I recently received a question that boils down to this: How do you know when you have enough money? And once you do, when is it time to shift from chasing excess returns to simply maintaining what you have?
There are several ways to approach this question, which I’ll explore in this post. I've come up with a framework that I think makes sense for those who think they truly have enough.
Here's the question presented from a reader.
Hi Sam,
I just finished your piece on risk-free passive income—really well done. A very accurate depiction of the trade-offs between the two approaches.
I have a question for you: You illustrate the comparison using a $5 million portfolio. I’m curious—at what wealth level does the appeal of building more wealth start to fade, and when does preserving capital with 2%–3% returns plus inflation protection become the primary objective?
I fully agree that wealth building is still relevant at the $5 million level. But what about at $10 million? $15 million? Or does it take more? Let’s assume a 3.75%–4% yield and inflation-beating dividend growth (say, via SCHD). Real estate could match this as well, but I question whether it truly qualifies as passive.
At what point in the journey does playing defense and focusing on income stability outweigh the pursuit of more wealth? When is it time to stop chasing and just maintain?
Thanks,
Jim
The Elusive Concept of “Enough”
“Enough” is subjective. For some, there’s never enough money—enough is always a moving target, 2X more than what they think they want once they get there.
For others, it might mean having 25X to 50X their annual expenses in investments, multiples I think are appropriate for 80% of people to answer what enough is. Spend $50,000 a year? You have enough if you have between $1.25 million – $2.5 million in investable assets.
I personally like using the inverse of the FS Withdrawal Rate as a guide. If the 10-year bond yield declines to 3%, then you'd divide $50,000 by 2.4% (3% X 80%) if you use my FS withdrawal rate to get to $2,083,333. My safe withdrawal rate is a dynamic safe withdrawal rate that changes with economic conditions. It helps families build generational wealth.
However, I believe the best way to know you have enough money is this: you refuse to trade your time doing something you don’t fully enjoy for money.
What you enjoy is, of course, also highly subjective. But it should be something you like doing at least 90% of the time or you feel at least 90% of the activity is enjoyable.
The Real Test: Will You Walk Away?
The clearest indicator that you have enough money is your willingness to walk away from a job—or an activity—that drains you.
You can rationalize your way into staying. You might tell yourself: “I don’t need the money.” But if you’re still clocking in at a job you dislike, you’re not being honest. Time is more valuable than money, so if you really had enough, you wouldn’t be doing something you dislike.
Now, I know some of you who are financially independent on paper will say, “But I love my job.” And that’s awesome. Seriously—you’ve hit the career lottery. Keep going. Nobody quits or retires early from a job they love.
But I also know many more are saying that out of fear—afraid to let go of a steady paycheck, afraid of losing structure or identity. And if that’s the case, I challenge you: muster the courage to engineer your layoff or find a path out. That’s when you’ll know you’ve reached enough.
Questions to Ask Yourself If You Think You Have Enough Money
To help determine whether you have the courage to stop doing something you don’t enjoy just for the money, ask yourself:
- Would you rather take care of your baby during their precious first year of life, or sit in endless meetings every day?
- Commute during rush hour, or sleep in and read a good book?
- Work late for a month to finish a project, or spend that time playing with your kids or helping them with schoolwork?
- Travel for business for weeks at a time, or care for an aging parent with health issues?
- Meet monthly and quarterly sales quotas, or play pickleball in the late morning and take a nap after?
- Play corporate politics to get promoted, or enjoy the freedom to be your true self and only spend time with people you like?
- Fly out on a Sunday afternoon for a Monday morning client meeting, or travel the world with no set return date?
If given the choice, who with enough money would honestly choose the work option in any of these scenarios?
Your financial independence number is not real if you continue to subject yourself to displeasure after getting there.
When Is It Time To Stop Chasing More Wealth and Just Maintain?
Once you have enough money, logic would dictate that you no longer need to take financial risks. Instead, you could simply invest your entire net worth into risk-free or low-risk investments that at least keep up with inflation.
These types of investments that generate risk-free income include:
- Money market funds (though yields may not always match or beat inflation)
- Treasury bonds (yields are generally higher than inflation)
- AAA municipal bonds (nearly risk-free and usually yield more than inflation)
The reality, however, is that stocks and real estate have historically been the best-performing asset classes when it comes to beating inflation over the long term. Cryptocurrency—specifically Bitcoin—is also a contender. But as we all know, none of these are risk-free.
Divide Your Wealth Into Risk-Free and Risk-Required Buckets
If you truly believe you have enough money, the best strategy is to allocate a portion of your net worth into completely risk-free or low-risk investments. This bucket should generate enough passive income to cover 100% of your living expenses. In other words, ringfence a portion of your net worth that will take care of you for life, no matter what happens.
