The Amount Of Money Needed To Retire Early And Live In Poverty

As more people look to retire early (<60), more people are looking for shortcuts in order to reach early retirement quicker. Some hate their jobs so much they are willing to retire early and live in poverty!

Instead of retiring early to live in poverty or near poverty, wouldn't it be better to find a different job to live a more comfortable life? I think so.

Post-pandemic, I've made the argument early retirement / FIRE is becoming obsolete. No longer do we need to grind so hard and sacrifice to get out ASAP. Instead, there are now a plethora of new ways to earn money. Further, if you are able to work from home, you've got ultimate flexibility!

My goal for this article is to help you think about early retirement in a more healthy and balanced way. FIRE FOMO is real. Instead of feeling an intense rush to try and retire as early as possible, consider the alternatives.

  • Find a more enjoyable job with better hours that pays less.
  • Start a side hustle or side business that brings in supplemental income.
  • Encourage your spouse to work longer or harder so you can take things down a notch.
  • Take a sabbatical to recharge and rethink what you want to do with your life.
  • Go back to school to change careers and take a break

Be careful sacrificing so much only to retire early and live a restricted life.

My Original Desire To Retire At 25

When I was 25, the September 11, 2001, terrorist attacks happened. This terrible event ignited my quarter-life crisis after only two-and-a-half years of working in finance.

I seriously thought about retiring with a ~$350,000 net worth and moving to Hawaii. There I'd be a fruit farmer on my grandparent's under-maintained farm. Due to a couple of lucky investments during the 2000 dot comb bubble and aggressive saving, I was able to amass a healthy net worth quickly for my age.

In exchange for clearing brush, watering trees, and doing general upkeep on the house, I could live for free in my grandparent's old house. Then I could make some extra income selling mangos, papayas, and pomelos down the street. The farm was only about eight acres in Waianae, a rougher part of town on Oahu.

For fun, I'd go surfing and hiking for free. Hawaii is truly a magical place once you have affordable housing.

A Modest Income And A Simple Life

Back in 2001, my $350,000 could have generated about $17,000 a year in risk-free passive income. If I sold $10,000 worth of mangos a year, I'd have enough. Without dependents or rent to pay, early retirement is easier.

For three months, I daydreamed about living this simple early retirement lifestyle. Then one day I slapped myself silly and told myself to buck up.

Although having a nice tan and washboard abs would be sweet due to surfing every day, I wanted more. I wanted to see what else I could do with my education. In addition, I wanted to one day start a family with my girlfriend.

Throwing away a perfectly good career in finance so young was stupid. So I gutted it out for another 10 years until my investments could generate about $80,000 a year and cover my living expenses in San Francisco.

Given this post is about figuring out how much money is required to retire early and live in poverty, let's look at what the government's definition of poverty is.

The Federal Poverty Level Limits By Household Size

Below is the official 2023 Federal Poverty Level (FPL). The baseline federal poverty level is under the 100% column.

In other words, if you make $13,590 or less as an individual, you are considered the most impoverished. If you make $27,750 as a household of four, you are also considered living in poverty etc.

The more impoverished you are, the more you are eligible for federal government subsidies, such as healthcare subsidies. So long as your household income earns less than 400% of the baseline federal poverty level, you can receive subsidies. After a household income over 400%, you're on your own.

Federal poverty level limit 2023

Minimum Amount Of Income To Feel Comfortable

The household income levels between 300% to 400% of FPL seem comfortable as long as the household doesn't live in an expensive coastal city like New York or Los Angeles.

For example, a couple with two kids making between $83,250 and $111,000 should be able to live a decent lifestyle in the heartland of America, where I've been investing in real estate since 2016.

The University of Texas, Austin, announced in 2020 that families earning less than $65,000 would not have to pay tuition. Meanwhile, families making up to $125,000 would also receive some type of tuition subsidy. Not bad!

Related: The Ideal Income Is The Student Loan Forgiveness Income Threshold

However, earning less than $111,000 as a family of four in San Francisco is tight. Rent for a three-bedroom house could easily cost over $4,500 a month in an average neighborhood. If you want to buy such a home, we're talking $1.5 – $1.8 million.

Note, I'm not here to argue which household income levels should receive extra assistance from the government. The government, with all its data and wisdom, is the decider of who is poor enough to receive assistance.

I'm here to highlight how big of a retirement portfolio you need to retire early in order to live in or near poverty, which the government and I define as 200% of FPL or less. Any household income under 200% of FPL seems tight, no matter where you live in America.

How Much Money You Need To Retire To Live In Poverty

Below is a chart I put together that shows how big of an taxable retirement portfolio you need by household size and percentage return if your household income is 100%, 150%, and 200% of the Federal Poverty Level limits.

Again, if your household income is over 200% of FPL, I no longer consider your household living in poverty.

How Much Money You Need To Retire To Live In Poverty, 100%, 150%, and 200% of Federal Poverty Level limits 2023

As an individual, in order to retire early and live on a household income equal to 200% of FPL and a 4% rate of return or withdrawal rate, you would need to amass $679,500. In other words, $679,000 in taxable investments at a 4% rate of return is required to generate $27,180 a year in gross income (200% of FPL).

If you are a household of six and want to earn retirement income equal to 100% of FPL, then you would need to amass a $929,750 portfolio at a 4% rate of return or withdrawal rate. 100% FPL for a household of six is $37,190.

If a couple wants to have two children and earn up to 150% of FPL in early retirement, they need to amass between $832,500 and $2,081,250 in their after-tax portfolio based on a 5% to 2% withdrawal rate or return rate. A household of four earning 150% of FPL is $41,625.

Personally, I like to match my withdrawal rate to the risk-free rate of return so I never run out of money. Once you achieve financial independence, you never want to go back to the salt mines.

The Inconsistency Of Accumulating A Lot Of Money To Then Live So Frugally

The chart above shows the objective numbers required to retire early and live in or near poverty, as defined by the federal government. However, it is highly unlikely a household would be willing to accumulate so much capital just so they can stop working to live so poorly.

There are certainly exceptions. For example, one Financial Samurai reader who experienced money trauma did something similar. As an individual, she retired early with about $600,000 right before the bear market and relocated to Taipei from Seattle, where the cost of living is lower.

In general, something really has to be wrong with your job, your life, your physical health, or your mental health to make such an abrupt change in lifestyle. But that's life. Eventually, we all face hardships where we must make difficult choices.

Quitting the money can be very hard to do. And the more you make, the harder it is to quit!

Is It Worth Living In Poverty To Retire Early?

The Amount Of Money You Need To Retire Early And Live In Poverty

For the first 13 years of my life, I grew up in emerging countries like Zambia and Malaysia where I was surrounded by poverty. Some of my best friends in Kuala Lumpur would share one room and a bathroom with three other family members.

Seeing so much poverty for so many years made me focus on school because I was afraid of becoming poor. Fear, in my opinion, is one of the most important ingredients necessary for achieving financial independence.

When I came to America in 1991, I decided not to take my good fortune for granted. I hit the books, studied hard, got really lucky, and saved and invested as much of my luck as possible.

Unwilling To Live Near Poverty Just To Retire Earlier

Even though money doesn't buy happiness, we must earn enough to cover all our basic living expenses before we can really believe in such an ideology. I personally would not be willing to retire early if I had to live in or near poverty. Instead, I would just find a more relaxing job.

Although my work was extremely stressful for 13 years out of college, it enabled my wife and me to own a comfortable home in San Francisco, take 5-6 weeks of vacation a year, drive a safe vehicle, and raise a family.

For the now four of us to live on only $55,500 a year (200% of FPL) would require sacrifices. First, we may have to leave San Francisco. Second, we may have to start living with my parents in Hawaii to save on rent.

Although plenty of readers have stated they have no problem living at home with their parents as adults, we do. Our parents value their privacy. And after decades of living apart, we're all set in our ways.

Third, we'd have to pull our son from a Mandarin language immersion school. I actually wouldn't mind because there are some great Mandarin immersion public school alternatives.

Then we could also get free money to pay for college. Now that I think of it, make we should go into poverty sophomore year of high school for my son!

Ways To Improve Early Retirement Life

One alternative to living a more comfortable early retirement is increasing our withdrawal rate. But this is difficult to do because we've been in the habit of saving and investing for so many years.

The proper safe withdrawal rate in retirement is dynamic. Although it's easier to make more passive income in a rising rate environment, perhaps another recession is on the horizon. Hence, saving more aggressively may be more prudent.

The other alternative, which is what many early retirees do nowadays is freelance or take on side hustles to make up for any earning shortfall. It's always nice to make supplemental retirement income by doing something enjoyable.

Although we've lived entirely off our investments since 2012, I've been accused of not really being a retiree because of Financial Samurai. That's totally understandable, which is why since 2013, I haven't told anybody in real life that I'm retired. In 2022, I introduced the term, “fake retirement” to embrace the criticism.

But isn't it funny that if Financial Samurai was smaller, I'd get more approval from the Internet Retirement Police?

I can't help the size of this site. I just write whatever and let the search engines and word-of-mouth do its thing. The lesson is to never stick out because a hammer will try to bang you down.

Retiring With Poverty Income For A Family Of Four

If we didn't move in with my parents, here's what I think our budget would look like in early retirement. It is based on a household of four living on $55,500 a year, or 200% of FPL. Any passive income less than 200% of FPL would be too little. I'd rather keep working.

Retiring With Poverty Income For A Family Of Four

Looking at this 200% of the FPL budget actually makes retiring near poverty more doable. Although a two-bedroom apartment is smaller than our current house, we could make it work if our kids share a room.

We wouldn't have money to pay for sports, music, or art lessons after school. Thankfully, my wife and I would teach these activities to our kids. The pandemic gave us 18 months of homeschool experience. Further, I was a tennis coach and my wife knows how to play piano and the violin.

Staycations or road trips are fine for now since our kids are still young. Once our daughter turns five we plan to get on a plane and see the world.

If we were to try to live on $55,500 a year in early retirement, we would try to pay off our primary residence mortgage first. Once the property is paid off, living on near-poverty income is easier. We could spend more on food, entertainment, and travel.

Retiring Early To Live Near Poverty Is Feasible

After going through this exercise, I've concluded retiring early on an income equal to 200% of FPL is possible! Having a taxable investment portfolio worth nearly $1,400,000 to generate $55,500 a year in passive income provides a nice cushion.

But would you really be willing to live super frugally if you had $1,400,000? Again, it depends on how much you hate your job and your life circumstances.

My father-in-law retired in a cabin in the woods and is happy. He lives a simple life with no WiFi and clutter. His monthly expenses are just $500 – $700 on average. He's one with nature and isn't bothered by the hoards of people who live in a city like San Francisco.

Ideally, my family of four would need to earn at least 300% of FPL ($83,250) in early retirement to feel comfortable. At a 3% – 4% safe withdrawal rate, we'd need a portfolio of $2,081,250 – $2,774,000.

