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Why You’ll Probably Never Run Out Of Money

As strange as it may sound, earning financial freedom is a lot easier for certain people than claiming that freedom once they have earned it. And if the following statement rings true to you, you may be suffering from this same hardship:

“I think I’m close to having enough money to jump into early retirement, but not quite. 

So I’m just working one more year and starting one more side hustle and buckling down extra hard to be more certain.”

It sounds rational, right? After all, you can never be too careful, as the saying goes. 

But the problem is that these people keep repeating the mantra regardless of how much money they have, and regardless of their actual living expenses. No matter how bright their financial picture is, they always find a way to undervalue their savings and overestimate their future expenses, just in case of the unexpected.

And by tilting the balance ever further in the direction of “safety”, they forget about what should be on the other side of the scale, which is “making the most of your finite time on this lovely planet.”

This happens way more than you might think. Every week, it’s in my email inbox and my in-person conversations with people I meet. This fear is even prevalent among some of my real-life friends, so let’s look at a couple of thinly disguised examples from that group to see some of the symptoms (and a possible cure for) this famed affliction of One More Year Syndrome.

Alina’s Anemic Withdrawal Rate

Alina is a currently-single doctor in a stressful but well paid area of practice, age 50 with one grown child. She has about $2 million in investments, and currently spends about $50,000 per year, a level which includes pretty much everything that is important to her.

 According to The 4% Rule, Alina’s nest egg will provide a pretty reliable income of roughly $80,000 per year for the rest of her life. Or to put it another way, her planned spending of $50k is only a 2.5% withdrawal rate from that 2 million. Since 4% is reasonably safe, 2.5% is a preposterously safe withdrawal rate.

But wait! There’s more. In the interest of being conservative, Alina has deliberately ignored several other key pieces of her own financial future:

  • All future social security income (over $2000 per month for the last 2-3 decades of your life) 
  • A highly likely inheritance from her parents who, while wise and vibrant and still doing great, are in their early 80s. 
  • And she’s also assuming that she will never couple up with another partner someday and share household expenses, despite the fact that she’s an attractive and sociable person with many options in this department.

Her response to this feeling of extra caution? Just crank it out for another year or three in the furnace of the operating room, and hold off on any luxuries to save up another few hundred thousand, just in case. 

Dave’s Deceptively Bright Future

My other friend Dave is ten years younger, with a lower income but equally scrappy and very entrepreneurial. He has been a star performer in a very underpaid full-time job for over fifteen years. His total annual spending – including a mortgage on a $430,000 house here in Longmont – is only about $45,000 per year.

Although Dave lives in high-cost Colorado, he has carefully accumulated eight rental apartments back in his hometown (a midsized city in Ohio), which very conservatively deliver $2800 per month of net cashflow, while also increasing his wealth by a further $3000 every month through principal payoff and appreciation.

He also has a couple of side jobs, helping various members of our local HQ Coworking space with their businesses, which bring in a further $1000 per month. 

And then the kicker: Over the past seven months, Dave and I teamed up to renovate the main floor of that somewhat costly new house into a very high-end Airbnb rental. We recently pressed the button to make this place go live, and it became an immediate success with virtually no vacancy, now bringing in another $5000 per month (!?), while still leaving him with his finished walkout lower-level apartment as a place to live. 

So, Dave is living in his own basement collecting $5000 every month, while spending only $2000 on the mortgage. In other words, he is living for free and getting paid an additional $3000 for the chore of owning this house, a trick formally known as  the “Mustachian Inversion”

If you add all this up, he has a total business income of $8800 per month ($105,600 per year!), which absolutely dwarfs his $45,000 spending even without taking into account the salary from that crappy full-time job which he has been wanting to quit for so long.

 When you add in the additional $3000 per month of mortgage principal payoff and appreciation of the rentals, my friend’s side hustles are netting him $140,000 every year. And his bank accounts reflect this: there are sizable cash reserves and maintenance and contingency funds for every rental unit, plus a well-funded personal 401k plan and every other bit of responsible financial preparation you can imagine.

You may be slightly jealous of Dave because he is all set to kick back and enjoy the proceeds of all this hard work for life. He could cut his income in half and his wealth would still increase rapidly forever.

But remember, on top of all this he still has that full time job which is demanding about 10 hours of his time every day, with several hours of Zoom meetings packed in throughout, eliminating the possibility of slacking. 

Dave is a great sport and puts on a brave face, but all of us in the local friends group can tell that he is nearly buckling under the stress of this shitty, stressful job, especially combined with his overflowing salad bowl of side hustles. 

“Dave, you stubborn dumbass, you need to quit that job yesterday”

is the loving message we have been trying to get into his head.

“Yeah, I know”, he says, “But I’m just holding on for one more year, just to pad the accounts a bit further. What if the Airbnb slows down? What if my rental houses experience some vacancy? What if I want to help my nephew with college ten years down the line?”

Alina and Dave are both leaning upon the old rule of “You can never be too safe”, and many people agree with that statement, because how could you argue with such plain folksy wisdom?

But this rule is incorrect. It is indeed possible to be “too safe”, because safety comes at a high cost – and the price is your own life. 

If Dave enjoys perfect health and lives to age 90, he still only has about 600 months left to live, or an even more precious 240 months of “youth” before hitting age 60. And Alina’s remaining 120 months of youth are even more dear. 

With both of their financial situations already so cushy, why oh why are my dear friends trading away this time for jobs they don’t enjoy, just to get that last shred of unnecessary safety?

Why are they letting these jobs compromise their friendships and relationships, cost them sleep, miss out on camping trips and international adventures and just plain lazy Tuesday brunches with the people they love the most? (most of whom are already retired and currently having brunch without them?)

