How Much You Need to Retire is a Lot Less Than You Think

You need a lot less to retire than you think. Early retirement dreams come real faster when you know the facts. The 4% rule isn't good enough. #earlyretirement #FIRE #financialplanning #personalfinanceA common question in the FIRE (financial independence, retire early) community involves how much money you need to retire. Before I became a card-carrying member of the community I would hear the question something short of a dozen times per year. This blog means I hear the question a lot more these days. And people still don’t believe my answer.

There is a great misperception over how much money is needed to cash a check and walk your own path. I’ve consulted with 70 year old men worried they don’t have enough to retire. In the FIRE community younger people are more interested in the same question with a different set of rules.

Social Security changes all the rules. The 4% rule is wildly off the mark because they forget two simple facts; facts we will cover right now.

How Much is Enough

I will use one example to outline how much you need to retire. It is easy to adjust to fit your personal circumstances.

This exercise began when I started to wonder how much Social Security I’ll receive monthly at 70. We will not use my actual numbers. Instead, we’ll use a hypothetical married man my age. (I don’t use my actual numbers since they are atypical.)

Later this month I’ll tip the age scale at 54. Yeah, I know. Never thought I’d live that long either. It also brings up a few interesting facts. First, I qualify for early retirement (qualify for early discounted Social Security) in eight years. (Where the heck did the time go?) Full retirement for Social Security is 13 years away and I can get a bump in my benefits every year I wait until 70, or 16 years. Regardless, Medicare is for the taking at 65, or 11 years for your favorite accountant.

My daughter, Heather (age 23), and her friend, Katie (age 27), at the centerpoint of Beijing, China. They’re getting paid to travel.

So how much do you think I need to call it a career? A million? More?

It all depends on my spending habits really. Depending on the circumstances, most years I spend about $20,000. Some years I spend as much as $30,000 in the event the car dies (every twenty or so years) or some other personal adventure arises. Summertime is low spending season. An average summer month sets me back $600 – $800. Rare is the non-winter month that sees a four-figure reversal on my spending fortunes. Winter is another matter. December is property tax month. January (February, too) is cold in backwoods Wisconsin. The utility bill gnaws at me the entire time.  By the time the frost clears I’ve lost $20,000 of weight from my money belt.

The 4% rule (bantied about in the FIRE community a lot) says you need a cool $625,000 to be safe with a $25,000 annual withdrawal rate. This is just plain stupid! You don’t need $625,000 to retire with a $25,000 annual budget!

Here are the two mistakes most people make. First, it assumes you’ll never earn another penny after you retire. Oh, for God’s sake people! You will earn money after you retire, if only by accident. Heck, you can sell tradelines if you’re allergic to work and need a thousand or so each month to supplement your wants.

Time for Math Class, Accountants

Let me ask you this. If you have $625,000 at age 54 and withdraw 4% ($25,000) annually, how much do you have at age 70? Answer: More than Zero! The 4% rule is considered a safe withdrawal rate to never run out of money in retirement.

But this assumes you want to leave a legacy at least as big as your net worth pile right now! If 4% is a safe withdrawal rate then in all but the rarest of circumstances the account balance will continue growing!

The second mistake people make when deciding how much they need to retire is using the 4% rule rather than amortizing the liquid net worth balance over the maximum years needed before another form of income kicks in.

There are plenty of amortization calculators around the web. I’m using the program inside my tax software. I asked my amortization program a simple question. How much will I need today to withdraw $25,000 annually for 16 years (remember I’m 54 and want to wait until 70 before drawing Social Security) at a 4% return? Since many people consider the 4% rule safe (as do I) it is acceptable to amortize the liquid net worth balance at a 4% investment return rate.

My tax software says I need $291,307 (I rounded) to make this work. I’ll have exhausted my liquid cash at the same time Social Security kicks in. (Assumptions: withdrawals for the year are in one payment in advance with the money market holding the funds prior to use earning 0% with the first payment drawn the first day to account for an immediate retirement and the next full year withdrawal of the first day of each fiscal year.)