But man, having over $2 million is a lot of money! At this level, I would think I'd want to live it up more than what a 3% to 4% withdrawal rate lifestyle would enable. As a result, I'd continue to generate supplemental retirement income online by making money online and writing books.

Be Patient With Early Retirement

Instead of rushing to retire as soon as possible, go through the numbers and see if everything makes sense. To give up a well-paying job to live like a pauper is probably not ideal.

One of my early retirement regrets is retiring too soon. I would have been financially better off if I had accumulated several more years of income. It's only after you've permanently left the workforce for a while that you realize how truly long post-work life is.

For those people willing to live in or near poverty to retire early, I say more power to you! Living a simple life without much desire or possessions is the key to enlightenment according to the Buddha.

Just know there's a chance your expenses will increase as you age, especially the earlier you retire. Worst case, you can always just go back to work.

In fact, after buying a true forever home in 4Q2023, we cut our passive income by $150,000. We are no longer financially independent and I will have to get a consulting job to make up for the shortfall. We could live on less, but we choose not to.

The math really doesn't lie, no matter how our emotions make us feel. If you can survive off poverty wages until Social Security kicks in, you're golden! At the end of the day, it's up to each of you to figure out what works best for you and your family.

Are you willing to live in poverty or near poverty so you can retire early?

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Readers, would you be willing to retire early to live in or near poverty? Why or why not? What is the lowest FPL level you'd be willing to accept to retire early? How much money are you trying to accumulate to retire early? Do you think young folks retiring with the amounts in my chart are making a mistake?

Related posts about retirement:

Living Paycheck To Paycheck Off A $5 Million Retirement Portfolio

Preparing For A 50-Year Retirement With Vanguard's New Return Assumptions

Coast FIRE: Another Term For An Employee Who Saves For Retirement

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169 thoughts on “The Amount Of Money Needed To Retire Early And Live In Poverty”

  1. I thought the “original definition” of FIRE was to be able to remove your salary (i.e. retire) and continue the lifestyle that your salary afforded prior to retirement?

    That was what all the initial teachings were about. They taught people to not always be upgrading their lifestlyes. Everytime you get a bonus or a salary increase, don’t upgrade your lifestyle. Maintain your lifestyle and save. Later, you should be able to continue to maintain your lifestyle, without your salary. That is FIRE.

    It seems along the way, for a variety of reasons the “original” FIRE has been contorted by many. People desperate to retire early have come up with things like lean-FIRE. And now, on this very website, we have a story of the fundamental principles of FIRE also being broken – a significant upgrade to lifestyle, is now preventing FIRE !

    We all need to get back to the basics and educate those out there without so much deviation from the initial principles of FIRE. And with that we can get back to teaching the average person the discipline and the way to achieve FIRE – right now a person learning all this for the first time would get horribly confused. Lean FIRE? Or hey, I will just keep upgrading my lifestyle, because that now seems to be what others do! NO, FIRE was about maintaining your lifestyle (not downgrading, nor upgrading), so that you could later stop earning an earned income and MAINTAIN your lifesyle. We really need to get back to the basics.

  2. I thought the “original definition” of FIRE was to be able to remove your salary (i.e. retire) and continue the lifestyle that your salary afforded prior to retirement?

    That was what all the initial teachings were about. They taught people to not always be upgrading their lifestyles. Everytime you get a bonus or a salary increase, don’t upgrade your lifestyle. Maintain your lifestyle and save. Later, you should be able to continue to maintain your lifestyle, without your salary. That is FIRE.

    It seems along the way, for a variety of reasons, the “original” FIRE has been contorted by many. People desperate to retire early have come up with things like lean-FIRE. And now, on this very website, we have a story of the fundamental principles of FIRE also being broken – a significant upgrade to lifestyle, is now preventing FIRE !

    We all need to get back to the basics and educate those out there without so much deviation from the initial principles of FIRE. And with that we can get back to teaching the average person the discipline and the way to achieve FIRE – right now a person learning all this for the first time would get horribly confused. Lean FIRE? Or hey, I will just keep upgrading my lifestyle, because that now seems to be what others do! NO, FIRE was about maintaining your lifestyle (not downgrading, nor upgrading), so that you could later stop earning an earned income and MAINTAIN your lifesyle. We really need to get back to the basics.

  3. Wow- so at that income level your hypothetical family would only have to pay $60 in healthcare costs? Is that because you’d essentially get a big enough ACA subsidy to cover the majority of the cost on a deductible plan? Still surprised it’s that low!

  4. It is a really unusual thought exercise you have gone through here. I’m sure it will be helpful to those thinking about FIRE. I read some of other bloggers who have FIREd and they talk about living on $45K a year and it always amazes how they can do it and still have an enjoyable life. They always makes me feel like I’m spending way too much in my retired life.

    On the other hand, I read the FS and I feel I’m practically frugal by comparison. The important thing I stress is by comparison. We can’t help but compare ourselves to others in our community. I grew up in Shanghai in the 70s and we were three generations in a 2 room unit with no indoor bathroom or kitchen. With everyone else living the same way, I didn’t feel poor, I felt normal. I played with my friends and had a great childhood. I didn’t feel poor until we got to LA in early 80s and you start to see how others live.

    Like you said, some people just want a simple life with simple pleasures and they don’t need a lot of money to achieve that. Your Hawaiian fruit farm life with your grandparents would sound like a dream to someone out there. We will be happier if we can manage our expectations and choose our comparisons wisely.

    1. Yes, every lifestyle and desired lifestyle is different. And we are always at different stages of our lives as well.

      I wouldn’t mind going to my grandparents food farm now and living a simple life with my family. Did so at 25 years old, I think I would’ve regretted not building my net worth larger to have more options later.

      It’s always a balance and a race against time. The sooner we can find enough, the better!

  5. Is there any article that describe amount you need to retire which is net of primary home equity? Most of your articles talk about net worth but it is a bit confusing as home equity can make up majority of it. I am trying to figure out how much you need to retire if you pay off your home already, both for early retirement and retire at average retirement age with social security.

  6. IMO, if you choose to retire early, good for you. However, if you retire early government benefits should be completely unavailable to you until you reach the appropriate age(s). Be self supporting, pay your own bills, have a great time. But you shouldn’t be able to retire when you can work and then have it subsidized by the government. That doesn’t pass the smell test.

      1. I believe the original poster is referring to ACA discounted rates. For red, see the blogger Root of Good.

  7. I’m currently living at 300-400% of FPL. I save the rest for retirement, a house (outside of my HCOL area) and three years of expenses. My hope is to be able to afford to completely retire and never have to work after retirement to make ends meet. Second option is to work part-time while retired.

    I’d rather continue to work then retire and struggle to make ends meet.

    I currently have enough saved that it is conservatively projected to keep me in the middle class (along with social security) when I retire. Saving for a house and three years of expenses are my next goals. Having a paid off house keeps expenses down. If it doesn’t make sense to buy I can spend more in another category. Three years of living expenses are a buffer for a bear market, or if I want to retire three years early. Once I’ve hit all three goals I’ll widen the three years of expenses to five, six, etc.

    I’m also saving more in Roth 401K than Trad 401K now because my salary is high. This would let me shift to Trad 401K if my salary were lower and reap the tax benefits.

    I haven’t been able to resolve the argument on Roth versus Trad. so I’m splitting my bets and balancing between the two.

  8. I’m looking at remote working from overseas where 200 percent of the FPL is a upper middle class income. For reference I have no spouse or children and my relatives are all financially self-sufficient at this point in their lives. My plan is to invest the difference and semi- retire within 10-15 years but keep working as I genuinely enjoy my job.

  9. The sad reality is to achieve that type of early retirement out lined in your chart you don’t have to work hard and save up. You can literally quit working and collect welfare and change almost every line item to government subsidized. When a guy at my office realized this he quit working and moved in with his parents. Not my preference but reality.

  10. Everyday is a gift. When I entered the workforce in 1983 my goal was to retire at 55. What I found to be the real game changer was achieving financial security. Meaning I could go to work unencumbered. That allowed me to work without financial stress and actually quickly advance. Didn’t work week ends and was always home by 5 for the most part. Going to work became a lot easier and more enjoyable. I “fake retired” at 56 leaving my VP job and started consulting which was even better. I have no employees, mainly work from home (sometimes on the beach) and set my schedule. At 62 I am winding the consulting work down and increasing our travel. For me personally I found not focusing on the retirement day but finding a way to make each day better was the ticket. Financial Security helped!

  11. Your article has certainly put quite a lot of people to think about the quality of their life post early retirement, including me. So much as to delay my retirement from 2 to 4 years when I am 42 years old. As I have gotten older, I do like a few finer things in life and less inclined to rough it in dorm rooms or hostels. An extra 2 years means a safe withdrawal rate of 2.5% post retirement for me as per some new calculations despite my increased new budget. Can’t wait for your next article.

      1. Very true. I was earning $40K gross when I started my nursing career in 2008 and despite pay increases and overtime, I was still getting around $70K gross in 2019. Thankfully, doing up houses on the side and having flatmates helped my savings. Due to working 60+hrs weekly in Covid 19 areas in 2020-2021, it increased to $120K – $150K gross. Last year despite taking time off for health reasons, I still grossed $100K. I have only just now reached a decent payrate, and retiring now with a 4% withdrawal rate is not optimal. Instead working less hours, taking small holidays, working on my health and fitness while still taking advantage of 4 more years of free healthcare and retiring with a 2.5% withdrawal rate is the plan now. Your book which I have finished reading now also helped in making my decisions so keep writing please.

      1. That’s the point. Why pay for health insurance when certain retiree’s can obtain free health care for life from their employer upon retirement for their self and their spouse and not pay for a monthly premium ever.

  12. Wow, this article really got me thinking about the bigger picture when it comes to early retirement. It’s so important to consider not just the amount of money we have saved, but also the quality of life we want to live. Thanks for sharing such an insightful and important message.

  13. Great discussion. If there’s one thing I’ve learned in my travels, it’s just how well off we are in the US even if we don’t feel it or appreciate it day to day. There are a lot of places in the world that have widespread poverty challenges. It’s very humbling.

    There’s a post you’ve written about how you shouldn’t depend on anyone in retirement, especially the government. I think it’s the new 3-legged retirement stool post that talks about you, you, and you. I totally agree with that philosophy and certainly don’t plan on social security being there to support me when I’m of age. If I do collect, fantastic! But I’m not counting on it.

    I don’t want to retire with money stress so I won’t fully retire until I’m confident I can maintain my lifestyle through passive income and then later live off of my retirement accounts.

