harder during a bull market, when your investments are doing the heavy lifting, doesn’t make sense. Similarly, working harder during a bear market, when your net worth is declining, can just lead to frustration and burnout.
Given that everyone in my pickleball group was well under 40, at this rate, they may struggle to save enough for a home. I know because one of them had no idea what the median home price was in San Francisco, and was shocked when he found out. But they are choosing leisure now because that's more important to them than money.
Breaking The 25X Annual Expenses Target
One of the most commonly cited net worth goals (excluding the value of your primary residence) is to accumulate 25X your annual expenses. Achieving this milestone is often seen as the gateway to financial independence and retirement.
After speaking with William Bengen about misconceptions surrounding his 4% Rule and his updated proposal for a 5% safe withdrawal rate, I came away with a key takeaway: we should be able to lower the traditional retirement age from 65 to 55.
More leisure for all—hooray!
However, when I analyzed my own situation in 2012, with an expense multiple of ~38X, I realized I couldn’t comfortably stay retired for more than 18 months. My portfolio was heavily weighted toward growth stocks that didn’t pay dividends, and our expenses grew due to family additions and elevated inflation. On top of that, I wasn’t comfortable drawing down principal in my 30s or 40s to cover living costs.
If you want to retire well before 55, I’m not convinced that having a net worth equal to 25X your annual expenses will be sufficient. Not only does this figure need to exclude your primary residence, but your investments also need to generate enough passive income to cover your living expenses.
For those pursuing early retirement, consider avoiding tying up too much capital in a primary residence. Additionally, investing in venture capital might not be practical given its long payout cycles and lack of dividends. Focus on building a portfolio that generates reliable cash flow to support your lifestyle.
Let me know if you agree with my post: A Net Worth Equal To 25X Annual Expenses Is Not Enough To Retire Early
Waiting For The Santa Claus Rally
The Santa Claus Rally refers to a historically observed stock market phenomenon where U.S. equity markets tend to perform well during the last five trading days of the year and the first two trading days of the new year. Historically, the average gain during this seven-day period is around 1.3%.
Interestingly, the Santa Claus Rally appears to be extending in both duration and upside. In recent years, it seems the rally may begin as early as November 25 and last through the end of the year, potentially delivering a 2.6% gain during that time. Not bad—especially if it holds true this year, given the S&P 500’s already impressive year-to-date performance.

Have A Safe Thanksgiving Week
For those on the Northeast and Northwest coasts, I hope the storms don’t disrupt your holiday plans too much. Here in San Francisco, we’re dealing with strong winds and heavy rainfall.
I had to hire a roofer to replace the nails in my gutters with screws because the rattling from the wind was unbearable in the middle of the night. It cost me $400 for just 45 minutes of work, but it was well worth it—I’m definitely not risking a fall from 35 feet up!
Wishing you a safe and peaceful Thanksgiving week with your friends and family.
To Your Financial Freedom,
Sam
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