This is a far cry from $625,000! The amortization solution doesn’t take into account several factors. You are likely to earn at least a small amount of income in the next 16 years, but inflation is not factored in so  buying power slowly erodes. It also assumes the stock market (I assume we’re using broad-based index funds) only performs at half its historical average. That is a serious assumption! Odds are the market will do better and you will still not use up your nest egg by the time Social Security kicks in. If fact, it’ll probably be bigger than when you started.

The Crazy FIRE People

The crazy FIRE community needs even less than my calculations indicate. When a 35 year old walks into my office and wants to know how much more he needs to retire when he has $200,000 stashed away already with no debt I tell her she can retire today. After they break the dead stare they think I’m joking. I’m not!

Once again we are assuming the $200,000 will only throw off $8,000 per year under the 4% rule. Not so. Once you give up on the rat race you can join a race you really enjoy! If you’re 35 you need something to fill your time. First, you are likely to move to a lower cost area if you don’t already live in one. (My low living expenses are partly a product of geography. New Your City or most of the West Coast would force me to talk out of the other side of my mouth.)

You can live the good life with spending a fortune. This museum piece in Beijing, China requires a King’s Ransom, but you can enjoy the jewels for less than a $10 admission fee.

Second, you’re 35 years old!!! There is only so much travel or golf a guy can handle. It gets old fast, becoming the new rat race you want out of.  Then reality sets in and your interests bubble to the top. A side hustle you always wanted to try is now a viable option. It doesn’t have to pay tremendous amounts of money. Your cost of living will decline unless you engage stupid spending habits. If you have said habit it is unlikely you’ve read this far. (For the rest of you, this way.)

Using the assumptions above, the $200,000 amortized over 32 years will throw off a bit more than $11,000. Still not enough to retire.

But if you spot a 35 year old $11,000 per year and she only needs $25,000 per year to live you have a helluva start!

If you can swing $1,200 per month with a side hustle you can retire at 35! Yes, Social Security might be pretty small, but your side hustle will add to your account when calculating benefits. At full retirement a husband/wife team should realize around $2,000 a month even with the low earnings assumed here! Retiring at 35 with $200k is doable if you have any interest at all in any activity with potential to throw off an income stream.

Crybabies this Way

The information above has the tendency to bring out the crybabies. “I can’t do that! Waaaa!” “It’s impossible! Waaaa!”  “I want my mommy! Waaaa!”

Your mommy isn’t here so pull up your shorts and listen. $200,000 is a bit light to retire on at 35, but not bad for someone a certain accountant’s age. Amortized over a shorter period means you will have enough until pensions and Social Security kick in.

You can travel the world or stay closer to home. Beauty is everywhere. This piece is showing at a Beijing, China jewelry expo.

At 35 you will be required to still earn some coin. Notice I didn’t say work. Please don’t break out in a rash.

A seasonal or part-time job can provide enough money to enjoy a very joyful and full life. The first ingredient is cutting out all the stupid spending! The more you spend annually, the more you will need at the start to make it to the finish line!

If you live in a high-cost area it many require a move. If you stay put you need to adjust my numbers. Younger people need to calculate on their age, not mine! If you have a higher lifestyle than mine you’ll need more to start unless you plan on spending more time on your side hustle.

Until your health gives out or you die, you will bring in more income than you realize. Just doing the stuff you enjoy doing has a tendency to become an income source. Even small income sources do wonders to your investment account. Using your favorite accountant as an example, the lower spending habits of summer means money is left to earn more before it is spent. Every nickel earned on the side is one nickel less needed to appreciate the awesome retired life you’re living.

You probably worry as much as my clients about how much you need to retire. Financial advisors always scare you with big numbers. It’s good for them when they get more of your money. The truth is you don’t need as much as you think to have a comfortable retirement with spare change for some travel and entertainment.

And for God’s sake, please don’t be that guy who has $200,000 in cash, a $25,000 annual spending budget and is 65 with Social Security checks for him and his wife totaling over $3,000. Just don’t be that guy. You’re never going to run out. Now go and enjoy your life.

Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. Quickbooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

A cost segregation study can save $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Posted in

Keith Taxguy, EA

Keith started his tax practice in 1982 and went full-time in 1989. An enrolled agent (licensed tax professional) since 1992, Keith has focuses on helping businesses and individuals pay the least amount of tax allowed by law.