Once you’ve secured this financial base, you can then invest the remainder of your wealth in riskier assets for potentially greater returns, without the stress of needing those returns to survive. Think about this portion of your investments as playing with the house’s money.
A Fat FIRE Example:
Let’s say your desired annual household spending is $400,000. You’re fortunate to have a top 1% net worth of $14 million. At a 4% safe withdrawal rate, you’d allocate $10 million ($400,000 / 0.04) into Treasury bonds yielding over 4% or similarly safe investments.
You can then invest the remaining $4 million into stocks, real estate, venture, crypto, or any risk asset you want. Even if you lose half—or all—of this risk bucket, your lifestyle remains fully supported by your safe assets. Thankfully, most investments don’t go to zero and actually make you money over time.
A Lean FIRE Example:
Let’s say you and your spouse have no children and are content spending $30,000 gross a year. Your net worth is $800,000. At a 4.5% safe withdrawal rate, you would allocate $667,000 to risk-free or low-risk investments, and invest the remaining $133,000 in riskier assets for possible upside.
Now, of course, allocating 83% of your net worth to safe assets might seem extreme. But if you’re truly satisfied with what you have, then this asset allocation makes perfect sense. Especially when the Treasury yield is greater than inflation, as it often is—since inflation helps determine bond yields in the first place.
If you're uncomfortable with such a conservative approach, then perhaps you don’t actually feel like you have enough. On paper, you might be financially independent, but emotionally and psychologically, you're not there yet.
You're still willing to risk losing money for the chance of having more that you want or think you need. Or you're still encouraging your spouse to work or you're still working hard on generating supplemental income.
And that’s OK. Just be honest with yourself about whether you truly have enough.
The Ideal Percentage of Your Net Worth in Risk-Free Assets
You might think the ideal situation is being able to allocate the smallest percentage of your net worth to risk-free assets while still being able to cover your desired living expenses. The lower the percentage, the richer you appear to be. But having too small a percentage in risk-free assets might also suggest you're overly frugal or not generous enough with your time and wealth.
For example, let’s say you have a $10 million net worth, the ideal net worth to retire according to a previous FS survey, and only spend $40,000 in gross income a year. At a 4% rate of return, you’d only need to allocate 10%—or $1 million—into risk-free investments to cover your expenses. But what’s the point of having $10 million if you’re only living off 10% of it? You could have saved all the stress and energy slaving away when you were younger.
Sure, investing the remaining $9 million in risk assets to potentially double it in 10 years sounds exciting. But again, what’s the point if you're not spending it or using it to help others? Money should be spent or given away before we die.
A More Balanced Approach: 20%–50% In Risk-Free Investments
Once you have enough, the ideal percentage of your net worth in risk-free assets is somewhere around 20% to 50%. Within this range, you're likely spending enough to enjoy the fruits of your labor—say, $80,000 to $200,000 a year, continuing the earlier example. At the same time, you still have a significant portion of your net worth—50% or more—invested in risk assets that have historically outpaced inflation.
Even if you no longer need more money, it would be unwise to bet against the long-term returns of stocks, real estate, and other growth assets. And if your risk investments do well, you can always use the extra gains to support your children, grandchildren, friends, relatives, or organizations in need.
When in doubt, split the difference: 50% risk-free, 50% risk assets. It’s a balanced, emotionally comforting strategy that gives you both security and upside. As your net worth grows, overtime, the risk free percentage of your net worth gets smaller and smaller.
Nobody Is Going to Follow My Recommended Risk-Free Percentages
Despite the logic, very few people who believe they have enough money will follow this 20%–50% allocation guide. Why? Two reasons:
- Greed – We all want more money, especially more than our peers.
- An Unrealistic Fear of the Worst – We catastrophize worst-case scenarios that rarely happen.
Ironically, these two emotions often lead us to take more risk than necessary in pursuit of money we don’t actually need. The result is usually working far longer than necessary and/or dying with far more money than we can ever spend.
There’s also a positive reason many of the multi-millionaires I consult with give for why they keep grinding: the simple challenge of making more. They see it as a game—running up the score through productive efforts like building a business, gaining more clients, or conducting investment research and taking calculated risks.
My Reason to Take More Risk: A Clear Forecast for Higher Expenses
I left corporate America in 2012 because I believed $3 million was enough for my wife and me to live a modest lifestyle in expensive cities like San Francisco or Honolulu. And it was as we could comfortably live off $80,000 gross a year, the amount my investments were producing. The actual courage to leave was helped by negotiating a severance package that covered at least five years of normal living expenses.