    1. I am glad you brought up the realities of living in another country. I find it quite short sited when people think they will just leave America with their American funneled resources, buy a little place somewhere and lived the dream. What they fail to appreciate is both a historical perspective and a current perspective. No other country has provided the level of safety as America in the last 100 years. By that I mean property rights, bill of rights, economic prosperity and peaceful transfer of power. In the 70s countries were still nationalizing property all over over the world. That means, you may have bought the property and the government simply takes it from you. Sorry, you lose. Two years ago, I fell in love with Cusco after hiking the Inca trail. Today, it is closed to all tourists and bordering on outright violence. Don’t get me started on House Hunter’s International contestants buying land in Mexico. I was reading articles about Eastern Europe being the under discovered paradise of retirement. Not so much now as refugees poor into Poland, Prague and Greece nearly destroying those nations.

      Many talk about living the dream outside of America because of all its issues but America as a leader of the world pays a HUGE price to provide an unprecedented umbrella of peace. We are not perfect. We need to do better in many areas. But democracy is messy. Our last earthquake saw 165 fatalities. Compare that to the earthquakes in “paradise” southeast Asian countries. That is because we have strong governmental with strong regulations. When my little boy had a fever of over 105, I drove him three blocks away to immediately get the medicine he needed. None of it was tainted. He did not get an infection from the hospital. I thanked God I lived in America.

      So make your own decisions but don’t fail to appreciate the unprecedented luxury even those living in poverty level have in America – clean water, paved streets, public education with free food programs. Maybe if people were grateful for that they would be willing to work a little longer to continue to put back into the kitty so the next American generation can enjoy the same.

  14. Being Coast FI with some cushion is freeing in itself. You can relax a little, save a little less, but definitely keep adding to that portfolio! We are in our mid 40s and phasing down; after 5 more years of working and saving, then husband will step back and downshift. I only work 30 hrs so I will keep doing that til I don’t want to any more.

  15. > In general, something really has to be wrong with your job, your life, your physical health, or your mental health to make such an abrupt change in lifestyle.

    Lots of positive reasons to move overseas – adventure, family, sunshine, higher quality of life. Something doesnt have to be wrong.

  16. I think more credit needs to be given to “Fake Retirement“. Why do you think people with jobs like supreme court justices, bloggers, sports analysts, professors, etc.., work so long? Because: 1. They have a low-stress job, 2. They, most likely, love what they do, and 3. They most likely don’t have to put in a whole lot of hours to do the job.
    All the retirement experts advise us to do SOMETHING after we retire, right? They say it’s good for your health. Then, being a Blogger isn’t your job, Sam. I think it’s more of your retirement project. It just so happens to pay you very well. That’s how I look at my “fake retirement” job. I went from working 70 hours a week on my pre-retirement job, to now working on average 15 hours a week on my post-retirement job. And, although it doesn’t pay what my first job paid, it DOESN’T HAVE TO.
    I think Fake Retirement is the way to go….IF!! your fake retirement includes have a low-stress, low-hours “job”.

    1. Correct. Retire to something, not just from something.

      Being able to do something you enjoy doing after retirement and getting paid for it is seriously the best combination. Because for many of us, we would do these things for free for a list a number of hours a week.

      What you say about 15 hours a week is actually right in my target zone for how many hours I want to spend writing and spending time on Financial Samurai a week. The maximum number of hours is 20 hours a week. But if I could do 15 hours a week, by averaging 2 to 3 hours a day during the weekdays, and two hours over the weekend, that is ideal.

      What is it that you are doing post retirement for 15 hours a week?

      1. I teach online. I kind of fell into this gig. It started out as a traditional job, but the pandemic changed everything. Now most adult (graduate) students want to take their courses online only. I just happened to be in the right place at the right time.

        As you’ve said before about getting wealthy, I was extremely lucky.

  17. Post FI Doc

    I think Coast FIRE is an attractive way to ease into your financial independence lifestyle. Once you’ve hit FI, you don’t have to save for retirement anymore. You can work just enough to sustain your life. The pressure is off to save for retirement. You can do something you like, keep your mind sharp and engaged, and you will still have structure to your life. Personally, this is how I’m living right now.

  18. Great thought exercise! I love to plan and run different scenarios before making big decisions. Looking at how we could adjust and adapt to different financial situations in retirement is fun and a helpful way to reaching an ideal reality in the future. I’ve never regretted being a bit over prepared for big decisions and changes in my life, but I have regretted being under prepared. Thanks for the helpful insights.

  19. Don’t mean to brag, but I live in a simple12x12 “cabina” in Central America by a jungle creek with a queen size bed, hot plate, refrigerator/freezer, microwave, flat screen tv, cable, WiFi, a fan, I have a sweet little swimming pool to cool off in and view the sun setting over the ocean any time I want, I’ve got a mountain bike I can hop on to go to one of THE most beautiful beaches in the country anytime I want, I can use the bus, Uber or taxis when I want, I can get fresh pineapples for a buck and change, coconuts (LOVE coconut water for a recovery drink after a good bike ride) for about fifty cents, avocado for around the same, I get to see and hear parrots and all kind of cool jungle birds every day, the only I have to do when I wake up in the morning, is decide what I want to do that day, and I’m doing it on (drum roll please)….wait for it….1200 bones a month from social security. Ahh, it’s a life but somebody’s gotta live it :-)

    1. My friends dad died in Central America more than 5 years ago… They’re still trying to get his body and give him a proper burial.

    2. Bruce you’re living my dream! Are you in CR? Send us some pictures of the abode. I would love to make that move but getting resistance from the mrs.

  20. Retiring is such a big life style change. I think about the change from being a high schooler living at home to a college freshman in a rented room and waitressing full time (I was part timing first year at a community college).

    Although I can’t retire now (taking care of my mum), I am mentally preparing myself for retirement. I am also planning to minimize belonging over time to be more mobile when the change comes.

    Saving money by moving to a location with lower expenses is ideal but it takes planning to transition well. I feel fortunate that I have the option to move back to the country where I grew up. I just pray daily that it will stay beautiful and affordable when I can pull the retirement trigger.

    I used to worry sick about old age; being parentless, spouseless, and childless (only one nephew that I am not close to). All the money in the world can’t fend off vultures and age related mental and physical breakdown. I am learning to not get obsessed. Whatever comes, comes.

  21. Just discovered your blog. Great content. I totally feel this post. I’ve worked since I was 14 (56 now) and don’t want to live in poverty in retirement after saving/investing since I was 27. If I have to move to another country, I will, but I will definitely live my best life. The world is my country. I’m FI in my location (rich in a few other great countries) but still work because I enjoy it and I’m good at what I do. I tell friends that I have the best part-time job because I telework most days (since COVID) and it’s stress-free. Not having financial worries is the best feeling. I vacation, spend time with my daughter, stay fit, indulge in my hobbies and enjoy my social life…all financed by my salary while my investments continue to appreciate. I’m very grateful for what I have and my station in life. Life is good.

  22. I have enjoyed your blog for many years. I hope I can express my thoughts in the right way.

    You stated: “Any household income under 200% of FPL seems really tight, no matter where you live in America. I’m confident all of you agree.”

    I have to disagree with this statement. In fact, I disagree with a bit more as well. Please allow me to explain:

    I live in a relatively low cost of living area, but not as low as, say, the Midwest. (For example, median homes – 3000 sq ft – are going for about 450k where I live right now.) My wife and I have 4 children, and so for us, 200% of FPL is $74,380.

    I work for a small college, and we are not all that well compensated (salary is still under 60k) despite a decade of teaching. Due to health situations with our youngest son, my wife is unable to earn consistent income. So we have learned to make do on just my income.

    The biggest key is to be wise with what you have. And what we have is time. A career in teaching is not a good way to make a lot of money, but it does give you a lot of flexibility. I have learned to be a jack-of-all-trades, which saves me a lot of money. Thankfully, I enjoy the breadth of education and skills that comes with it. Home remodels? Materials are the only cost in cash I pay. Carpentry, electrical work, plumbing, drywall, etc.. are all doable if you take the time to read and watch videos and chat with your local building authorities, and learn by doing. Car repairs? As long as it is not a transmission job or major engine overhaul, I’ll sort it out. Cost of food? Basic staples are not that much money, if you take the time to cook yourself, which both my wife and I enjoy. Travel? Locally, you can do a lot on foot or by bike, but if you must take a car, our 05 Civic still gets great gas mileage. Education? I don’t think public schools are all that great, but when you take the time to supplement at home by encouraging reading, math problems (for fun!) and other engaging learning activities, I think our kids are going to do just great. Recreation? We live by and love the great outdoors. Camping in beautiful places beats a theme park hands down, as long as you have a little fortitude.

    With this approach to life, I am able to max out my 403b at work, which is on top of a 14% automatic pension. I also max out my Roth IRA most years. Thus, we are really living on closer to 30-40k/year. I don’t know if I’m ready to claim financial independence yet, but I am close, and am not yet 40. But I won’t have $6-$8 million portfolio when I do. I think living off of approximately $40,000-$45,000/year (inflation adjusted) will be perfectly manageable.

    Honestly, I may end up continuing to work for a while. I’ve not found a vision for the other thing I’d rather do that isn’t what I’m doing now. But it would feel great to be doing so while knowing that I am FI and could walk away at any point.

    The best part to me in all this is that just about all of these things are great teaching moments for your kids. They learn to be hard-working, problem-solving, creative-thinking, money-conscious individuals. I know our life is not for everyone. And I definitely don’t recommend jumping from a more extravagant life to a frugal life cold turkey. But I do want to offer the perspective that frugal living is more than consigning yourself to a miserable life in abject poverty.

    1. Thanks for the feedback! Towards the end of the post, where I put together a budget for a household of four, I mentioned that I agree about the feasibility of living off 200% of FPL. It helps to see the numbers, pay down debt, and earn supplemental retirement income.

      “ Honestly, I may end up continuing to work for a while. I’ve not found a vision for the other thing I’d rather do that isn’t what I’m doing now. But it would feel great to be doing so while knowing that I am FI and could walk away at any point.”

      This part of your comment you make is actually very important though. Because thinking you can retire officer in an amount is different from actually pulling the rip cord and living off a certain retirement amount.

      You have to overcome your fear and make a change. Otherwise, as I discuss in this post, is your financial independence number real? FI is about having the confidence to change your life for the better, whatever that means.

      Something to think about!

      1. Hi. I am 73 and work 25 hours/wk as a lawyer. My dr. told
        me “Chuck keep going.” Maybe, you could write an article about not retiring. I would NOT want to retire and then worry about money. To each their own.

  23. Currently, we spend about 200% FPL and live a pretty comfortable lifestyle. It really depends on how you set up your life. Our housing and transportation expenses are much lower than the average household. This frees up our resources to spend on travel and various other niceties.

    I think you can have a comfortable early retirement on a smaller budget if your house is paid off. That’s a huge part of the cost of living.