  1. Andy on June 7, 2018 at 7:54 am


    I love this article. Thank you! One item to consider is health insurance. How would this fit into your equation above?

    • Andy on June 7, 2018 at 8:07 am

      I should say for early retirees in their 40’s that are healthy. Our plan is to sem-retire to cover the costs of insurance. One of us can go part time at 30 hours to still have full benefits. I have no idea where to start with insurance or if there is a better plan.

      • Keith Taxguy on June 7, 2018 at 9:14 am

        Good answer, Andy. Some side gigs include health coverage. If you keep your eyes open opportunities will abound.

        • Shari DeRuyter on July 6, 2019 at 1:46 am

          I am 62 and receive disability insurance totaling $1400 per month, my husband will be 63 and we have a business we may be selling which may net us 800k. No debt. What’s the best way to retire and invest our money until my husband is 65

    • Keith Taxguy on June 7, 2018 at 9:10 am

      I considered health care expenses, Andy, but excluded them to stay on point. Each situation is different. I recommend a low cost solutions like Medi-Share as a starting point for research. The TWA Recommends tab starts with three health care programs used to reduce costs.

  2. Kenneth on June 7, 2018 at 7:58 am

    “And for God’s sake, please don’t be that guy who has $200,000 in cash, a $25,000 annual spending budget and is 65 with Social Security checks for him and his wife totaling over $3,000. Just don’t be that guy. You’re never going to run out. Now go and enjoy your life.”

    I’m that guy. 68 years old. $400,000 IRA and savings. $30,000 spending budget. Social security, dual, $3,800/mo net of part B premium. $650/mo small annuity pension. We travel a lot and golf a lot. Life is good. And no matter how hard we try to spend it, our net worth keeps going up.

    • Keith Taxguy on June 7, 2018 at 9:13 am

      You might be that guy, Kenneth, but you also get it. If you work because you want to you should. Just know that if your Social Security exceeds spending your nest egg is never going away. My joke at the end was a polite joke at me. I’m that guy, too. I can easily retire but can’t fathom a life without my precious accounting practice. Don’t tell anyone, Kenneth, but it is okay to be that guy.

      • Michael Crosby on June 7, 2018 at 9:58 am

        Hey Keith, I hope this article doesn’t find its way to the Bogleheads. You’ll be soundly eviscerated.

        But I do like your way of thinking. Thanks, as always, wonderful post.

        • Keith Taxguy on June 7, 2018 at 10:05 am

          Michael, when I was editing this morning with Mrs. Accountant I said, “You know I’m going to catch hell for this one.” She just smiled.

          What I wanted to do here was illustrate what is possible. This isn’t a recommendation to actually do it. If you really need to get away from a bad job this shows it is easier than most realize. Also, if you are willing to pay the price you can retire at any age with a very small amount of money. Reference: Your Money of Your Life. Joe Dominguez and Vivki Robin showed how little a person can live on and still have a good life.

          On the other hand, if you hear rumors of an accountant being assassinated in the Northwoods of Wisconsin you’ll know what happened. (What was that noise!)

        • Andy on June 7, 2018 at 12:45 pm


          Fellow Boglehead here. I strongly agree with your statement..haha. 🙂

  3. Justin on June 7, 2018 at 8:36 am

    I would also like your thoughts on health insurance. Is that included in the $20k per year that you spend? I have a 4yo child who will always have an above average need for healthcare. Right now, I have good insurance through my employer. Health Insurance and the instability of Obamacare(not to mention the majority party’s outright abhorrence of it) is my biggest obstacle to early retirement in my mind.

    • Keith Taxguy on June 7, 2018 at 9:15 am

      Justin, under current law, if you retire and only withdraw $20k per year for spending your income is so low your ACA health plan is free. Medicaid will cover your child or the ACA policy.

      • Andrew on August 11, 2018 at 12:56 pm

        I love these articles! Don’t forget guys and gals: you could retire overseas, saving money even more! You could live very comfortably in Latin America or Asia on $2,000/month, and in many places with considerably less!

        This is actually what I want to do when I retire. I’m 31 now, have 65k towards retirement in index funds (Vanguard) and put away about 20% in an IRA and brokerage account.