The real answer of course is not money, it’s fear.

But if you dig deeper, their fear is still about “running out of money”, even though it is almost mathematically impossible at this point.

To train away this fear in myself and others, I like to conduct a thought experiment. And that is to force yourself through the numbers (using a spreadsheet) of these two things.

  • If you quit your job right now, what would a good, typical, and improbably bad scenario look like for your financial future?
  • Then in the case of the “bad” scenario, write down, step by step, what it would really mean for you to run out of money. 

This can be a crazy thought experiment, but in many cases it will also reveal just how much of a ridiculously fortunate fortress you have built for yourself. 

Because unlike you, most people in the US really are almost out of money. They have virtually no retirement savings, monthly spending that meets or exceeds their income, and an array of car loans, student loans, and credit card debt that grows every year. A full ten percent of households have a negative net worth, and even the median net worth is under $100,000 meaning half of us have only a 1-2 year cushion between ourselves and being dead broke.

 If the average person quits their job, any shreds of net worth would be depleted almost immediately. At this point, the landlord and the collection agencies come calling, and they would truly end up with no food or shelter beyond what is available through welfare programs. It’s a rough place to be, but this category includes tens of millions of people in the US.

But for most Mustachians considering early retirement, the situation is completely different. And to prove this point, let’s try to get Alina to go bankrupt.

(note: I made all of the spreadsheets and graphs below in “real” (inflation-adjusted) dollars so they make more sense from our perspective of today. In reality, all the numbers (both spending and investments/income) will get bigger over time depending on the rate of inflation, but the net effect is the same)

Alina: The Worst Case Scenario

Instead of “one more year”, she quits her job now.

Even though the stock market tends to grow along with the economy, let’s assume we enter a never ending period of stagnation where stocks barely even match inflation, and she decides to live only off of the dividends of her $2 million portfolio, which are a paltry 2% at the moment, or $40,000 per year.  

But despite her conservative investment management, she insists on keeping her spending at the full $50k. She never rents out an apartment in her house, never finds any pastimes that generate any income, never switches from Whole Foods to Costco, keeps up the international travel, and always keeps a new-ish car in the driveway despite the fact that she has no more commute. 

The US Social Security program somehow gets canceled despite the fact that our aging population carries the bulk of the voting power and would never vote away its own retirement income, and her mom and dad decide to donate all their remaining wealth to charity rather than leaving it to Alina and her sister. 

In the event of this ridiculously contrived example, she would end up drawing down $10,000 per year from her savings, which means her wealth would drain down to, uh-oh, 1.99 million after the first year. And the trend would continue like this:

Uh-oh. So the worst things have happened in many areas of her economic life, and Alina lives out the next 40 years of her life and dies with only $1,395,000 in the account. What a harrowing close call!

But what if things turned out worse than the worst? Despite our best efforts to make her go bankrupt, she still died a millionaire. So we need to get a little more Mad Max in our scenario:

Alina: Fury Road

The US decides to cripple its own economy forever so there is no more innovation, no productivity, and all dividends are halted and yet our 330 million citizens all decide to go along with it. 

Amid the chaos and the dune buggy machine gun battles which rage day and night in the street, her wealth drains by $100,000 every year  and she is down to a single million by age 60. But she keeps up the spending and refuses to make any changes. She’s broke by age 70 but just sticks to her favorite activities which are rewarding and engaging but never produce a penny of income.

Her mortgage checks start to bounce. The bank eventually enters foreclosure but she remains glued to that house. After another year, the foreclosure is complete and the sheriff arrives to drag her wiry 71-year-old frame out of the house, kicking all the way.

Alina is eligible for social programs, but rejects them all. She has a huge network of friends, but doesn’t accept any of their offers for help or employment. 

She checks into a nice all-suites hotel and starts paying all her bills with credit cards, maxing them all out including some cash advances to keep the money flowing. With the usual tricks of balance transfers and delayed-repayment plans, she keeps the party going for two more years, until all the credit cards have been canceled and sent off to collections.

At age 73, Alina is finally out of money. She cannot buy food or shelter and she has finally arrived at a reality that homeless people currently experience every day right now. But we had to make up an absolutely ridiculous and frankly impossible story to get her there.

I’ll spare you the long story of Dave’s decline, but it’s equally impossible. 

Dave’s Doubtful Demise

If he quit his job today, stopped airbnbing his house and just enjoyed the whole thing and never even rented out the lower level, forfeited his six-figure 401k account and social security and everything else except the rental properties and the $1000 from local gigs, this would happen:

What the heck!?

We threw Dave into the worst of situations, something far beyond just quitting his crappy day job and arguably impossible. Yet not only does his cashflow continue to increase, but  his net worth skyrockets by about $50,000 per year, ending up at almost $4 million dollars (inflation-adjusted too) by the time he kicks the bucket at 90 years old. 

In reality, that purple “other income” column is likely to be triple what the spreadsheet says, his 401(k) account will definitely continue to exist and grow, and many other good things will happen. 

More Realistic Projections for Both Of My Friends

If you’re a pessimist, you may have looked at all of those numbers above and said, “Hmm yeah they made it, but it was a little close”. But remember, these were worst case scenarios. It is foolish to plan everything in your life around the worst case scenario, because it will often result in you having the minimum possible amount of fun.

So instead, you need to at least include a conservative estimate of what is most likely to happen. And I’ve done so for both Alina an Dave, creating these graphs of the results

Alina grows exponentially richer over time, due to having a large stock portfolio that she never really touches.
Dave does incredibly well too, even starting from a much smaller initial net worth.