  24. Can someone please clarify:
    If you have a million in assets (or probably just a few thousand), you can draw that 4% poverty income off your portfolio, but it would disqualify you from any benefits.
    If you really want to live off of this level of income, you’re better off having no accumulated wealth.
    This sadly demonstrates why in many cities you’re better off being city supported poor than working and middle class.
    I know a zoomer who decided to work less and take advantage of this fact. He just got reduced internet, food stamps of roughly $450 a month plus goes to the food bank every week, goes to the pet food pantry, gets a free gym membership, and just told me yesterday he had not paid his utilities since spring and got an emergency program to pay off over $1000 in utility bills for him-which apparently he can do twice a year. He also qualifies for LEAP to get his utility bills reduced. He’s looking at other benefits like the savers credit .The city will give him a sales tax rebate once a year since he is on food stamps. All up, the benefits he receives will be worth around $1200 a month. He is also on a waiting list for UBI if it ever gets implemented.
    I wonder how many people have figured this out and are working less? I think it’s sad to give up on your life in your 20’s and take this route, but for some people who feel they will always be very middle class and not a tech bro with an outsized retirement account, he has retired at poverty level in his 20’s without having to save anything.

  25. Good post. Agree with your thoughts on ratcheting back or switching jobs rather than calling it quits totally. Like the Viking Spirituality: inevitability of death and misfortune should (will) not paralyze us.

  26. Chris Hanson

    I ask myself, what would I do if I retired now before i achieved my optimal goals. I would do the same thing i am doing now, which tells me two things, I like what i am doing and i shouldn’t ‘retire’

    1. TheEngineer

      Financial Independence is the detachment from other people money – their money can no longer enslave you.

      Financial Freedom is the freedom from money itself – money plays no role in the true meaning of your life.

      Financial Independence is the first mile maker! Most of us are conditioned into chasing the number for
      so long that less than 1% of the population ever gets to the next mile marker – Financial Freedom.

      Hence – the financial target will forever be changed!

      The one more year syndrome.

  27. ‘The major action step to take before deciding to retire with only $41,560 a year in investment income is to completely pay off a property to reduce living expenses.’ Actually, you should compare two cases: repay the mortgage vs save and invest a comparable sum in financial assets. Which yields a greater after-tax total return? There’s nothing wrong with paying rent if the returns from your investments more than cover the rent.

  28. I have just turned 50 I am panicked, I work full time, its not enough money, working on getting a second job. I want to retire at 70 (God willing if I live that long), I really love the website…so informative. What would you suggest I do for investments. I was looking at Bonds, Fundrise, getting another Life Insurance policy, CIT. – I need to SAVE AND INVEST AGGRESSIVELY. I have no problems being frugal for the end result.

    1. Hi Julie,

      Don’t panic! If you’ve got 20 more years of work, savings, and investing to do, I think you’ll be OK, especially if you can get Social Security.

      Please do a thorough analysis of your budget, your net worth, and any other alternative incomes you have.

      I’d also try and keep your investments simple: stocks, bonds, cash. Control what you can control. The FS Forum is probably a better place to share all your details.

  29. You mention you have regrets for not working longer.
    What about “one more year syndrome” where people just keep working because the perception of additional safety.
    Where do you fall in the spectrum?

    1. Given I left work full-time at the age of 34, and I really didn’t start thinking about leaving work until age 33, I didn’t suffer from the one more year syndrome at all. I made up my mind, devised a severance negotiation plan, and took action the very next year.

      I think people who suffer from the one more year syndrome or older, perhaps in their 50s or late 40s even though they probably have enough.

      I don’t really like to dillydally and waste time when I want to achieve something. My problem is not being thorough enough and trying to achieve something too quickly. I’ve always been this way since I was a kid. For example, I took pride in finishing an exam first, despite making mistakes due to carelessness.

      I should’ve just tried to take a sabbatical for three months and recharge for hopefully a couple years. What it is what it is at the end of the day and I’m just trying to share my perspective to others who were trying to anxiously retire early as well. There’s less of a rush than you think.

      1. A few years ago, I was also desperate to just retire. I could’ve done it but it definitely would’ve meant some fairly drastic choices like never having kids and moving to a much lower cost area. I had taken a 3 month sabbatical but returned feeling even less motivated. Luckily, my wife persuaded me to look into a career change which ultimately led to a much lower stress job in a lower cost area.

  30. WannabeTrophyHubster

    That photo of the slum areas of Xiamen is amazing, and not least because it proves there really is “a Mexican Grill on every corner”!

    Thanks Sam for laying out the various poverty rates (100-400%) and accompanying withdrawal rates. My gut wants to tell me 4% or higher (even 6%) is a safe rate because I’m a “smart investor who thinks he’s a genius for doing well in a long bull market”… but I know that’s not reasonable.

    Luckily, although I retire in 3 weeks, I won’t have to worry about it for 9 years or so due to deferred comp payouts that I’ve got staggered over that period, although not as evenly as I’d like (it’s hard to make them even given the IRC rules on these plans). And my wife, 7 years my junior, doesn’t want to quit her job for another 5 years or so.

    Hopefully we continue bulling on until then (and my investments keep growing meanwhile) or if we hit a bear, we’re going back into recovery by then.

  31. WannabeTrophyHubster

    “University of Texas, Austin announced families earning less than $65,000 would not have to pay tuition starting in 2020. Meanwhile, families making up to $125,000 would also receive some type of tuition subsidy. Hooray! Let’s hope this trend spreads across the country.”

    I guess it depends on how they do it. On the one hand, sometimes scholarship monies are actually paid out of a school’s endowment.

    However, on the other hand, often total tuition is a zero sum game, where those paying full tuition are merely subsidizing those obtaining discounts. Tuition is set based on the overall needed budget and the expected amount of discounts.

  32. Just found this blog a month or so ago and it is my new fave because investing and planning for retirement is on of my current passions. The tone of this site is much more my style. Another site I frequent will hand your head to you if you say you “need” $2 million to retire. But in my case it will take that at a minimum to maintain our current lifestyle and perhaps do a little more traveling and going out to restaurants/bars which we both love. One thing I will NOT do is spend retirement worrying about money because I pulled the trigger too early. So it’s cathartic to here similar sentiments. My work is not that bad even if I didn’t have to I wouldn’t be working

    1. Welcome to my site! It is more geared towards half the population who live in more expensive coastal cities in America and throughout the world.

      I don’t feel that there is a voice for our population, so I’m happy to fill-in and discuss pertinent matters that affect those living here.

      $2 million is a good amount of money. But once you do the math on the potential returns and what it costs in other expensive cities, it can be very tough to live off of without having supplemental side income.

  33. David Michael

    Interesting article Sam. Thanks for your insights and planning. I’ll give my perspective from 26 years of retirement starting at age 56 (due to a bout with cancer) and presently at a healthy age of 82. My wife and I have lived mostly within the scope of 200% FPL. Yet, we have had a great retirement with only $200,000 in savings and investments. I’ll share a few details along the way.

    Retirement these days is really a period of change with opportunities of trying new things and realizing new dreams. After I lost my pension due to a divorce, and my second wife lost her annuity due to a company bankruptcy, we started all over at age 65. It turned out to be a blessing as it forced us to rethink retirement and what that meant. After my two successful careers, and three advanced degrees, we decided to sell everything including our dream home and start over at age 65. My wife became a minister in our home town in Oregon which was her dream, and I went back to graduate school in Vermont to get an M.A. degree in ESL (English as a Second Language). It was the most fun year I ever spent in college, playing on the school soccer team. Upon graduation I received a great university job in Istanbul for two years and then worked for another two years in Jordan at a small college under a fellowship with the US State Dept. I hired my wife to teach wth me in Amman and we traveled through Europe on our vacations. Next, seven years of full-time RVing in the USA and Canada. Then back to Oregon for a more conventional retirement with social security plus the $200,000.

    So…a long story short, whenever we need extra money, I return to the work force at $15 an hour for two or three months a year going from Amazon Fulfilment Centers to Camp Hosting to Costco. My current specialty is a wine specialist with unending job possibilities, working when I want or not. It’s a far cry from my early six figure salary as a professional, but it keeps me mentally alert and physically challenged.

    So…in summary, yes. One can live on 200% FPL. A lot has to do with attitude and getting over the need to have a few million in the bank. It’s a grand world out there and I have never been turned down for a job, even in my eighties. I just had to reinvent myself many times with the thought of the following buckets: social security + investments + seasonal work + no pension.

    1. David Michael

      Forgot to mention we have five children between us as a blended family and 11 grandchildren. We did pay for their undergrad years but they paid for their graduate degrees which includes two physicians.

    2. Great to hear David! Thanks for sharing your journey and story. Also, with 5 children, surely they’ll help support you guys in case you do need money yeah? Perhaps there’s really no need to work $15/hr when you need money if you let your kids know about your financial needs?

      I would help my parents with any and all financial necessities, and have been carefully trying to keep tabs to make sure they are OK. For example, I offered up my credit card for them to user Uber in order to feel more free and stop driving in their 70s. But no response. yet.

      Can you talk candidly about the money stresses post cancer/retirement though? Surely everything wasn’t financially stress free after this period.

      Perhaps a guest post!

        1. Questionable Existence

          Dad’s also helped paid for two children’s undergrad, private school grad, and med school.

          1. Questionable Existence

            He’s the type, even when I tried to give him a brand new, expensive laptop he refused to accept the gift.

    3. David’s story is a bit reminiscent of my dad’s. Dad had a heart attack in his mid-50’s and, thankfully, pulled through.

      He decided to retire early and manages with a very minimalist lifestyle living in the outer parts of San Francisco.

      I don’t know every single detail about his income/expenses or net worth, but he’s shown me a $200k-ish stock portfolio and has a paid-off house.

      He tells me Mom and Dad live off of $25k a year, including the several years I lived with them. This is below the 200% FPL for a multiple person household.

      1. Questionable Existence

        Parents also spend up to 4 months of the year abroad traveling.

        They rent out the upstairs 2 BR and live in the in-law unit downstairs.

        1. He’s always talked about doing something to make money beyond passive income from stocks and real estate, but has never done so.

          However, as evident by some of the comments in this post, not everyone can lead this same type of lifestyle.

  34. Stephen Cornelius

    I came to know I am very inherently Budda like when it comes to materialism: Being overly possessed by possessions has little appeal to me of a need to be and of sense of presence: But, confess, for about a decade long ago in my prime years, I thought to use my wealth, and let my handsome self have a go at the fancy cars, furniture, home, ladies in my life, high-end and walk-in star recognition got the #1 table or at the booth in the BH Polo lounge no wait for me at top chic restaurants or waiting for entry to most exclusive social clubs was how it was – with my 67 Jag Salon Limo, vintage Mercedez, and a classic old fun to drive 37 Bently… Travel and PARTY to be sure, for what I struggled to recall the day after wine and fine dining and interesting times in Las Vegas in the still semi-mob calling the shots was part of the theme. WELL… I was mostly more miserable than happy in consequence!!!