  4. Bob on June 7, 2018 at 9:00 am

    And if you live in a country that doesn’t do social security?

    • Keith Taxguy on June 7, 2018 at 9:18 am

      Bob, as a writer I had to stick with what I know. Each country is different. If you have no social safety net or pension all you can do is use my amortization method. It’s still better than the 4% rule where you have to build enough cash reserve to live AND provide a legacy.

      • Bob on June 7, 2018 at 9:44 am

        True – we’ve got some interesting dynamics over here in terms of the amort, namely quite high inflation relative to the US (c.5-6%), high taxes, and no social net in terms of SS or medical type cover. So our number is likely higher than noted, but still below 25x. The part people forget, as you’ve mentioned, is that the 4% is earning no more income and already conservative. If you’re aiming for 3%, just to be safe, your probabilities of failure based on market history may drop to 0%, but actually is probably the same as 4% or 5% withdrawal because you have both: a higher chance of death than the risk of running out of money, higher chance that your country will fail than running out of money.

        So get a decent capital lumpsum as a buffer, and chill! =)

      • Bill on June 8, 2018 at 9:15 pm

        Keith, what is your amortization method? Do you have an article on that?

        • Keith Taxguy on June 8, 2018 at 9:33 pm

          Bill, I used the amortization module in my tax software. The software allowed me to enter the interest rate (4%), what I needed per month (the monthly payment from the investment to me: $25k per year) and the number of years I needed the payment (the amortization period). The software calculated the missing piece, the beginning balance. I couldn’t find anything online that worked the way I wanted so I didn’t include a link.

          Most of the online calculators require you to use a hit and miss method where you keep guessing until you get close enough for rural work.

          • Mike on June 9, 2018 at 2:52 pm

            In Sheets (or Excel) that’s the “Present Value” function:

            =PV(4%, 16, 25000) => -291,307


          • Bill on June 10, 2018 at 11:11 am

            Sorry..I see my question was covered in the article. I skimmed it too quickly during my lunch break and then later went straight to the comment section.

          • Keith Taxguy on June 10, 2018 at 12:20 pm

            No worries, Bill. I’m flattered you came back after enjoying some accountant skimmings.

  5. dale m on June 7, 2018 at 10:07 am

    Since you used the phrase in this informative post, I would appreciate hearing your informed perspective on the term “full retirement” as it certainly seems a contrived concept in that SS is simply a continuum from 62-70 starting with x and then approx 8% increases the longer you hold off. Seems an obvious thing to grasp, but I’m amazed how pervasive the acceptance of an “approved” date for the criteria for “full.” I’ve researched this a bit and have come up with only one pretty minor medicare contingency (which I can’t even remember) that kicks in after an individuals qualifying date for full.

    • Keith Taxguy on June 7, 2018 at 10:14 am

      Sorry about the ambiguity, Dale. I use the term “full retirement” in this instance as the full retirement age for Social Security, currently age 67. When you think about retirement the way I outline here, you can maximize your Social Security benefits by waiting until 70. This makes a world a sense to me unless you are in poor health. Where else can you get an 8% return, plus an inflation increase every year? Most people don’t retire at exactly 67 so this is only a Social Security construct.

  6. dale m on June 7, 2018 at 10:46 am

    Yes, it’s the Social Security construct I’m digging at a bit. The general notion that (for instance) yours is apparently at 67 (mine at 66and x months) but those are just ambiguous points in time given the 8% increases that accrue anyway. I do not see the necessity (or more to my point, some unclear advantage) for this widely accepted notion of a pre-identified age for “full” … take it at 63 it is x+8% (from base earnings benefit) … take it at 66 and it’s x+32% (approx) … and that’s all there is to it.

    What does “full” mean ?? (nothing, as near as I can tell !)

    • Adam on October 27, 2019 at 12:35 pm

      I love this article. It’s TRUE, many don’t need to work as long as they think they need to. I think for high achievers it’s difficult to step away from the world of work, and going part time is my favoured option.