So, both of these friends can not only quit working, they can also start splashing out more money on whatever they want. Congratulations to both of you!

 Both of them, and more importantly a large percentage of MMM readers, possibly including YOU, are beyond the point where they could ever run out of money even if they quit their jobs today. 

And they need to see this wonderful truth for what it is, so that they can confidently act on it, so that they can stop giving away precious months of their lives away to their employers, to amass still more chunks of easy money, to add to a pile that they will never, ever, ever need.

And then they can start experiencing actual reality of early retirement, which is as follows:

  • Your spending ends up a little bit lower than you expected, despite your best efforts to splurge on yourself and be generous to others.
  • Your investments do keep going up over the long run, exceeding those conservative forecasts you made.
  • You do end up making bits of money here and there (in Dave’s case shit-tons of money), even though you absolutely don’t need it.
  • As the decades pass and you settle into this pattern, you realize that money is not one of your worries. Life as a Human Being still presents plenty of challenges, but holy shit, thank goodness you quit working when you did because it was completely unnecessary. Looking back, you probably should have done it several years earlier.

If any of this sounds familiar, congratulations – you will never run out of money which means you need to stop letting it rule your life. 

Quit your job.

Seriously. 

Sheesh. What are you waiting for?!

Epilogue: Mr Money Mustache Chills out for a Splurge too:

Writing this article reminded me that I too can still be a victim of excessively frugal habits. Sure, my house is beautiful and I have great food, cars, tools, bikes and everything else. But when it comes to travel, I start playing silly games with myself. 

For example, my boy and I are heading to Canada later this month to visit the family. And against all logic, I noticed the Nagging Voices of Cheapness starting to chatter in my head.

“These plane tickets were only $210 each – can I really justify paying an extra $80 for a bigger seat at the front of the plane? And sheesh, how can I get around the $150 roundtrip Uber ride (or $150 roundtrip driving+parking) to the airport, that’s ALMOST AS MUCH AS THE PLANE TICKET! Should we spend an extra 3 hours roundtrip to save $100 by taking the bus?” And then what about our transportation once we’re in Canada? Bus? Car rental? Train tickets? How does the $7.00 per gallon gasoline factor into this given that we need to travel over 800 miles during our time there?

Blah blah blah. The correct answer is “Shut up, Mustache! You should do whatever you think is most fun and least stressful, without thinking about the money.”

For me, this means driving my nice electric car on the speedy toll road to the expensive Denver Airport parking lot so we can walk right into the terminal with no shuttle. It also means sitting in a good plane seat, and then taking the least stressful and most fun form of transportation once I get there.

Why? Because the difference between the cheapest and most stressful trip, and the most expensive one in this case, is only about one thousand dollars.

Even if I did this every single year for the rest of my life, I’d blow $50,000 on luxurious trips to visit my family (and I could drive my Mom to her 125th birthday in style!)

And based on my own worst-case spreadsheet, I am never going to wake up and think,

 “Damn, if I just had one thousand more dollars, or even fifty thousand dollars more in this net worth column, I’d be a happier person”

So I get to relax, and enjoy my trip, and guess what I even did this:

So I’ll see you in retirement, and maybe even in Canada later this month!

Further Homework for Spreadsheet Lovers:

I have shared a copy of the Google Sheets spreadsheet I made for these examples and graphs here. You should be able to “file->make a copy” to get an editable version to mess around with. Mine are pretty basic and leave out some details in order to avoid getting any more complicated than they already are, but feel free to add more if you like,

In the Comments:

Are you too fearful, or too optimistic, or somewhere in between? If you have already quit your job, how did you get the confidence? If you’re still stuck in One More Year Limbo, what would it take to get you out of it?

  • Bob July 20, 2022, 5:06 pm

    How do you plan for dementia, Parkinson’s, stroke, traumatic brain injury or cancer ?

    Who’s going to manage the household and investments if you need to go to a hospital, care home or assisted living cause now you can’t remember who you are, where you are, account number or passwords to any account you have ?
    A decent care home is going to be 5-8/k month for the next 5 years or until you die. Sure, springing POA, will and trust but someone has to coordinate your care and financials, and relatives don’t have the fiduciary skill or responsibility.

    Reply
    • Lynne July 22, 2022, 5:02 pm

      @Bob, I guess the same way you would if any of that happened when you retired at 65?

      Reply
      • Mr. Money Mustache July 23, 2022, 7:11 pm

        Yep. And another question to ask is, “would working One More Year improve this situation overall or worsen it?”

        Since dementia and most other chronic diseases are most strongly predicted by your level of physical fitness, diet, exercise and stress throughout your life, it could be argued that quitting a stressful job and investing that time into healthier living is statistically likely to pay for itself in medical expense savings alone!

        And of course, more important than the money is just enjoying your life while you have it. It seems like a foolish trade to me, working MORE right now when I’m young, in hopes of paying for MORE time in the hospital when I’m older.

        Reply
  • Marcia July 20, 2022, 5:16 pm

    Why is it that your worst-case scenarios never include bad health, accidents or disasters like being scammed?

    Bad health ca n easily add extra tens of thousands of dollars a year of unavoidable expenses to the equation. Imagine that you need to hire in-home health aides to get by, you need to modify your house for a disability, you need experimental chemotherapy that runs $10,000 a month, etc.

    You can be sure that the “just in case” people are thinking about scenarios like these!