But instead of putting my roughly $2.7 million in investable assets (excluding home equity) into Treasury and municipal bonds, I chose to invest 98% in stocks and rental properties. At 34, I knew I was too young not to take risk—especially since we appeared to be recovering from the global financial crisis. I even dumped my entire six-figure severance check into a DJIA index structured note. Check the receipts.
My wife also wanted to leave her job by age 35 in 2015, which added more pressure to grow our net worth. I also knew that having children would cause our annual expenses to balloon—especially if we stayed in San Francisco. Unsubsidized healthcare and preschool tuition alone could run an extra $4,000–$5,000 a month after tax. With a second child, our monthly costs could easily rise by another $3,000–$4,000.
Putting the 20% – 50% Into Risk-Free Investments To The Test
With a $3 million net worth, my recommended percentages into risk-free investments would be between $600,000 to $1.5 million. At a 4% rate of return, that would generate $24,000 – $60,000. Unfortunately, we wanted to live off $80,000 a year. Further, the risk-free rate was only about 1.6% at the time. Oh how lucky we are today.
At 34, I simply wasn’t rich enough to comfortably retire. Covering $80,000 a year in pre-tax expenses through risk-free income at 4% would require allocating $2 million. That means, at a 20% allocation, I would’ve needed to retire with at least $10 million! So it seems that the low-end of my recommended risk-free investments range is still quite extreme.
In hindsight, the most reasonable allocation to risk-free investments would have been 50%. To do that, I would have needed an extra $1 million in capital—raising my target net worth to $4 million.
This makes sense because one of my biggest regrets about retiring early was doing so too early. If I could do it over again, I would have tried to transfer to another office and worked until age 40—just 5.5 more years. If I had, I would’ve reached at least a $4 million net worth by then, especially given how stocks and real estate continued to rise. But then again, I forget how miserable I was.
Ah, being able to back up what I felt I should have done with objective math is a wonderful feeling! Instead of accumulating a $1 million greater net worth, I just spent time earning online income to make up for the phantom risk-free gross passive income gap of $20,000 – $56,0000 a year. It was an enjoyable and effective process, especially since I had the security blanket of a severance package.
This 20%–50% risk-free allocation range is another way to calculate your financial independence number. With $80,000 in desired annual spending and a 4% safe withdrawal rate, my FI target ranged from $4 million to $10 million.
Fear Of A Difficult Future Pushes Me To Continue Taking Risk
Today, I could sell a large portion of my investments and move the proceeds into risk-free Treasury bonds to cover our desired living expenses. But the tax bill would be immense.
Instead, I’d much rather allocate most of my new money I earn toward building up our risk-free investments. Of course, with my relatively low income, that will take time. So the first step was to sell one rental property and reposition some of the tax-free profits into Treasury bonds.
While our investments are worth more than 25 times our annual household expenses, only about 5% of our net worth is currently allocated to risk-free or ultra-low-risk assets. Witnessing AI displace jobs and seeing kids with 1,590 SAT scores and 3.96 unweighted GPAs get rejected from nearly 90% of the colleges they apply to paints a bleak picture of the future for my children. As a result, I continue to take risks for them.
Now that I’ve written this article, I should aim to increase that risk-free allocation to 30% by the time I turn 50 in 2027. Based on our current expenses and realistic net worth projections, this percentage feels achievable and appropriate. Having 70% of my net worth exposed to risk assets is more than enough to participate in greater upside potential.
If I can make the asset allocation shift, I’ll let you know whether I finally feel 100% financially secure. Please run your own risk-free percentage allocation as well!
Readers, how do you measure whether you truly have enough? Do you think people who say they have enough but continue working at a job they don’t enjoy are fooling themselves? What do you believe is the ideal percentage of your net worth to allocate to risk-free assets in order to confidently cover your living expenses for life? And why do you think we still take investment risks—even when, on paper, we already have enough?
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My answer to the original question that sparked the article is: Any level of wealth at which you are a) comfortable living off 2-3% of your invested assets indefinitely, b) can find a long-term risk-free investment indexed to inflation that will have a coupon of your desired rate, and c) are comfortable maintaining your current level of wealth. The problem is that pesky part b.
If you could buy $1M of TIPS (or similar) at 3% for 30 years and live off the income, you are guaranteed to have the same purchasing power for 30 years while maintaining your original investment.