  7. Jim @ Route To Retire on June 7, 2018 at 10:59 am

    Awesome post, Keith! I was planning to call it quits at my job at the end of 2019 because that’s when the numbers would align completely. But recently, I’ve been re-evaluating. I have the same thoughts as you mentioned. My blog is starting to bring in some income and there are other projects that I’m sure will bring in some money.

    I haven’t decided for sure yet, but it’s really looking like I’ll be moving that date up. Even if things don’t work out perfectly, we’ll figure it out. My wife and I are young enough that we could go back to work part-time just to help take a bite out of our expenses if it really came down to it.

    — Jim

  8. Greenbacks Magnet on June 7, 2018 at 1:43 pm

    I read that it could take having a cool million to be able to draw down at least $40k per year. Therefore, for many to FIRE they would need at least that amount to walk away from their jobs. Every case is different, but generally most needed $500k or more. Nice post.

  9. Mark on June 7, 2018 at 2:42 pm

    Yes, Social Security does change everything. For a couple it can easily increase your net worth by well over $500,000. Taking even the 4% rule on half a million is nice income. An easy calculator for all this is at

  10. Ms Money Mantra on June 7, 2018 at 7:22 pm

    Great post! Fellow CPA/accountant here but based in NYC. I crunched my numbers and I will be leaving the rat race this summer. 28 female with net worth of $500,000 (including net real estate). I’ll be detailing my journey once I have more time since I think there are a lot of misconceptions about FIRE in a high cost of living area. Thanks for reaffirming my choice to pursue freedom instead of money.

    • Me on June 8, 2018 at 11:31 am

      Would love to hear this story!!

  11. TJ on June 7, 2018 at 8:41 pm

    This was an eye opening article for me. I believe I just might be another one of “those guys” that you warn we should not be one of. Now to go re-figure everything. Believe it’s time to look over my priorities and make some different choices. Thank you.

  12. Jamie V on June 8, 2018 at 7:11 am

    Keith, I have to agree with some above posters. This was a really good eye-opening article. Tuesday or Wednesday night, my partner and I went over our numbers (we are still paying off debt but getting ready to start putting money into our investment accounts, we’re so close!) and after looking at our annual expenses, factoring in personal/non-job-provided health insurance, we found “our number” was hovering around or a little over $1M to be comfortable.. That’s another 15-20 years out for us since we’re starting ‘so late’ (har-har, I’m 31 and he’s 38). I can only be so optimistic about getting there in 5 years or less before the realism sets in as we’re looking at those numbers (“We’re going to be in our 40’s and 50’s, if not older!”). You posted this the day after our conversation and I was like WHOA we need to re-evaluate! I think this weekend we may be having another serious discussion and seeing if we’re maybe comfortable with halving (or more) that final number (we were not factoring in social security, or really anything that might help at 67, because we aren’t sure if anything will even be around, like SS). I will also need to read up on amortization since I am very unfamiliar, and the online calculators I looked at were for debt, and it boggled my mind how to turn that around in terms of living off the income and not the other way around.. So thank you for this post because it might be making a huge difference for us and for our timelines (and hopes).

  13. Andy R on June 8, 2018 at 10:29 am

    Keith, this article hit home for me as well. I am literally giving my 2 weeks notice to my employer this coming Monday to step away from full time employment. I’m 30, and my wife is 27, and our net worth is about half of the “magic number” that most in the FIRE community aspire to, but i’m open to part time employment, and even looking forward to exploring a few interests, that I’m sure will generate income. My wife additionally works in healthcare, which allows for part time schedules, that in some cases maintain full benefits as well. I’m sure a few might point out concerns regarding “sequence of return risk” aka what if you “retire” at the start of a major recession. One thing I think you could highlight in the future, is some of the research into variable withdrawal rates. If you look at the work that Paul Merriman has done, in most 30 year periods the spending power of a portfolio even at a 5% variable withdrawal rate can double adjusted for inflation. I believe that variable withdrawal rates are ideal for early retirees, due to our ability supplement a poor year of market returns, with a little extra part time or seasonal work. Thank you for the great content!