    Reply
  • ChrisD July 20, 2022, 5:19 pm

    The thing that is important to me is doing good work. If I just relaxed and had fun and read books for the rest of my life I wouldn’t feel I had lived my best life. And I’m just not confident I can do good work by myself. I really value the structure of a job (I’m an obliger, cf Gretchen Rubin). However, I have gone 80% in my day job, and now I’m taking 3 weeks unpaid leave over summer (plus two weeks paid leave). Admitedly that is spend more time working on my 25% side hustle and volunteering projects, which are aligned with my interestes and I hope can grow into good work I can do myself. But I really need the pressure of external expectations to get anything done. Can anyone recommend advice on running your own indpependent stats/academic research? (there was a question on Stack exchange about if you were FIRE, how should do your career and everyone was all ‘what is this FIRE thing you mention, it’s impossible’). Anyway I think going 80% and taking unpaid leave over summer is a good start on retirment.

    Reply
    • Derek July 21, 2022, 9:45 am

      You can always submit academic papers without an affiliation. They’re blinded during peer review, anyway, so you’ll only have to deal with pretentious editors rejecting you.

      Reply
  • Odrog July 20, 2022, 5:39 pm

    Great points in this post, but a possible scenario could be 10 years of the S&P500 going nowhere (it has happened before, from 2000 to 2009) and 10 years of 9% annual inflation, that would probably be a good “stress test” of a persons’ financial situation.

    Reply
  • Marcia July 20, 2022, 5:47 pm

    Ah ha ha, I can relate to your little blurb at the end about travel. We took a 2 week trip in the northeast to visit family. And we did what was easy (well, except for taking the red eye. I do not sleep on planes.)

    2 weeks of a rental car? (vs. begging a 2 hour ride home from the airport, and then another 3 hr ride to get a rental car to transition between families) $1500 but who cares. I mean, my family lives in the middle of nowhere. Pay to actually sit together? Yes. LOOK we even have miles to cut the cost of the flights.

    The only bits of sadness: we left one kid to hang with the family for an extra week, so we booked a second set of flights for DH to go retrieve him. Since it’s another red-eye, we paid extra for the 1st class ticket so he could get a lie flat seat for part of the trip. First time ever paying for 1st class! And…the flight was canceled. He’s been rebooked but on a plane that just has crappy “regular” 1st class seats, with limited recline. Shoulda just gone with Economy plus.

    The other “chill out”…one kid and I picked up COVID on our flights home, but DH did not. So he was hemming and hawing about spending $1000 on 3 nights in a local hotel (hello vacation destination), and I said DO IT. IT’S ONLY MONEY AND WE HAVE BUCKETS. Wait. I should probably quit my job.

    Reply
  • Kurt July 20, 2022, 6:18 pm

    Great post, MMM. This is exactly the mental struggle (and ultimately the calculations and scenarios that I ran) 7 years ago (when I was still the tender age of 46) in order to convince myself that it was “safe” to retire. The impetus was my wife sitting me down one day and telling me that I was missing my 4 kids childhood since I was always on an airplane somewhere working, and even when I was at home my mind was on work.

    I, too, had been caught in the3 trap of “just a couple more years and we will be able to retire.” But when I finally actually sat down and examined my assumptions, it was clear that I already had more than enough — even in a “worst case scenario.” And that the REAL risk was delaying retirement a few more years and missing out on my kids’ childhood while also driving my wife crazy.

    Long story short, I retired and never looked back. And today, even after the big market downturn, our net worth is double what it was when I determined we had “enough” seven years ago. So we are not making very good progress on that whole “running out of money” thing! :-)

    Thanks for your continued inspiration and common sense.

    Reply
  • Corwin July 20, 2022, 6:51 pm

    Doug Nordman said something at Fincon last year that really stuck with me, very relevant to this topic: if somehow something really bad does happen with the markets / economy / whatever, and thus you might run out of money without adjusting your spending, odds are you will easily see that quite a ways out, and have plenty of time to make adjustments (reduce expenses / find new income).

    Apparently he heard that sentiment first from Joel at FI 180 – thanks Joel!

    Someday I hope to do some analysis with historical market returns to figure out just how much time and just how much adjustment is needed – that’d be neat to see plotted up.

    Reply
  • Emma July 20, 2022, 7:31 pm

    The examples in this article go to show that security is subjective. I could only wish to be in Alina’s position. Two months ago I was almost killed in a freak accident. It was the wake-up call I needed to remind me that we die. And when we do, we take zero with us, yet we spend the majority of our lives accumulating to enjoy only during a small window of time. The winner in this scenario is The Machine. So I’m exploring my final chapter career options. Something I can do as a free agent, that will feed my soul and will be on my own schedule. This way I can hold off tapping into my savings until I need to but still enjoy a semi-retired and satisfying life.

    Reply
  • Marion July 20, 2022, 8:57 pm

    I laughed when I read the last part about saving money. I tried to save a buck when I booked a ticket to CA. Picked a day it was cheaper, had booked a super early flight (cause it was the least expensive) and instead of taking a direct flight I booked one with a connection, since it cost less. Well, got to the airport, checked in for the first leg of the flight and found out the connecting flight was cancelled. Had to quickly book another flight and the only one I could get that day was to CO and then catch a connecting flight to CA. Needless to say, it was stressful, took much longer to get there and definitely wasn’t worth the money I “saved”.

    Reply
    • Mr. Money Mustache July 21, 2022, 10:37 am

      YIKES! Yeah, although I still have to battle the frugality instinct when booking travel, I’d never, ever go so far as to book a non-direct flight to anywhere if there is any other choice.

      And I hate flights and delays sufficiently that I basically just won’t go somewhere if I can’t get a direct flight from Denver (although thankfully it’s one of the world’s most connected airports).