Unfortunately, average TIPS yields have been lower than that, with the historical 20-year bond average of 1.2% (I couldn’t find 30-year data). However this year, 30-year TIPS have been over 2%. So, yes, theoretically it is possible. But, if you want a higher safe withdrawal rate (SWR) and/or the potential for principal growth, you’re going to have to take some risk.
In the original 4% Rule research the SWR was indexed to inflation, but suggested a portfolio of at least 50% stocks to last 30 years. You need risk in order to beat inflation by the margin needed to withdrawal 4%.
A 1M portfolio consisting of 100% Treasury bonds at 4% would produce 40,000 risk-free dollars a year, but would not be indexed to inflation. If inflation averaged 2.5% annually over 30 years, the original $40,000 would have the purchasing power of roughly $18,500 at the end of the period. Yes, you would have your original investment amount , but that would then be worth 116% less in real terms.
The 4% research was designed for a traditional 30-year retirement, which makes inflation adjustment even more critical for someone retiring in their 30’s or 40’s. Sam’s 20-50% advice for investing in risk-free assets is therefore in the correct range for anyone looking to use the 4% guideline. The earlier you retire, the lower in that range you should likely be.
As touched on in the article, there is a lot more to determining how much is “enough” than just math, but math is easier than emotions. Ha. Great article as always Sam.
“but math is easier than emotions” is a brilliant way to wrap it up, Neill!
I’ve found that most of us striving for financial independence can do the math and come up with a good estimate of when enough is enough.
Like Sam pointed out, the problem is, those numbers are only on paper. Making the leap from money on paper to money with actual purpose funding our lives is emotionally challenging.
My theory why it’s so hard to admit when we have enough: people that reach that number are high-achievers. To have $5M or $10M or more means you’ve been really good at whatever you do for a long time. It’s hard for people to give up that feeling of success, no matter how much it’s draining them on the inside.
Professional sports is an easy example. How often do we see top athletes hang on for another year or two when they’re well past their primes? It’s rare to see the biggest stars walk away early while still in their peak.
For us regular people on a typical career trajectory, our peak earning years are in our 40s and 50s.
Walking away from big paychecks, even though we know the math says we can is not easy to do.
Thanks!
Matt
Obviously, one size does not fit all here as every situation is different. I’ve been trying to come up with the right plan for the last 10 years when I retired, while my wife is still working. She was recently unemployed for 10 months and that gave us a chance to really track our expenses/spending without active income, and also gave me some pretty good insights on what we should be doing.
I am 67 and my wife is 64. I’ve decided I never really want to completely give up on equities and growth but I do want to make sure our passive income and safety net are in place so that we can continually allow the rest of the portfolio to experience long term growth and leave a nice financial legacy for our daughter.
We have no debt so it helps to be able to focus on basic expenses and potential wants for the future. For our family, our pensions and projected social security will cover our expenses pretty comfortably. We are delaying SS until age 70 to maximize the monthly payout. We both have deferred compensation plans from previous employers that bridge the gap until we take SS. I’ve considered Fixed Income Annuities with an LTC component to further provide some additional passive income/financial security.
Last, we are setting aside about 8 years of projected expenses in fixed income as an added safety net, in case something were to happen with pensions and/or SS reductions.
With this in place, I’m pretty comfortable with the rest of the portfolio continuing to be heavily invested in equities (about 70-75%). I like keeping some liquidity for future investments that may become attractive.
The plan always seems to be evolving, but this is my current thinking as move forward.
Really appreciate you sharing your plan. It sounds like you’ve put a ton of thought into it, and it shows. I like how you’ve found that middle ground between keeping growth potential with equities while still locking in enough safety to ride out whatever might come.
The 8 years of fixed income as a buffer is a smart move, especially with all the uncertainty around Social Security and pensions long term. And being debt-free? Huge. That alone makes everything else easier to manage.
Totally hear you on the plan constantly evolving. It’s like a living document—adjusting as life throws new stuff at you. Sounds like you’re in a great spot and still leaving room to stay flexible.
Hope you can enjoy that wealth to the max! Thanks again for sharing—lots of helpful takeaways here.
Thank you, Sam. I appreciate the kind words and well wishes. We are very blessed and I try not to take that for granted.
Congrats on the new book. I can’t wait to read it!
Thanks. And if you don’t mind leaving a review on Amazon, I’d appreciate it. Every review counts. Cheers
Great article Sam! I believe there is a middle ground however, between quitting your job entirely and grinding it out till you hit “safe” levels on wealth. This middle ground starts when you have a sizable amount of cash, perhaps around 10x of expenses, which allows one to shape their job experience such that the choices provided in your questions have obvious answers. Once your wealth hits 10x expenses, there is no need to chase promotions with office politics, travel incessantly on Sundays, wake up early for meetings or work late to finish a project. Moreover, nobody will notice if you go play golf in the afternoon 2-3 times during the work week, since most people are too self absorbed with their own performance. The key to such a life, beyond saving to reach the 10x threshold, is to recognize the situation and start making small changes in your job over the course of year or 2 to reach this idealized state where your job is not draining. Finally, by gradually reducing your workload over time, you get a glimpse of what the retired life could look like by easing into it, instead of making a drastic change all at once.