  14. Mimoza on June 8, 2018 at 9:51 pm

    Hmm, I’m probably indoctrinated by BHs not to be so drastic, so for me it sounds scary.
    First, I thought the Trinity study stated that the 4% rate would be safe for the 30-year retirement, not ‘forever’ like your article states. No studies were made for the ERs yet whose retirements last for 40-60 years.
    Secondly, did the study really say that you’d never run out of money and leave the same pile of money behind as you retired with? I missed that.
    Thirdly, but…but…but what’s the amount I should have for the ER if I *really* don’t want to even drag my brain through the onerous thinking process of earning extra bucks of driving drunk people at night so that I can earn a few bucks per hours or write the same story as other ER bloggers do (I’m weaning myself from reading blogs as it seems the bloggers start blogging just because of money and nothing else), etc., etc.? What about such a conservative soul who needs say $60-75K/yr for a family of 4, and we would last another 40 and 50 years on this earth. Is it really that safe to just multiply 25 x 75k regardless of age and we are ready to ER?

    I am not drinking the right water in my city because I didn’t feel as euphoric reading such an advise. You beat MMM’s number totally down LOL.

    • Keith Taxguy on June 9, 2018 at 8:10 am

      Mimoza, I think you’re reading extra into my words. I never referenced the Trinity study. The 4% rule or 25x rule, whatever you decide to call it, is what many consider a safe withdrawal rate. Since most people reading this blog will use broad-based index funds their return will average more than 4%. The dividend yield is around 2% alone! The broad stock market in the U.S. has grown 7% plus inflation for a long-term growth rate of around 10%.Reference Jeremy Siegel’s work to see how consistent this has been.

      Armed with this information you know that in most circumstances a 4% withdrawal rate will allow the account value to grow, not decline! If a year of spending is kept in a money market account and dividends are not reinvested you have a strong buffer against temporary market declines.

      Now to “your” thought experiment. The longer the time frame the less amortization affects your withdrawal rate. Under the amortization method you need a beginning balance of $1,385,494 assuming a 4% rate of return, $70,000 in annual withdrawals and a 40 year withdrawal period. This is significantly better than the $1,750,000 needed if you just multiplied $70,000 by 25.

      Of course your solution still hides a lie beneficial to you. It assumes you are always spending the maximum amount each year without fail. If one day you say, “Ah, the hell with it!” and take a pass on even a minor expenditure more of your money continues to grow longer and the ending accountant balance is likely to be seriously higher. It also assumes money sitting around in a money market account waiting to be spent earns 0%. Capital One 360 and Discover Savings pay 1.6% currently and Vanguard’s money market fund pays around 1.9%. This is all extra money for you.

      Safe withdrawal rates assume you never touch the principle. I’m fine with that. But many people don’t reach the lofty financial goals and need an alternative that works. I provided that. And if you use it to retire early it will not hurt my feelings either.

      • Jeff on July 4, 2018 at 2:59 pm

        This is all fascinating. After 32 years with the same company, I gave my notice and am within 30 days of departure. Your site is the best of the several I have been reading. For us, it’s been a “budget up” approach to determining the money needed until full retirement age with SS. The aspect that I haven’t seen covered is that spending doesn’t stay constant. As we age, it seems likely we will spend less money in our later years due to mental and physical decline. Acknowledging increased health care and assistance costs, but even the charts I have found don’t look scary.

        Please keep the random points of insight coming. I’ve already learned so much. I’m trying to look way, way, way ahead to things like preventing elder scams, discussing wealth transfer, and leaving a legacy.

        Thank you.

  15. Debt Free DDS on June 8, 2018 at 10:18 pm

    Keith: Fantastic info has usual.

    I’m in the process of assisting my dad with retirement next year and also handling my parents finances which the majority is in Vanguard index funds.

    I’m going to show him the last paragraph in the post as he’s in a unique situation. Their monthly expenses are about $3K/month and it’s been this amount for years.

    What they didn’t realize was the amount that they will have available to them to use at retirement each month is TRIPLE their monthly expenses without EVER running out until age 90.

    I don’t think I could EVER get them to spend 9K/month but I want them to enjoy themselves while they are in good health.

    By the way, looking forward to our consultation next month.

  16. Emparion on June 10, 2018 at 9:15 am

    As a CPA myself, I completely agree. Not only do the numbers make sense, but people tend to spend a lot less in retirement. Health care is always the big question mark.