      This airport/airplane aversion is a mixed blessing – I miss out on certain international adventures that certain friends find so easy, but on the other hand I get to enjoy a much richer and happier local life here because they are always away and tend to miss all the best stuff that happens here in town.

      Reply
      • nostache July 25, 2022, 7:08 am

        Best not fly into Pearson this summer!

        Reply
  • George Choy July 20, 2022, 10:45 pm

    Hi MMM. I quit my job before I reached financial freedom as I was stressed and and severely depressed. We already had a couple of rental properties, but we weren’t managing our money correctly. We were finally financially free two years later, when my wife was 39.

    However, just like you, a lot of the steps we took to manage our money (and spending) continued even when we had a lot more money. We did release the brakes on our spending a little (we regularly eat out at restaurants, go to the spa for a massage, go to the movies), but had continued delaying the “big” spending. We were hoarding and amassing more commercial and residential properties every year. It would be difficult for us to spend all the money before we die.

    Eventually we realised that when you are 80 years old, you are not going to want to do a lot more than sit in a chair all day. All those places and things you wanted to experience, or large purchases you wanted to buy, will be of zero interest.

    So we made a “bucket list” plan for different life stages and what we feel we would like to do every 5 years to 80+, based on how mobile we thing we might be, and whether our kids have left home, etc.

    What that has done has bought forward some expensive purchases, such as a not very MMM brand new Land Rover Defender, and luxury holidays we had been putting off for later.

    Reply
  • Brian July 21, 2022, 5:08 am

    I finally pulled the trigger two months ago. I’ll probably continue to work part-time but for reasons other than money. I’ll be drawing down a little each year until SS kicks in and then I’ll be rich. Worst case scenario where I don’t get SS, oops, I’ll run out of money if I don’t die first. The thing I realized is that I won’t be living until 95 which I had on my spreadsheet. I’m currently 55 and have an autoimmune condition that put my father in a nursing home at 70. I’ve known I had this condition for 25 years so planned for it. I’ve taken mini-retirements along the way and never got too into “things”. By retiring at 55, I still get a full length retirement plus the mini-retirements. I’m in a support group and I feel so grateful to have been able to do this since a lot of people end up fighting disability when they can’t work anymore. I’m quitting before I’m disabled and can still do some things. I pre-retired about 4 years ago and have worked about 6 months/year in that time. Also, I have a great attitude about death. When it dawned on my that I won’t be around that long I felt quite happy that I now know my finances are good. I had the choice of saving for a nice nursing home room or quitting now and enjoying some of life while I still can. When I thought of it that way, it was an easy choice.

    Reply
    • MarkinMadison July 24, 2022, 9:22 pm

      Praying for an advance in medical science for you.

      Reply
  • Rakiki July 21, 2022, 6:40 am

    Poster child for OMY syndrome here. I have been struggling with this for months now. Mid-40s, 3.5M Canadian net worth couple, two government jobs, DB pensions… side gig income… investment income… kids’ studies taken care of… decent DIYer… all the good stuff. Have been working remotely for years but now facing being called back to the office and commuting at least a couple of days a week after an arbitrary management decision. These jobs are a sort of golden goose that is difficult to give up on. Our income has not come close to following real inflation, and our pensions won’t either. A 50 year retirement could be relatively bleak in an inflationary environment. It’s difficult when literally NO ONE we know has any type of FU money. ALL rely on their eventual pensions. ALL will work for the next 10-15 years. Kids are still in school so our mobility is restrained. We really appreciate the food for thought as usual. No need to face punch me, I will self-punch.

    Reply
    • Soma Bhadra July 21, 2022, 7:48 pm

      Hi! I hear you. In my friend circle I am THE ONLY one who is launching on this early retirement journey. No one seems to have any type of FU money, not even the concept!

      Reply
  • Katy July 21, 2022, 10:35 am

    Wow…as many have already stated, this post totally resonates with me for I am stuck in the “one more year” (actually 16 months) boat. Part of my reasoning/justification is that I’m booked to take a 9 month long cruise with my aunt who is retired at the end of next year so I’m just working these last 16 months to save enough to pay for the cruise. When in actuality, I could quit today and still have enough money to pay for this cruise even if my husband were to quit his job as well, which he doesn’t plan on doing. He enjoys his part-time gig (and makes good money doing it) so we’re pretty much set and then some. While fear definitely comes into play for me, I also tend to struggle with leaving a job/position (whether I like it or not) too early. I tend to stay in a position for at least 2 years due to a sense of loyalty to those I work with/for and I’ve worked with a lot of great people over the course of my 13 years of post-grad school employment. Hence me not wanting to “up and leave” them. So while this post strikes a chord in me, I’m probably going to stick it out in my job for the remaining 16 months (sigh) and then hit the “early retirement” button. But who knows maybe will trigger me to quit sooner…

    Reply
  • Chet Shannon July 21, 2022, 12:51 pm

    Great article. I’ve seen people make that statement – just one more year and I always wonder if they’ve ‘really’ done the numbers like M3 presented. I long suspected it was more of – ‘I’m used to doing this and it feels comfortable’ OR ‘I have developed my whole life identity based on my work and I don’t know what to do with myself outside of work’. I’ve always looked at work as a ‘means to the end’ and not a ‘end to the means’. I retired at age 60 feeling good about that!…

    Reply
  • AMSS July 21, 2022, 1:09 pm

    I think this concept is definitely one to consider, especially how much would delight/less stress cost and it’s usually not that much, but in reality there are a lot of unknowns especially health. I see that with my parents, who are in their 80s (and are not leaving me or my many siblings a nice nest egg). I also had kids late (1st will graduate from HS this coming year, another 5 years after), and they definitely need the example of focused work and working for what you get since I am their only parent. I enjoy the work I do AND need to set aside more time for myself, including travel, so I’m making gradual changes to accommodate both as well as providing a lot of support to one of my elderly parents. I don’t agree with all your what if’s, but good to have this perspective as I balance what’s right for me.