    There was no sense of real intellectual purpose nor emotional harmony… I learned, for me, less is more freedom and friends in life more authentic. That’s all the money you need is that to serve, more doesn’t hurt, all you might gain but do not let it corrupt your true sense of happiness is the key.

    It was more fun giving excess money away to help others get a step up in life or a little help with health care and remain anonymous in my doing so: I live very simply, very happily… I keep funded as might I just need doing due-diligence Property Condition Evaluations for others obsessions for the acquisition of high-end cash flow properties. – When the property and place interest me to experience and does not disrupt my harmony of simplicity be corrupted.

    1. SavingSince15

      There is a Buddhist quote that I have in my home office, hanging right in front of me:

      If one’s life is simple, contentment has to come. Simplicity is extremely important for happiness. Having few desires, feeling satisfied with what you have, is very vital: satisfaction with just enough food, clothing, and shelter to protect yourself from the elements. And finally, there is an intense delight in abandoning faulty states of mind and in cultivating helpful ones in meditation.

      The Dalai Lama

  35. We live in Belgium, Europe, and we are a couple (37&45y) with three kids of 11,9 and 4 years old.
    Our governement says we are poor because wedont have jobs that pay us enough income to support our family, so we get extra governement aid: we pay less for healthcare, we pay less taxes, we pay less for the kids schools, we get more child support money etc.
    In fact, for us it was a goal to be poor enough to get this extra governement support. The catch is: our government only looks at what our income from jobs is and what you make from income out of the stock market. It only for a small part counts our 4 rental properties and our own house or the two holiday houses we rent out.
    So when you count the rental income and income from holiday houses we get, we are financially independent. I think our net worth in this instant is over 1 milion €. We dont really need all the extra support our governement gives us, but we are very gratefull for it. It was part of our plan to become FI.

    1. This is why so many European countries are ranked in the top 10 happiest countries in the world.

      But perhaps this is also why there’s not as much innovation coming out of Europe than the US? Do you think the government support hampers a person’s motivation to earn and create?

  36. Financial Freedom Countdown

    I plan to retire on 200% FPL but technically it is more than that since I have a paid off Bay area home. Prop 13 ensures my property taxes increase at the most by 2%. And the 200% FPL will be to eat drink and be merry :-)
    Having being born in a 3rd world country and coming to USA with only $1K and no family support makes me confident I can rough it out if I need to lower my standard of living.

  37. 9 years ago with $1.5M, a home without mortgages, at age 43, we were considering early retirement. After talking to a few coworkers who DID retire early (with $10M or more since they joined the company way before our IPO), I found out most of them ended their retirement and came back to work in some capacity (startups, consulting, writing blogs, etc..). We were looking for traveling around the world, and the one person who actually that did stopped after one year: his reason? Travel isn’t as exciting as, uh, work. All of them pretty much advise against my early retirement (of course, their savings were much larger than mine back then)

    9 years later, I’m still working at 52, pulling in ~$400K a year, with $4.5M liquid assets, $3M real estate investments that give us $75K/year net income, and we donate $ > 2xFPL every year and very happy I didn’t pull the trigger in 2010. Work has its up and downs, I’ve been with good teams and bad teams, but the FUM allow me to keep switching and stay true to myself (and said FU to those bad bosses, several times). My current work/team is fabulous!

    The one book I’d highly recommend is – When I read his book 10 years ago, it didn’t really register, but re-reading it after we obtain FI and many things he said start to make sense. For people who’d been lucky like me (have enough money and considering early retirement to seek happiness), please read Russell’s book and learn why early retirement is not the path to happiness. If you really have FUM, it’s your golden ticket to find more fun and challenging work, and make a difference using your charity donation: we are very engaged with our charity and were able to influence and connect with the people and kids whose lives were affected.

    1. Must feel nice to have that extra $3M+ now yeah? I’m sure it feels a little like playing with house money where work is much more enjoyable once you don’t need the money.

      I felt this when I did some part-time consulting in 2013-2014. And I’m down to look for really meaningful and fun work again now that my boy is going to preschool soon.

    2. Thank you for sharing your journey. I was in a work funk and desired an early retirement for the past couple of years. It forced me to delve deeper into my work life and its meaning, and also about how I function.

      Working for me isn’t just about money. Wealth in the form of money has never been a motivation. My job gives me financial and functional stability. I also like my coworkers and management (we don’t have revolving doors; people tend to work 25-35 years before retiring). Instead of feeling trapped, I began to see my job in a different light. As it turned out, beginning 2018, my mother needs my assistance financially. Retirement is out of the question until she’d no long be with me. This change also gives me more motivation to stay working. My work isn’t just about saving retirement funds, it also keeps my mother safe and sound (I am sure people with young children feel similarly).

      When I was in work funk, I read quite a bit about FIRE. And my feeling is that many people zero in on numbers. It is no different than zeroing in on moving up the company ladder. Very few ask themselves why they want FIRE and who they are as functioning adults. Work isn’t evil. Money isn’t everything. Hobby and travel are icing on the cake. The cake is the point, and is the essence of each individual (plus spouse, to add more complexity).

  38. I’m 54 and my wife is 52. We have about $2.4 million in liquid assets and a paid off house worth about $600,000.

    I can retire at 56 and receive a pension of about $4,000 a month and keep my health insurance at a rate of about $400 a month.

    The plan is to sell the house and travel to world. The CURRENT plan it to travel until we are tired of traveling and then settle down in Thailand or Malaysia (both of which have 10 year renewable visa programs.

    We have been traveling for 6 weeks a year for the last 20 years so I do not think traveling full time is going to be a problem. (BUT, you never know.)

    We have been to Japan, Malaysia, Thailand, Laos, Vietnam, Indonesia and India 2 or more times over the years. However, we have only seen the tip of the iceburg in these locations. And there are many more places we hope to visit – Morocco and Uzbekistan are at the top of the list.

    My wife is from Japan and her parents still live in Japan. As necessary we will stay in Japan to take care of her parents as they age.

    We do not have any children.

    So we will not be retiring early like many in the FIRE movement – but – we will be retiring much earlier than many.

    Looking forward to the last 2 years of work and HOPEFULLY many HEALTHY years of retirement.

    1. The pension amount is awesome! And you know what else is awesome? Malaysia in terms of having the best food in the world. I am super jealous. I live there for four years as a kid and the food is so cheap and good. Just like Singapore. I don’t think you guys have any problems retiring today if you want.

      1. Thanks for the reply FS.

        Yes Malaysia is wonderful. We were just there last December and the costs are still very reasonable. There is a Buddhist temple in KL that serves a buffet lunch every day that must serve about 1,000 people a day. The food is so delicious and the cost is about 8 ringett or $2.

        Singapore, we have been there 3 times in the past. We will likely not spend that much time there in the future. The cost of housing in Singapore is I think 2 to 3 times the cost of housing in KL – just not worth the difference. (And its a pretty boring place in my opinion.)

        Thanks for the input that we can retire now. I think we will wait 2 more years just in case. In addition to the $4,000 a month pension, I can get about $2,000 a month for 6 years if I wait until I’m 56.

  39. SavingSince15

    Just took early retirement at age 58. $1 million in 401(k), $70,000 cash, $50,000 in savings bonds, $220,000 stock portfolio, and $90,000 saved for my 10-year-old daughter’s college. No debt, 10 years left on mortgage. Small pension from previous employment of $1,200 a month starting when I am 60. Monte Carlo simulations say I have enough to live until 95.

      1. SavingSince15

        Julie: its hard to explain. I grew up destitute, and have saved money all of my life. I have always lived simply, and really only ever purchased things I really needed. I have been lucky to have a career that paid me well and allowed me to save at least 25% of my salary, and I have diversified my portfolio enough (purchased a savings bond every month for 20 years) that I have a sufficient mix of both conservative and aggressive investments in the stock market and my 403(b)s which has resulted in being able to currently have 1.3 million and retire at age 58. My wife finds this hard to believe, as she is German and grew up with a very different philosophy (if you don’t work, you have no identity), whereas my philosophy has always been that we work to live, and not live to work. In any case, no one has the right or wrong answers, we all try to do the best we have with what we have. So I wish you the best, and hope that you can find your way as well.

  40. A note from Charles Gave on negative rates:

    When meeting some clients a few weeks ago in Amsterdam, I made my usual
    remark about the stupidity of running negative interest rates. In response
    my host told me a sobering story. He manages a pension fund and had
    recently started to build large cash positions. One day he was called by a
    pension regulator at the central bank and reminded of a rule that says funds
    should not hold too much cash because it’s risky; they should instead buy
    more long-dated bonds. His retort was that most eurozone long bonds had
    negative yields and so he was sure to lose money. “It doesn’t matter,” came the
    regulator’s reply: “A rule is a rule, and you must apply it.”

  41. I put 200% FLP but to retire in a cheap country. My wife and I aim to retire between Spain (next to my home country France) and Colombia (where she’s from) while traveling 3-6months of the year. We aim for 1.5M but could pull the trigger at 1M if we’re too stressed out by our jobs (currently working in China).

  42. As someone living around 200% of the FPL right now at 22 I think if I was to ever reach a point where I could live indefinitely with no real outside stress I’d be completely satisfied with my current lifestyle. This is also coming from the perspective of a single person though. If I had to worry about taking care of someone else retiring early definitely would not even cross my mind if it meant they would not have any of the opportunities I had growing up.

    1. True. Life is pretty inexpensive just taking care of oneself. Generating 200% FPL from a portfolio is fine for a family of three in many parts of America. But only making 200% FPL from a day job seems a little tight to me. Feel like it’s hard to ever get ahead.

  43. I just retired today. 44. 725k in equites and mortgage free house. 32k annual spending. Not worried. ✌️

  44. Using the Personal Capital retirement planner a couple with $1.6M at age 55 has a 99% portfolio survival rate at age 90 with a $48K per year spend rate ($4K a month) assuming $36K SS income starting age 67. That’s assuming 3.5% inflation, 20% marginal tax rate during retirement.

    You don’t need $5M if the kids are out of the house but I’ll probably hang in there until 62 and not bother being frugal.

  45. Marie Jacobs

    You’re right that a monthly budget spending 67% of income on rent for a 1 bedroom apartment is silly and needs more income. But quite wrong that less than 200% of the poverty limit is not enough in the Midwest when the house and all other debt are paid for pre-retirement. It’s plenty. But it was a great laugh and reminder that our values are not compatible with the elitist attitudes of coastal cities where a Land Rover and private school are “required” to live.

    1. Glad this article made you laugh! :)

      If you feel OK making 200% of FPL in the Midwest, that is great. Your belief is why I’m heavily investing in Midwest real estate. I’m hoping other people from the coasts realize they don’t need as much and continue to move inland as well.

      I’m very pro public school. Not sure how that is seen as elitist. See:

      Would You Give Up $1 Million To Go To Private School?