    I have clients who are little old ladies with millions in the bank and they hardly spend anything. They are creatures of habit and just want the same cup of coffee every morning. No matter how much I tell them to spend a little money and enjoy it they simply can’t. Nice post.

  17. Jim on June 12, 2018 at 1:07 pm

    Thanks Keith. Great post. And, very timely, as I’ve been thinking about it recently. Using your example, what if your expenses where more, say $50,000. You’d need $291,307 until age 70, when you begin taking social security, but what about the remaining $25,000? The 4% rule suggests that you would need an additional $625,000, for a total of $916,307, but would it make more sense to apply an annuity, for example, assuming average life expectancy (84) or a more conservative age (90, 100, etc.)? Using 84, you would need an additional $432,300, for a total of $723,608, almost $200,000 less than using the 4% rule. The oldest person ever, at 122, would need an additional $581,587, for a total of $872,895, which is still less than using the 4% rule. And, given the your expenses will likely decrease as you get older, especially if you live beyond 84, wouldn’t social security provide enough of a safety net? I’d appreciate your thoughts on this approach, and more particularly, which parameters seem reasonable.

    • TJ on June 12, 2018 at 1:20 pm

      As people age, their medical costs increase. I am on medicare and recently had to pay $400 to see a doctor for the flu. What is going to happen when I really get sick?

    • Keith Taxguy on June 12, 2018 at 1:27 pm

      Jim, you only need your full spending from investments/retirement accounts until pensions and Social Security kick in; then your distribution declines as the other income fills the void. It also assumes you never earn another penny. This may be true for some, but my experience says most people in retirement earn something just to get out of the house.

      Let’s play with the above example with $50,000 in spending. We will assume you are 50 years old, want to wait until 70 before collecting Social Security, have a 4% return on investments and withdraw $50k up front each year and drop it into a money market account earning 0%. Your starting balance needs to be $679516.32. You run out at age 70. Buuuuut… if your return is higher than 4% — a strong possibility — then your account balance will still be going strong at 70.

      At 70 pensions and Social Security will kick in. But, let’s say your pension and SS are short $2,000 per month at age 70. Then you need just shy of another $200,000 today (at age 50) so it grows to $415,009 at 4% in 20 years. At age 70 you can take $24,000 per year under the same parameters until age 100 in which case you’ll be too old to care or spend money. All excess becomes legacy.

  18. Harry on June 12, 2018 at 8:13 pm

    Awesome post, The misses and I just pushed past 800k not including the house (gotta live somewhere). We spend less than 50k annually and I been thinking for a while that this might be enough and now after running it though a dozen or so models I’m planning on pulling the plug next Jan at 58. The misses is 56 and will prob push on a couple more years to shore up SS when we pull that rip cord at 70.

    Thanks !!!

  19. Frogdancer on June 14, 2018 at 6:11 pm

    About 6 months ago I had a friend who geeks out on numbers and spreadsheets come over and have a look at my finances, investments etc and he put together a spreadsheet that projected 40 years into the future about where I’d be. It was pretty reassuring.
    I’m planning on working another 4 or 5 years, till I’m 59 (when I can access my superannuation) or 60, (just One More Year syndrome.)
    He looked at me and said, “You know, you could retire right now. You just don’t believe it yet.”
    He’s right. I still feel the need to get that 7+ figure sum to feel safe.
    But this article and the ideas you’re playing with was what he was talking about.

  20. WH on June 21, 2018 at 10:24 am

    Thank you for a great article! I don’t think there is much argument with the numbers as an excel model will get you to the correct amounts. I agree that historical rates of returns for financial assets will indicate that earning 4% is a realistic number which will leave the balance of the principal virtually intact. Erosion of purchasing power on fixed income will be an issue of course so a withdrawal of principal will be required to counteract this. Without SS and other “guaranteed” income, watching your financial assets dwindling can be stressful if you live much longer than your excel model. For me, having peace of mind is on the top of the list in terms of quality of life metrics. Therefore, being more conservative in your withdrawal has been widely advocated by the financial planning community.