    Reply
  • fatFIRE July 21, 2022, 3:07 pm

    I downloaded the Google doc and plugged in our stats – which are fatFIRE big numbers. $180k/$4.4M, Big spending, big net worth. Worst case: run out of money in our 70s. More likely scenario: At age 90 have $28M. Quite the spread.

    One flaw I see in these models is they don’t account for taxes. Spending is just that: spending. It’s after tax dollars spent.

    Reply
    • Mr. Money Mustache July 23, 2022, 7:21 pm

      Yes, good point. At lower levels of income/spending, taxes are fairly negligible here in the US (my own spending is usually in somewhere in the 20s per year, plus 100k in donations on years where I earn a lot, but conveniently enough charity is tax deductible!)

      Thankfully, that aligns perfectly with the type of lifestyle I am encouraging people to consider because less spending means less natural resource destruction as well.

      If your spending is higher it does require planning for taxes, but thankfully that should be very easy because you’ll still be keeping most of your income and the lifestyle itself has lots of wiggle room for adjustments.

      Reply
  • Soma Bhadra July 21, 2022, 7:45 pm

    Spot on!
    I am like Alina, I’m 46, an engineer/ business owner. I’ve carefully programmed my financial futures. This year was when I was about to “pull the plug”, sell my high priced townhome in San Diego, and move to Pittsboro, North Carolina – buy a small “retirement home” and a car (probably a Subaru). I put the home on the market on June 2nd, and the buyers sails deflated right then! House did not sell. Now I’m going to take it off the market next week, and try again in September. Let’s see when this housing recession fades a bit. I did a pause in my plans because I felt I need to be very strategic in this and patient as well.
    I’m really looking to the cross country drive. I plan to take time and drive slowly, enjoying this beautiful country. At NC, I have picked a really nice community and am looking forward to settling there.
    Of course, I’m not the type to sit at home and brood, I will be very active. What I am mostly looking forward to is control over my time. It is a luxury I’ve never had in my life.
    Thank you for your great blog. JLColins, MadFeintist, and your blog has been my guiding light as I programmed my retirement. I have heart full of gratitude for you all.
    Cheers!
    Soma

    Reply
  • Dude1234 July 21, 2022, 8:50 pm

    I’m only in my mid 30’s but in the past month I’ve learned of another couple people I used to know that have died prematurely. One was younger than me and another was slightly older and left behind a growing family. One was pandemic related, the other was entirely random. I think many people over-value the wealth accumulation process and under-value how much those 20-40 hours a week would be worth if they could invest just 10-20% in their health. You can always go back to work, but once you have a long term health condition your life will likely not be the same.

    Reply
  • Arik July 22, 2022, 5:37 am

    I feel bad for Dave. I was in that position and finally cut the cord. The last three years of of NO corp BS and making a few bucks in a part-time job with great friends is like stepping into another universe. Perhaps a intervention is needed.

    Live long Explore often,
    AriK

    Reply
    • Mr. Money Mustache July 23, 2022, 7:14 pm

      Haha, nice to see you here my friend, and I’m glad retirement is still treating you so well.

      P.S. all of us Longmont Locals are big fans of your work in the new side hustle! ;-)

      Reply
  • Herve July 22, 2022, 7:34 am

    Excellent article as almost all other. My wife and I did a Spreadsheet early this year calculating how many hours I need to work to match our assumptions (she never competed in the rat race). And we did it for a pessimistic scenario (2% annual increase in income per hour), 5% increased spending per year plus extra for when we plan to increase our family size. In 9 years when our fixed interest loans (flat plus apartment) become flexible we plan for paying them off to become debt free. Brings me down to max. 24h/week, and very likely much less since things won’t run that pessimistic.

    Few days ago I applied to reduced to 90% (=36h/week), that’s the first step and a much smaller one than going for full retirement (I had part time and a year off before but never with a kid to care for as it is the case now). Whats does it mean?
    More time for the family now and less stress now and not sometime in the future = immediate burst of motivation, spirit, health.

    Thanks MMM, I like most the concept articles (such as tiny detail exaggeration syndrome). Keep up the spirit!

    Reply
  • Nick B July 22, 2022, 7:56 am

    Always enjoy your articles. I find your assumptions to be overly optimistic. As of today, for 15 straight months, wage growth has not kept up with inflation. People are falling further behind as compared to the cost of everyday living the those inflation figures are understated and exclude a proper housing metric. Not to mention both the stock and bond market are down over 20% over the last 12 months. Of course a person can cut back and adjust their lifestyle, likely required for a lot of people in today’s environment. Thanks

    Reply
    • robrdam July 22, 2022, 2:36 pm

      You sound like a lot of people I meet IRL. so I’ve given your points some consideration allready.
      – wage growth has not kept up with inflation
      First, it’s an average. Individual job hoppers report wage growth much larger than inflation. Second, it’s only a problem if you spend your full paycheck. If you previously spent 50% of your paycheck, and you are hit with 10% inflation (above wage increase) you now have to spend 55% of your paycheck.
      – those inflation figures are understated and exclude a proper housing metric
      Inflation is an individual item, gas prices are up 20%, but I don’t have a car. And how much is your housing cost gonna grow when you own your house (with or without a mortgage)?
      If you own rental houses you even profit from inflation, rents go up, mortgage stays the same and the principal shrinks in real value.
      – both the stock and bond market are down over 20% over the last 12 months
      The absolute heigth of the stock and bond prices is not important, you live of the proceeds. If you have an apple orchard, you don’t care how much your trees are worth, what matters is how many apples you can harvest.
      Please read some more MMM stuff, and shift your thinking from “paycheck to paycheck” to a long term mindset!