      Public Or Private School? Depends On Your Fear And Guilt

      If you have a problem with the definition of poverty and what income level is low enough to get government assistance, please let the government know. I don’t determine the levels. thx

      1. Marie Jacobs

        The government definition of poverty has to apply to everyone so it has to include enough to cover rent, transportation, education and retirement savings for those starting out in life. Your title was specific to early retirees. An early retiree who is debt free and owns the property they live in does not need to pay for those things or continue to save for retirement so the same poverty income level can provide a much higher standard of living. Early retirees also have the support of their savings to help them through any rough parts that those living in true poverty do not. You said living on income of less than 200% FPL would be tight anywhere in the country and were confident we would agree. I not only do not agree for the case of an early retiree outlined above, but find it rather elitist to assume that a poverty level income is a life of deprivation and something that simply could never be acceptable. Income is but one part of a happy life. Time spent earning a higher income is time not spent on other activities that make life worth living.

        I do agree with your basic idea that many early retirees are cutting it too close when they leave a career in a rush to show off they are retired, but that’s maybe my scars from living through the late 70’s energy crisis, investing through the dot com bust and Great Recession and watching health and dementia issues decimate my relatives investments. Just not the idea that poverty level income post retirement defines failure.

        1. Nobody said failure. Where did you get that idea? We’re following the federal guidelines.

          Instead of just talking about opinions and feelings only, let’s include NUMBERS.

          What is your budget, situation and overall financial situation. The numbers matter. I include the numbers in this article so we can be more objective.

          1. Marie Jacobs

            “Instead of building a large enough passive income portfolio to cover a comfortable lifestyle, I’ve noticed more people are willing to retire early to live in or near poverty!” So…an early retired lifestyle with an income in or near the poverty level cannot be comfortable?

            “Any household income under 200% of FPL seems really tight, no matter where you live in America.” “I personally would not be willing to retire early if I had to live in or near poverty.” “After going through this exercise, I’ve concluded that my family of three would need to earn at least 300% of FPL ($62,340) in early retirement to feel reasonably comfortable.” Um…you’re right I totally missed there how you meant that having an income in or near poverty level would be a successful early retirement outcome.

            “If you are OK with living in abject poverty (100% of FPL)…” Well…abject poverty, aka extreme poverty or deep poverty is something different than 100% FPL. The Center for Poverty Research at UC Davis indicates that the US Census Bureau defines deep poverty as living with income of less than 50% of its poverty thresholds. But I see how adding that adjective to 100% FPL instead of calling it regular poverty sure makes it scarier than it would on just the accurate words or math. Also, true poverty is something more than just an income number—see my response to Andy below and the United Nations Sustainable Development Goal #1.

          2. Marie Jacobs

            But you asked for my numbers, which I dug out just for you today and are $4287 annually for property taxes and insurance. That’s right, I pay less than $360 dollars a month for taxes and insurance to live mortgage-free in a 4 bedroom 2300 sq foot house with a garage and a basement in a Midwestern metropolitan area with my spouse and three kids. Don’t worry—it is in a blue zone per your Investing in the Heartland of America Real Estate post map—not the dreaded gray zone which is likely cheaper. There are also two grocery stores, over a dozen restaurants and more than three dozen retail shops in a 1.5 mile radius. Of course, if you want to shop at Saks or Louis Vuitton or eat at Ruth’s Chris you’ll need transportation for the half-hour drive there. Let’s see how that one change in housing costs impacts the 200% of FPL budget that makes you a little angry because you want better for your wife and son…$3115-2100 rent + say $800 for taxes, insurance and maintenance on a smaller place for your smaller family = $1815 per month. Look at that-enough for the extra $650 in spending you already identified you want and still room for more fanciness or a lifestyle under 200% FPL! You’re right that you’d probably have to leave SF but clearly the other choices are not limited to imposing on your family. If you need more number examples there are dozens of FIRE bloggers out there that publish their expenses.

            Seriously though, poverty is a big problem to solve and kids too hungry and worried to learn are a heartbreaking outcome. Making fun of millionaires or otherwise globally wealthy people because their passive incomes are only near the FPL by calling them “paupers” aka destitute and relying on charity (per Merriam Webster) sure doesn’t improve the social stigma of poverty or help people understand how hard it really is to live in poverty without any safety nets, not even family to live with free if the income earned isn’t adequate to support the preferred lifestyle. With generational poverty the family probably also needs help. Sites like Financial Samurai can help close knowledge gaps from inadequate personal finance education learned at home and in the US educational system and help readers overcome stereotypes. As a voice for a higher cost of living coastal town surely you could have made readers aware of how using the same FPL figure for an area like SF as a low cost of living area doesn’t make sense? A voice for change and learning if you’re interested in helping make the world a better place and all? If you’re just in it for the clickbait to up your site traffic then forget I said anything.

            1. Your comments are super entertaining Marie. You’re totally missing the forest for the trees. And you are being way too sensitive to make you a pleasant person to be around.

              You share property taxes. Anything else?

              What do you think is the reason why you are so offended by the post? Look around. You are the only one.

            2. I’m a millionaire and my feelings weren’t hurt Marie. I can’t imagine what else you are so easily offended by. Be happy you live in the Midwest with a low cost of living.

              Don’t see how you’re helping anyone here, let alone the impoverished.

        2. Why are you blaming Sam when the government determines the level of poverty in the country? They are including low-cost areas of the country. If you think the government is elitist, blame the government, don’t blame the numbers.

          The numbers don’t lie. People do. Until you can show us your numbers and tell us how well off you are living on 200% FPL, you’re just being emotional and not looking at the numbers.

          1. Marie Jacobs

            A basic cost of living calculator easily shows that $31,170 in Brownsville/Harlingen TX equates to $57,490 in Oakland/Hayward/Berkeley, CA which is not that far from the $62k Sam considers the minimum for his family to feel reasonably comfortable. Location is a guess because I don’t know where 45 minutes outside of SF he finds acceptable and presumed 45 minutes to the beaches of South Padre Island would be better than suffering through a miserable midwestern winter.

            I’m not blaming Sam for using government definition of poverty level to start a discussion of margins and portfolio size and whether too many people trash a career too early in the rush to label themselves early retirees. I’m disappointed that he chooses to apply the poverty label to persons with a “small” portfolio (“How much you need to retire to live in poverty”).

            Per the United Nations Sustainable Development Goal #1:
            “Poverty is more than the lack of income and resources to ensure a sustainable livelihood. It’s manifestations include hunger and malnutrition, limited access to education and other basic services, social discrimination and exclusion as well as the lack of participation in decision-making.”

            This hardly describes most US early retirees, even those living #vanlife.

  46. I think a percentage of the FIRE movement sees it as sport “I retired at 30! Look at me!”

    Which I understand…at the start of my journey six years ago (@40) I just couldn’t wait to get to the finish line.

    Over time, I’ve come to understand this is more a toolkit to customize to your family’s needs. I won’t retire at 30 but I’ll retire before 98% of my peers, and for now I have plenty of FU money, which makes life much better!

    It’s been very empowering and satisfying for me.

    One piece of advice I’ll throw out there is focus on income above all else. Embracing enough is good, and required really, but as you age that definition will change. Focus on income and your options will grow exponentially.

  47. I love this post as it portrays sort of close to my own personal situation.

    I think the argument is, do you want to live in NYC while washing dishes or do you wanna live in a small town in North Dakota while having a decent office job? Yes, the allure of NYC is there and we all would like to live in a place like that if we could BUT, we sacrifice a whole lot in the process. Therefore at the end of the day, it all really comes down to escaping the rat race ASAP so you’re not bind down by anything then you’ll be truly free.

  48. People Are Dumb

    There’s definitely a lot of early retirement fakers out there who don’t even have close to the numbers in your figure to live in poverty. All they’re doing is trying to make money online so they don’t have to go to work.

    But restricting yourself so much in “early retirement“ isn’t appealing at all. Imagine wanting kids and not having kids because you can’t afford it. Imagine having to still live in a crappy place in your 40s.

    Retiring early in a bull market is really stupid. And I see stupid people everywhere online right now trying to get convinced by stupid people who don’t have enough real world experience during down times.

    1. I definitely feared having to put my life on hold for the desire to be free. Now that I’m a dad, I can’t imagine life without my son. The joy is so amazing. And to be able to spend so much time with him until he goes off to school is a blessing.

      Retiring in a bull market is not financially optimal. At the same time, I retired at the beginning of a bull market… I could have made a lot of money if I stuck it out for 5 more years from 2012-2017. In other words, there’s no right time!

      But there is an ideal time to retire early.

  49. Interesting. I live in a mid-size West Coast city (so not as expensive as SF) and the minimum budget i’d be comfortable intentionally early retiring on is $10k with a family of 3.
    $3k housing/utilities
    $1.5k health insurance
    $.5k Travel
    $2k Food
    $2k private school tuition (public schools here are overcrowded and terrible)
    $.5 Car expenses
    $.5 Personal expenses (gym, clothes, gifts, cell phone)

    Currently, we could pull about $8500 a month passively so not a huge gap but I wouldn’t be wiling to cut any of the above voluntarily. If I lost my job, yes, there would be areas that could but cut but I wouldn’t want to permanently lower our lifestyle.

    1. Thanks for sharing the budget. $10K/month after tax for a family of three is a nice lifestyle. And the $3K for housing is reasonable and probably gets you a really nice place right?

      At a 3% withdrawal rate, we’re talking $4 million to cover $120K/year. Thanks for adding in the cost of health insurance there, which is very realistic. We pay $1,735/month for three.

      1. Yep- the 3k for housing is pretty reasonable. Currently, we’re renting because we recently sold a place in a higher cost area. Overall, I expect it to cost around the same once we buy (say opportunity cost @3% of 700k + maintenance/taxes/repairs).

        I think my 1500 health insurance cost might be tad low since that was just premium- should probably add another $500/month for actual pre-deductible/co-payment spending.

        Adding that in and adjusting for tax, we’d probably need atleast around $4.5M in total net worth to have a shot at retiring. So, yeah, those various FPL scenarios you talked about are well out of reach for us without a very uncomfortable amount of lifestyle adjustment + health cost risk.

    2. Rich – How are you paying $3,000 for housing in a bad school district in the midwest? You can get housing in a good school district in California or the NE for less than that.

      Unless you are living in a big coastal city, your housing expense should not exceed $2,000 per month. Hell, I just found a 3 bedroom/ 2 bath townhouse in SoCal 1 mile from the beach and in a 9/10 rated school district for $3,200.

      $2,000 a month for food is also insane. You spend $66 per day on food? I’m concerned for your health.

  50. Nope. When I retire (not all that far off) I want to be able to DO the things one can’t reasonably really do in a week or two of paid vacation.