  21. Paul Sharp on June 22, 2018 at 2:14 am

    I think that a rather more realistic approach is to think from the point of view of your present age and how much money would you need to spend the rest of your life. Then compare your income and savings. This will give you a realistic view of situation. But there are so many unexpected scenarios that will force you to keep a lot more wealth in your bank account than you would be thinking in the start. This is where you may cancel your plan of early retirement. After all, taking reverse mortgage loans at the start of retirements is not going to be a mindful approach. That’s why every thing should be checked from multiple angles before you actually decide to go for an early retirement.

  22. Zach on June 27, 2018 at 8:58 am

    One easy way to make this work even sooner for most I don’t see enough – move to a low cost country abroad. Your article rang true to me as my wife and I are currently working towards this goal. I’m 28, she’s 26, and we plan to semi retire in 2-3 years with around $200k that with a little side gig income will last until my pension that I’ll soon be vested inton and can start taking when I turn 55. Great article – also in Wisconsin! (For now 🙂)

  23. I want to retire at 60, not 62 on November 11, 2018 at 12:37 pm

    Hi. I love this. Found you on FB. Would you please provide the link to the post where you did this same math for the 54 year old as stated above?

    Also, would love to see what you have for people who draw pensions. How do those factor in?

    My husband is 62 and medically retired. Receives SSDI of about 1000 a month. Medicare will kick in for him in January 2020 because of the disability.

    We have $80,000 in 401k contributing $22,000 a year to that. My pension will be worth about $2000 a month in 4 years… …and my SS will be about $1000 a month. I do not want to work till 62 though… …that is 4 years away for me. Would like to work until 60 but that reduce pension by 10% …and social security too.

    I can never find info on how having a pension factors into all of this.

    Thank you for the encouragement!

  24. […] How Much You Need to Retire is a Lot Less Than You Think (The Wealthy Accountant) […]

  25. Weich on November 15, 2018 at 10:00 pm

    I read your article with great pleasure! I find myself chuckling as I read. It’s true, people always say you’ve got to have a million before you can arrive at FIRE. I have a lower figure than that, just 1/2 of a million. I (not American) live in a city in Asia, and hence the cost of living is high. But like you said, retire does not mean not working, and I can see myself working till I’m 70, and enjoying every bit of work along the way. Now, I’ve got to read your other articles. Thank you again for those words that inspire courage.

  26. Tracey on February 10, 2019 at 6:29 pm

    Great article! I was laughing out loud. I’m 51 and currently “on sabbatical” and enjoying myself tremendously (and candidly I’m shocked at how LITTLE I’m spending).
    I will return to work eventually (there’s a lot I get from work in addition to money) but definitely enjoying the time freedom for now.
    Thanks for the reality check that you DON’T need $5M or $10M in order to retire (like that crazy Suze Orman INSISTS)!

  27. Michael A on March 29, 2019 at 2:29 pm

    My parents (76 & 79) resemble the “frugal” concept and it is something I didn’t find attractive.

    I’m 58 and retired two days before my 57th birthday. On my retirement date, I had 800k in various investments. In the last 16 months my net worth has decreased by 5k (and that includes buying a new car and paying 2 years of health premiums to my wife’s employer.). At age 60, I will receive $1,350 a month from the State of NC + 100% health care paid under the States retirement plan.

    Three simple steps brought me to this point :

    1. Paid off house as quickly as possible
    2. Started making monthly 401k contributions at age 30
    3. I had the foresight to relocate to NC and get a state job which would pay full health care benefits. At age 44 I needed to work only 5 years to obtain 100% paid healthcare upon reaching age 60.

    Retirement is Great!

  28. Sara RichEnough on July 8, 2019 at 4:18 pm

    When I did the numbers for my now husband (wasn’t when he retired). If he delayed taking his SS rather than starting at 62 and instead started pulling from his 401k, he’d run out of money a year sooner due to missed earnings. For me I’m a couple years behind you, playing with a full deck of cards and waiting on my severance check. I’m tired of working and have NO plans to pick up any side hustle. I can’t imagine doing anything else than what I currently do, and nothing else pays nearly as well. Oh and I don’t need to call for my momma, she’s calling for me all day long as I’ve become her primary care giver…oh about that side hustle 🙁

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