      Reply
  • Jeff July 22, 2022, 5:36 pm

    When I first “Retired” at the end of 2020 a 4% withdrawal rate was comfortable. Today, with markets down, my 4% is no longer comfortable so I went and got a job. Is this incorrect?

    Reply
  • John C July 23, 2022, 3:48 am

    This is a great article and, as a financial advisor who frequently meets clients who are worried about whether they can retire despite having more money than they can ever spend, I would second the notion that OMY is a real and powerful hurdle for many people. Having said that I would caution younger readers to not necessarily extrapolate these examples to your current situation. If you are 30 and living a particular lifestyle and have accumulated enough to hit your number, that is great and congratulations on your accomplishment (setting aside for now the fact that the 4% rule was built around 25 years of retirement and may or may not support 50 or 60 years of retirement). My only caution would be that you have so much living in front of you that it is hard to determine what your future life might look like. What happens if 5 years from now you meet your absolutely ideal partner except that he or she has a very different lifestyle desire and also wants to have 4 or 5 kids? As long as you acknowledge that the FIRE experience could be temporary and you may need to do a reset or start over somewhere down the road, then go for it but as much as possible keep your options open.

    Reply
  • Dave July 23, 2022, 7:37 am

    Love the calculations and I have lots of spreadsheets with stress-tests just like this.

    Just out of curiosity – why is no income tax applied to the rentals income, side hustles, and market gains? For Alina to generate a 50k per year or for Dave to generate an 45k per year would take quite a bit more earning to cover their cost of living.

    I know it depends which state you live in, but federal tax obligations (ordinary income or capital gains) and whatever other tax you have to pay does add up.

    That is… unless I missed the fact that everyone includes tax obligation as part of their annual expenses.

    Thanks in the awesome article, thoughtful comments, and thanks in advance for an answer.

    Reply
  • Mark Schreiner July 23, 2022, 7:05 pm

    The ultimate financial planning “spreadsheet” is the MaxiFi Planner (google it). I am not affiliated with the product, just a PhD economist and someone who was unbeknowstingly stumbling towards FIRE before discovering MMM and who thinks, “Wow, MaxiFi is the best way to do what MMM did with his spreadsheet in this post.”

    MaxiFi accounts for state and federal taxes, social security, and just about everything else that can be financially quantified. Like any other financial planning tool, it is heavily dependent on assumptions about unknown things like future returns, inflation, life span, and medical costs. But to the extent that things can be planned, this is the best tool there is.

    Of course, it may be overkill for many people or purposes, but MaxiFi should go a long way towards estimating the money you would have to live on if you FIREd today, or in 1/5/10 years. In general, it lets you run a lot of “What If” scenarios (Change jobs? Downsize house? delay taking Social Security?) and then shows broadly how it affects your lifetime discretionary cash flow.

    Rather than using a 4% rule of thumb, it estimates how much you can spend, each year, using your own personal situation.

    Reply
    • Steve July 31, 2022, 3:47 pm

      Check out NewRetirement as well. Equally excellent.

      Reply
  • MarkinMadison July 24, 2022, 9:06 pm

    Holy shit was this an eyeopener. I’m embarrassed to say it here, but my wife and are much more JLCollins than MMM in our spending habits. So I didn’t expect the spread sheets to be so rosy for us. And my wife is hanging onto her job for another 12-24 months to vest all of her stock options. This will add another 20-25% to our net worth. And I’ve been worried about the costs of health insurance. But she HATES her job. We are 52 and we both converted to less than full-time this year. But damn. This is a conversation changer.

    Reply
  • scoaste July 25, 2022, 3:02 pm

    I was nearly ready and then Covid and inflation and Ukraine and crypto winter and… needless to say my net worth crashed 25% in 6 months. I suppose one might argue that there will always be something, but nevertheless — sequence of returns risk being what it is — I think it’s prudent to wait out a recovery.

    Reply
  • Amy July 25, 2022, 8:54 pm

    Thank you for this and especially for sharing your spreadsheet. I downloaded it and played around a bit. My target net worth is $1.875M and am currently at $1.35M. Given the current stock market, I assumed zero stock appreciation for the first 5 years, then 4% thereafter. I kept my spending at $50K and then bumped it up to $75K once the zero stock appreciation recovered (I would have a hard time spending $75K, but that makes me feel safer). I then dropped the spending by $24K at 72 when I would start social security. Even with that my net worth is $3.1M in 50 years. This is really an eye opener and I have some thinking to do. My job is super stressful, though in many ways I enjoy it. But it’s taking its toll and I have a long list of things I’d rather be doing! Again, thanks for sharing your perspective!

    Reply
  • MCFIRE July 25, 2022, 11:13 pm

    I’m in this phase right now and the struggle is real. This article was a great pep talk. Thank you!
    Hope you have a great vacation!

    Reply
  • Meer Money July 26, 2022, 4:20 am

    Since we’re quite young and quite frugal right now, we’re mostly wondering if we’ll be able to keep our low spending up as we grow older. We’re currently targeting a 3 % SWR based on our current spending, which would mean we can spend 1.33 times what we currently spend if we switch to a 4 % withdrawal rate. We’re about 80 % of the way there today.

    Current plan; we’ll keep our current jobs until we’re back to all-time highs and reach that 3 % goal. Then we’ll try to arrange a sabbatical or pull the plug to go travel for a couple of months.