    Go hike Easter Island and snorkel in Bora Bora, rent a house for a month or two on an Aegean island, or in Scandinavia. Main considerations should be deciding just how many stars I have to have for the hotel we will be staying in, and the restaurants we will be eating at.

    I sure as heck don’t want to be worrying over whether I should get the house-brand coffee versus Maxwell House, instead of Blue Mountain versus Kona (let alone cat food versus grass fed beef).

    What makes this doable is saving steadily, having a spouse with the same sort of spending habits, investing reasonably wisely (don’t have to be Warren Buffet), doing your own taxes so you actually understand what’s going on there.

    Most importantly, you can’t be wishing your life away waiting for the future.

    It may take awhile but chart a career path towards having a job that, that while it may make it difficult to take off more than a few weeks a year, doesn’t require wild hours, strange schedules, and is sufficiently rewarding, both in remuneration and satisfaction, that you don’t mind sticking with it awhile.

    Newsflash! Even most rich people work. The difference is that they get more choices as to what they work at, as well as when, and for how long.

    1. Good stuff! How old are you and when do you plan to retire? The fear a lot of people have is waiting to be too old or too sick or too injured to retire and do all those things. FOMO.

      1. Allan Press

        Yeah, I agree with Snazster. I feel that the “FIRE” crowd usually underestimates how much money that they will need in life in general. If you are a single person, with no children, and you are comfortable penny-pinching, then that’s one thing. Go ahead and retire with a small portfolio generating a meager income. But for many, the whole “FIRE” movement focuses too much on being 35 and telling people that you are retired.

        The way I look at money is how it relates to my time. My time is the priceless object that I sell for as much money as I can get. I take that money and spend some of it on my life’s expenses, and the rest I invest in income-producing assets. I will probably retire when three conditions are met: 1. I no longer enjoy my job. 2. I am generating enough monthly passive income to provide a comfortable lifestyle. 3. Debt-free.. This will probably happen when I am around 50.

        Obviously we all want to be healthy, and not “too old to enjoy” whatever it is we see ourselves doing. But I would rather do some of that stuff now, so that’s what our family does. We don’t save quite as much as we could but we do things that are cool and build memories. Our family is also active and we focus on physical activity. For me that is surfing mainly, but also running, hiking, walking, etc.

  51. The “do-ability” of retiring at 200% of the poverty level is not so bad if you live in a poor area. Not all of us are coastal elites. Consider that $25,000 a year goes a long way when rent is $650 a month.

    Here’s my budget

    Rent: $650
    Car ins: $ 47.26
    Gas: $ 65
    Phone: $ 29.64
    Food: $150
    Grooming:$ 20
    Misc: $100
    Health: $ 72
    Gaming: $ 65
    Booze: $ 50

    Obviously, health would go up upon retirement, but misc and gas would go down. This budget is $1,250 a month of spending and $25,000 would net to about 22,500 which gives you 1875 a month. That’s $525 of fun money, which is pretty sweet. I mean, you can go to dinner at Applebees for like $25, go bowling for $5 an hour, etc. There’d be money for vacations too.

    Also, not everybody lives off bonds in retirement. If you have a good dividend paying portfolio of stocks and junk bonds with a few REITS thrown in, there’s no reason you couldn’t get 4% in dividends a year and never draw down your principle. For example, Vanguards junk bond fund pays like 6% (monthly compounding). I don’t think very many people are really going to try to live off the 2.25 govt bonds.

    1. How old are you and how many people are in your household?

      BTW, where does the term “coastal elite” come from? Why are people considered elite in this situation? Half the population lives on the coasts due to the jobs.

      Do you feel like you’re getting ahead on your budget? And do you think you can amass $480K – $1.2 million on your existing income to retire early and live on your budget?

      1. I’m 23 and I rent with 2 roommates.

        Coastal elite is a person who thinks that a $100,000 income is “low” and “barely getting by”. It’s an upper middle class or borderline wealthy person who lives in a 100% white gated community with 2 Cadillacs in the driveway who is out of touch with what life is like for the vast majority of Americans. These are the typical “champagne socialists”. Not everyone who lives on the coast is a coastal elite.

        I’m currently investing over 50% of my income (net income $28k, spending $12). Over 20 years I’ll be over a million, the interest from which should support a comfortable lifestyle for me in a low cost of living area. Unlike most folks, I don’t need a mcmansion or Cadillac CTS-V or lunch at a 3 michelin star restaurant to enjoy my life. I also don’t have anyone leeching my money. I’ve seen too many guys ruined by a spendaholic wife, or a divorce. F that.

        1. Gotcha. Thanks for the explanation! I didn’t realize that was the definition.

          I’m glad he got things figured out. When I was 23, I lived in a studio with my friend in New York City. It was a fun time, but I have a quarter life crisis.

          1. Basically, if you support diversity, but live in a gated community and send your child to a private school, that’s a coastal elitist. It’s similar to a champagne socialist or limousine liberal, a person who has benefitted greatly from capitalism and still hates it. A person who says they care about the environment then drive a huge SUV, etc. A person who believes that Hillary lost because of Russia, and not because of how working-class whites in the rust belt were sick of getting sodomized by globalists. A person who thinks the SALT deduction (making poor folks share the cost of your choice to live in a big house or high tax area) is a good thing.

          1. I make about $35k. I live in a rather small city (~50k) in Rural PA. I’m glad to help improve the site, as I’m sure there are other minimalist people like me who would benefit from information that is tailored to them.

            Let me know if any other info would help.

  52. There are other methods to retiring early without living in poverty:

    1) Have a working spouse provide health insurance and extra income
    2) Be a childless couple with side income

    But I think most people want the love of having a family and both wanting financial freedom. That would stink if my spouse was retired and I had to work all day.

  53. Interesting and helpful post Sam, although a little confusing to understand IMO.
    If I understand it correctly, the amt in the far left column is what that investment portfolio would “throw off” based on the return %…and that total is below or at the Federal Poverty level.
    Like you mentioned about being used to saving and living frugally, I also equate that with being ok to living beneath your means. I’m ok with living very sparsely, with housing taking care of in my nice neighborhood.

    As a final point, this seems to mainly take into account an indefinite time horizon for living at this level. But, for people that just need to “bridge that gap” until SS kicks in, this seems more “dooms day” than it is. I’m planning to supplement our one income household with investments and then collect at 62 (or 9 yrs from now) and my wife might start collect between 65 and 70. When hers kicks in…(if investments continue to grow and barring a meltdown) We’ll be pulling in more money than we ever have before,(in the recent past) or very close to it

    Unless I’m missing something, or if you’re just assuming SS will be defunct….it doesn’t sound as scary as it might be…for a while.

  54. Thanks for FPL tables… really interesting to see! As I’m sure we all have done, I took these numbers and weighted them against my situation.

    We have a family of three and I plan to retire on dividends and a little rental property income. I suspect I’ll be inside the 200% number (around 40k a year).

    However, just as your family of three budget shows, the majority of that income goes to rent. For us, we will own our home and property expenses should be at max 7k a year (instead of 25k). This give us a pretty large buffer. Just wanted to point out that living under 40k a year is easily workable when you own a home.

    As always, great article!

    1. debt cycles are fun

      Wait until dividends are suspended to divert cash flow to debt payment and the principal takes a hit b/c companies are floating new shares to help pay back debt.

      But again, I missed out on the entire 10 year bull run, so I’m pretty bitter. ARgh!

      1. thats why you invest in companies with a solid balance sheet and little debt. Examples: XOM, T, MCD

        1. Recovering Engineer

          AT&T has $197B in debt and $10B in preferreds, they have more debt than equity. And their business is shrinking on an organic basis and declining in profitability. I’m not sure you have the definition of “solid balance sheet” quite right. Just because a company is a brand name doesn’t mean it is a safe dividend. Ask everybody who owned a bank stock in 2006 how safe their dividends were. People who have only been investing in a massive bull market with Fed induced debt bubbles forget that dividends are paid out of earnings and when earnings go down in a recession so can (and do) dividends.

          1. And AT&T is currently working hard on that debt. Sure, some companies will cut their dividend during the next recession, but it’s folly to think all companies will. Diversification is key! However, I really wasn’t trying to highlight dividend investing… I was just pointing out how important it is to minimize housing costs during retirement.

        2. There is beautiful irony in picking a lousy company that is also the most indebted in world history (AT&T) when making this comment.

  55. I agree with everything in this article. It’s also similar to some of the things Suze Orman has been saying that has brought her under attack by some segments of the FIRE movement.

    Too much of the FIRE movement seems predicated on being so miserable at your job that anything would be better. But another option is find a livelihood that doesn’t make you miserable.

  56. The older I get the more I think taking a gap year instead of full retirement makes sense. I’m planning on taking 16 months off in Spain to become conversational in Spanish, have my daughter experience a different culture at 6 years old, and to explore Europe. Life is a journey and I like the idea of trying new things and new paths. I’m an accountant so it should be quite easy to get a new job after the gap year.

  57. To me, “early retirement” feels like a scam. Even retiring after 65, many people go into depression for 2+ years, having lost their purpose in life. I can’t even imagine the pain and suffering people would go through with early retirement. My goal is to never retire. Maybe change jobs or do some business, but never retire.

    1. Thats why you need to have a life outside of work. The reason people get depressed when the reitre is that they built their whole lives around work. Dont let your work define you

  58. 200% FPL would be very tight in SF.
    For Portland, that’s not too bad. Our regular expense is around that level and we’re pretty happy with it. Of course, if we count travel, then our spending is closer to $50,000/year.
    100% FPL would be really tough even in cheaper locations. In that case, I’d rather work a bit longer and save up more.
    It’s mainly for safety sake. You never know what’s going to come next in life. You might be able to live on minimal expense now, but life changes. Life never gets cheaper so everyone needs some cushion.

  59. Sam, interesting insight as always! So that I can put in context, what is your definition of early retirement. Is it anyone retiring before they are eligible to take social security at age 62? or at 59 1/2 to access any of their respective pre-tax accounts without penalty?

  60. Effective lower bound awaits

    The official CPI will be rigged to make TIPS a loser. This is policy. Financial repression. 200T in unfunded liabilities are coming on balance sheet. This is why the Fed will have to return to QE in spite of so called “strong economy”. We are headed to a fiscal disaster as foreign demand for Treasuries has dried up since 2014. Back in 2013 during the debt ceiling fiasco, China saw what we were going to do and said screw you guys. “We will no longer accumulate treasuries.” Hence BRI, BRICS Payment to go around SWIFT, Shanghai RMB crude futures, and soon Shanghai gold futures in RMB and USD on our Comex.

    But I did miss out on the 10 year bull run, so I’m hoping things will come back so I can catch up.

    1. If I may, just focus on your risk tolerance, adjust your allocation, and take the long-term approach. 10 years on the sidelines during this bull run in inexcusable. Even though we may understand all economic indicators and keep up with current events, there are millions of variables that make it impossible to time the market. The opportunity cost of sitting on cash may not be worth the downside risk of the market crashing, especially if your retirement is beyond a ten year time horizon.