Thanks! I really appreciate your thoughtful comment—and I completely agree there’s a powerful middle ground between grinding hard and quitting cold turkey.
Hitting 10X annual expenses is a huge milestone. At that point, work becomes more of a choice than a necessity, and the pressure to play the office politics game or hustle nonstop fades. I love your point about reshaping your job over time—playing golf midweek, avoiding soul-sucking meetings, declining travel—all great ways to reclaim autonomy while still earning.
That gradual shift toward semi-retirement is something I’m a big fan of too. It gives people time to adjust, experiment, and find their ideal mix of purpose, income, and freedom. And you’re absolutely right: most people are too focused on their own KPIs to notice if you’re quietly optimizing your work-life balance.
Thanks again for sharing—your framework adds an important dimension to the conversation.
I think you’ll enjoy this post: The Minimum Investment Threshold Where Work Becomes Optional
This is currently exactly what I am doing. Attempting to adjust work like, in both time and intensity, to make it less of a grind and eliminate the all or nothing conundrum. I’m a 63 year old medical professional and I am decreasing my daily work load and beginning to look at a 3 day work week starting January 2026 at the latest. This article really hit home with me as I have been struggling with this exact topic for a couple of years. I viewed the business aspects of my work as a game, tweaking policies, schedules, investing to maximize. I now find myself with $35 million+ and wondering exactly what and why I continue doing what I’m doing. This article is perfect!!
Your heading, The Real Test: Will You Walk Away paragraph 3 says at the end nobody walks away from a job they dislike. I think you meant a job they love, just inviting you to recheck. Thanks for your content!
Good catch! Cheers
If you can afford to give half your money away in a divorce and you still have enough to live the life you want. You hit your number.
Congrats on the divorce and this financial achievement! But if you think about it, it should always be the case because assets will be split evenly at most.
Sam – thank you so much for your use of my question (no charge!) and kicking around many of the aspects one might consider. The math used to determine WD rates are value added and key – I really like the dynamic WD rate example.
I am flattered –
Thank you for all that you bring to the table
You bet! I really appreciate your kind words—and your thoughtful question. It sparked a deeper dive into a topic that so many people wrestle with but rarely get clear guidance on.
I’m glad the dynamic withdrawal rate example resonated with you. I’ve found that building flexibility into retirement planning helps people feel more empowered, especially during uncertain times.
Truly grateful for your engagement and support. You’ve helped make the discussion more valuable for everyone—thank you again!
Enough is definitely a tricky one to pinpoint. We can get so accustom to our routines over the years that it’s uncomfortable to stop. The fears of the unknown and running out of money are also hard to shake because of so many what-ifs. I do wonder how I’ll feel once I don’t have to worry about my parents anymore and my kids are independent. That should help a lot in decreasing what-ifs as will paying off the last of my mortgage.
These really resonates. Still having young kids and caring for an aging parent create a lot of financial unknowns. There is a huge psychological component to “enough”, a lot of it is rooted in trusting that whatever come your way, you can figure it out regardless of NW. there are just way to many factors in life that we can’t control that can easily blow up our plans, but having some faith in ourselves and remembering that we’ve always been able to figure it out how to get thru difficult situations really helps
Great article sam! I think the allocation you suggest based on safe withdrawal is appropriate. I think the increasing costs issue in the future kicks in more the younger (like you!) you are. At 60, I see being impacted by that in the next 10 years, but after that not as much since my pace of life will likely slow and (I am told) expenses will likely drop. Inotherwords, what I buy will increase but how much I buy and how many things I do wil. likely fall, resulting in less expenses or “real” wash.
That being said, with a 10 Mill net worth, and in a preservation stage, I don’t see putting more than 1M in cash/treasury-type assets initially in retirement. Instead of using SFW against my entire portfolio, I use a multiple of my expenses to allocate to low risk assets. We will plan to spend 250k (at most) a year over the next 10 years. With 4 years worth in no-risk assets (mutual funds and short term treasury ladders), I am comfortable that that will carry me through a bear market. During Market flat or up years we will draw from the 5 million or so in stocks. The other 4 million will be in municipal or longer-term treasuries.