    Reply
  • MKE July 26, 2022, 9:40 am

    In the comments, someone said, “perhaps an intervention is needed.”

    Yes. It’s a psychological issue. It’s not a mathematical issue. Much of it is derived from the messed-up identity Americans place on their jobs. “What are you going to be when you grow up?” cannot be successfully answered with anything other than a job name. The first thing most people ask when you meet them is,” What do you do for a living?” It’s awfully hard to counter with “Who fucking cares?” I am right now considering saying “investor.” It’s as true as anything else ever was.

    On recent vacations I met and spent time with many interesting people out on hiking, biking, and diving adventures. I don’t have the foggiest notion of what they do for a living. Gloriously, they never asked me. What a relief! They were vibrant, fun, interesting people. They were white collar, so whatever jobs they had were almost certainly boring and pointless. Hearing some contrived title is a buzzkill.

    If you want to help with this issue, ask people about their adventures, hobbies, goals. It helps to actually be involved in something interesting, versus pissing your life away making car payments. Don’t ask people what they do for money or ask children what they are going to do for money. It’s a little step toward moving them away from their bullshit jobs and the identity that gets attached.

    Reply
  • BobJ July 31, 2022, 4:55 am

    Mr. Money..
    I agree totally with your article. But I retired early and greatly underestimated the costs of taking care of parents and my own healthcare. Co-Pays, deductibles, meds, caretakers can wreck your plans. And as you get older.. (even though i consider my self in excellent shape for 67.. things happen more frequently.) So in a nutshell, medical costs are higher in retirment than you think. Watch out for that!

    Reply
  • Steve July 31, 2022, 3:42 pm

    Timely and reassuring article for me. I recently decided to retire after this year. I like my job and it has become a firehose of wealth in the last few years with no signs of slowing down. Also, we’re in a bear market with high inflation. Lot’s of reasons for me to work OMY. But as we all know, you can’t buy time. It is time for me to enjoy life on my own terms. Can’t wait! Exciting times.

    Reply
  • Courtney July 31, 2022, 4:14 pm

    I pulled the plug early six years ago and haven’t regretted a moment since. I was bummed with travel limits during COVID but am kicking that back up. The beauty of a 6-8 week adventure can’t be beat. You really get a feel for the country, customs, and lifestyle. I had great sojourns to Italy, then Chile/Argentina, then SE Asia, then Morocco/Tunisia, then New Zealand. Next is Portugal. I’ve learned (occasionally) to trade money to save time, which is vital when traveling. I’m still frugal but book in some great splurges. I love volunteering and helping others. My higher-earning friends envy my access to health insurance, but I have no other super advantage. Life is short! Get out and play!

    Reply
  • samanil July 31, 2022, 6:31 pm

    I do think it’s worth mentioning the fear of having nothing to do, of needing to create your own purpose etc. When you have the purpose of a job, there’s a certain psychological security there, in addition to the financial security. Indeed, there’s a study that found that people who retired earlier had a higher risk of death! Does this mean FIRE is bunk? I don’t think so at all, but I think it does require a broadening of the discussion to include issues in addition to finance.

    Reply
  • Karen Chow August 1, 2022, 9:20 am

    I’m definitely stuck in that just one more year scenario now. I’m 49, have a high paying job, and I’m ready to be done. I have a 12 year old, and my current plan is to retire when he’s done high school, but I definitely could stop working now. Hmmm…

    Reply
  • Jen August 1, 2022, 7:53 pm

    I got away from OMY after doing similar calculations. MMM’s old post about money vs confidence helped me a lot in this! I thought about how my grandma or parents had never been near to the nest egg that I currently have (nor had any stock market literacy), but are living no less happy lives with far more modest incomes than my 4% (or even 2.5%) would guarantee me.
    I realized that I have:
    1) a loving family that would provide roof over my head if needed;
    2) access to universal health care;
    3) access to free or nearly free clothes, furniture and any other item under the sun (just check out those freecycling groups – I had always been a donor, rather than a recipient – which shows that I worked to pay for other people’s stuff!);
    4) access to cheap food – and food is ridiculously cheap if you do not eat out all the time;
    5) offers of gigs – after I FIRE’d, I have been inundated by offers from people in my network. I even ended up taking a retainer consultancy role in a start-up that was of interest to me; I work from home for about an hour each morning and get 20% of my former pay. That’s the offer you get when you have the power of FU money! Frankly, I would have done it just for stock options (which I also get), but hey – free money.

    So I have to agree – once you have accumulated just enough, you would literally have to lose all your good habits that got you there and have heaps of bad luck in order to go broke.

    Reply
  • Mark August 1, 2022, 8:03 pm

    I personally like the idea of trying to live off the 4% for a year or two before pulling the plug. Your income goes straight into the slush fund and you pull .0033 a month out. It’s been helpful for me personally in a bear market watching withdrawals jump around and realizing that I’m fine so long as I keep 1-2 years emergency funds in something like a short term bond fund or money market.

    Reply
  • Matthew Pence August 3, 2022, 12:24 pm

    This resonates with me even now, thanks to the conscious engagement of my former consumerist self. “Your spending ends up a little bit lower than you expected, despite your best efforts to splurge on yourself and be generous to others.”

    Context: I make all my purchases on credit cards and pay them off bi-weekly with each paycheck.

    I’m always amused (and a bit surprised) when I have a particularly luxurious or expensive period, then come back on the next paycheck to see that I still have money left over (to invest) after paying off my credit cards. I don’t track my expenses because I don’t need to. I’m not one to habitually spend money on pointless life/time-sucks.

    Reply

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