      Btw all of your points are relevant, but there’s always a common denominator between people who have allocated all of their retirement funds into bonds or treasuries after the 2009 crash. The sky or the market will always fall because of A, B, C, or the combination of all. A crash may or may not be imminent, the financial system may or may not be completely revamped, there may or may not be new technological innovation that propels us forward, there may or may not be significant financial implications that we are not aware of…

      You get my point. We strive to know all (which is a good trait), but we all have the tendency to hone in on data points that confirm our bias (which hinders us).

  61. Effective lower bound awaits

    But yields are going negative! Lagarde being tapped as Mario’s successor makes it a done deal. If Euro rates are negative 3% then Powell will have to pierce the zero bound, for the differential would be too great. Too much capital would flow to the USD making the global margin call worse.

    So there is no way to achieve critical mass. There is no number at which enough passive income can be generated. This is the sovereign debt crisis. There is too much debt. It can’t be serviced at real positive rates. So bad now that nominal rates will go negative. Powell subtly told us this in Chicago last month with language changing from the “zero bound” to the “effective lower bound”.

    Savers, bondholders are the marks at the poker table. They will be sacrificed.

    As for equities…are they really equities any longer? Look at how polluted balance sheets have become with debt fueled buybacks. And they all use Enron type accounting now. Corporate managements are looting the company treasuries!

    1. You remind me of the guys that expected The End back in the 70s to come about from a combo package of: full nuclear exchange, ice age (which is actually a possible post-nuke scenario), and the collapse of the dollar. I’ve been hearing this last one my whole life. Much like the claim of the great leftist phase shift, which I have also been hearing most of my life, it is not going to happen. If everything goes to hell, gold will do you no good until AFTER things start recovering and assuming you will survive the phase change is pretty presumptuous.

      I’m betting on civilization making it, because what other option is there? We are a clever species and few of us sit sit around and wait to die if things get really bad.

      1. Paper Tiger

        Financial armageddon in 2008 came about as close as we will probably get in our lifetimes. Between the Fed, Global Banks and Government backstops, the crisis was averted. If we ever get close to the edge again, processes are in place to address the worst of the crisis. Global governments find ways to collaborate to avoid global armageddon when it is at the doorstep. If all Hell does break loose, there are no safe havens to run to no matter what you do to prepare for it.

        1. They just papered over the GFC. Since then debt growth has outpaced even the inflated official GDP numbers.

          In 98 a hedge fund almost collapsed the system.

          In 08 an investment bank,

          Next crisis will be on the sovereign level.

          But there is a solution. There is a mechanism to reconcile the mismatch between assets and liabilities on sovereign balance sheets. It’s an accounting trick. FDR did it in 34 and Trump has been hinting the same. Once done civilization will be out from under the yoke of debt deflation and a spectacular expansion will ensue. Just don’t be exposed to ghost assets which litter the investment landscape presently.

    2. If there was too much debt then its price should be low and its yield high. What is weird is that investors are happy to pay high prices for all this debt.

  62. I definitely do not want to live a minimalist life as an early retiree just to shave off a few years of work.

    As a physician I have invested a lot to build up a considerable amount of human capital and retiring too early would waste it. It is incredibly difficult to hang up the stethoscope for a period of a just even a few years and then try to get back in if you find out you made a mistake. Even if you kept up with your active licenses and required continuing medical education each year, just being out of medicine means you will fall behind in your knowledge and skills and it is hard to regain that.

    That’s why I’m ultra conservative and likely retire a little later than I could have just to build a margin of safety (I would like to keep my SWR at 3.5% or lower).

    1. Hi Xrayvsn, I agree wholeheartedly. Veterinarians (though not as well paid as physicians) invest a lot of time and money to reach the level that we do (again, continuing education, licenses, etc), and to give it all up too early is a shame. I’ll retire at 59 1/2 and be happy. Sam’s posts have been invaluable!

  63. Between 1990-2005 there seems to be a healthy spread between Treasury yields and inflation. In this model, 2% leaves you with negative “real” income. To make this work you’d need to build a passive income portfolio of riskier assets that beat CPI by 2% (or figure out how to personally leverage up on TIPS)

  64. I was in Southern California this week for work. I did an early run. As the sun came up, I ran by a Leisure World which had a rehabilitation facility right next to it. As I rounded the corner, an old woman’s face appeared in a window under harsh light and dim sunrise. The curtains of her room were in tatters. The bed looked shabby. She was alone.

    I ran away fast going “no no no no no.”

    I’m not sure why.

    I am sure I’ll be working for a long time. I don’t want my parents, my wife, or myself to end up in that room at the end of life. I don’t know if a lot of jobs in this country worse than being in that room in old age.

    1. Yeah, I know what you mean.

      Whenever I see a senior, alone, in their senior homes, I feel terrible for them even though I know nothing about them. For all I know, they may have wanted to retire there to peacefully live a low-key retirement life.

      However that projection that I feel is because being alone and weak is one of my greatest fears of aging.

      I don’t want to be in a position where I don’t have an adequate retirement fund or have made terrible health decisions to put my in physically bad shape. I don’t want to have to depend on my kids when I’m old financially. I want to be able to have options ton move or travel around anywhere I please when I’m of old age. I don’ want my kids to come home to me when they visit with my back all curled up and barely able to hold my grand children. Or become exhausted with joints and hurting everywhere after running around with my grand children for five minutes. I want to be able to engage with everyone, mentally, intellectually, physically, until the day I die.

      I don’t know the real reason for why I feel that fear so much, but if I were to guess, I’m sure it has to do with my personality. I’m an INTJ who’s fiercely independent (to a fault). Having little to no option makes me feel claustrophobic and anxious. Not being able to do what I want or not being able to express my opinion in the way I feel is logical, makes me feel frustrated. I can go days without interacting with friends or sometimes even weeks and be completely OK with it as long as I’m doing stuff alone that makes me happy. As long as I know I have the option to do what I want, but am making a conscious choice in everything that I do in life. How I spread my time. My money.

      I’m going off on a tangent here, but I just wanted to reply to your post because your “no, no, no, no” part resonated a lot with me.

      1. Thanks for responding. At least one person out there feels the same as me.

        Interesting that we are both more introverted but it is important to us that we are not alone as we age.

        This will require social and familial investments to compound in addition to financial and physical.

        1. NICE! And why am I not surprised?!

          I always get excited to meet a fellow INTJer. In fact, there is one other INTJ at work that I know of (we have about 400 people in our organization) and we get along great. We constantly challenge each other, we seldom offend each other even though we’re blunt, and we don’t mind if we don’t talk at all even if we’re in the same room together.

          Here are some interesting tidbits about INTJs:

          – INTJ’s make up only 2 or 3% of the population, but are represented in numbers way out of proportion for those that are in upper management / executives

          – INTJ’s are perceived to have very poor emotional IQ, because of the way we think / judge. We only filter information objectively as possible, and discard relational or personal aspects that turn people off when talking with INTJs

          – You would think INTJ’s would get along with someone who’s their opposite, e.g. someone’s who’s extremely social, someone who loves realistic ideas, etc., but it’s actually the exact opposite. INTJ’s get along best with those that share similar traits.

          – Most INTJs don’t care about credentials. It’s all about competence. The con here is that even though an individual may have gained an INTJ’s respect through competence, it’s very salient because for INTJ’s that competence needs to be continually shown which leaves INTJ’s frequently dissatisfied with leadership.

          -INTJs, although blunt and “objective” in thinking, tends to overthink a situation and marries a thought that they developed in their head and projects it to reason that it’s true, thus we make a lot of assumption about people’s behavior.

          Anyway, that’s enough. I had a fascination with the 16 myersbrigg personality type and jotted down some notes that I wanted to share.

          1. Bernie Keene

            Another INTJ here! My mother passed away at just 75 years old. The last 5 years she was in bad health for a number of reasons. My Dad did absolutely all he could for her. Myself and a few of siblings did a lot too. That was 17 years ago. My Dad has been in a nursing home for 2 years and I visit him almost daily. I’ve seen so many older folks not being able to take care of themselves that I have made drastic diet, exercise, sleep, emotional and other health related improvements to my life. I don’t have 6 kids like my parents do, to take care of me later in life. I am 59, never married and no kids at all. The funny thing about relying on your kids to help you during old age is, I hardly ever see other visitors at my Dad’s nursing home. A nurse there told me many residents hardly ever have visitors. So I need to be able to take care of myself for a long time!!

            I’m 59 now and got a very late start on financial independence. My plan is to work until I am 63 or 65, have about 1.5 million to leave in index funds until age 75, when it will hopefully be 3 million. From retirement to age 75, I want to travel certain parts of the world frugally and enjoy healthy foods and activities. I should have about $300,000 and SSN kicking in at 70 at about 40k a year for this.

            I want to have plenty of money for when I am about 90 or so, if I do need to move into some type of assisted living or nursing home, I want it to be among the very best!! I hope my healthy lifestyle allows me to have a strong mind and body, for more years than most people do now.

            Besides investing money, investing in ones health is just as important. I’m trying to figure our a blog that encompasses this idea and want to be a resource for others.

            Thank you Sam and everyone for the community around this,


      2. Loving the INTJ tangent here. I’m another INTJ who’s currently coming to grips with that fact that my career may be over right now in my early 50s. I too was pegged as having low emotional intelligence because I had the audacity to speak up on occasions when I disagreed with something. About 3 years ago, my boss who understood me got pushed out into early “retirement” himself. The head of HR took this opportunity to tell the new boss that I was “difficult to work with” and “not collegial”. The new boss bought it and was the type of leader who is quite intolerant of any form of dissent, so I probably never really had a chance. I saw the handwriting on the wall and was ready to try something new anyway, so starting googling “how to negotiate a severance package” and that’s how I discovered this site. I bought the severance negotiation book and “got laid” (off) in Sam’s terminology. I had worked there about 15 years and received a very strong package. After a year of job search and some consulting work I landed another position. It only lasted ~2 years because my new boss was pretty much incompetent and I decided not to live in his chaos. I negotiated another soft landing. I could probably retire now with about a 3.75%-4.0% withdrawal rate, but I would have liked a greater safety margin. I’m finding that having left 2 jobs in the past 3 years has pretty much made my name mud in my current market (a mid-size midwestern city with around 1 million population where everybody in my field seems to know everyone else). Never mind that before that I had 2 jobs in 21 years – now I am a flaky, mercurial job hopper.

  65. Fascinating math! There’s a ton to take into consideration before retiring no matter how old or young you are. But I think the younger you are the more factors and unknowns one should prepare for. And I don’t think I would want to have only a poverty level of income to survive if I was retiring young and had so many years left to live with so many unknowns.

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