Retire Early or Retire RICH?

Would it be better to retire with just enough to cover your basic expenses, or to work a few extra years to have a lot more?

On one hand, it’d be nice to have the time back that your full-time job used to consume. But work gives you purpose, and it’s also nice to have extra security. And a few luxuries, of course 🙂

What would you choose?

photo by Jonathan Andrew from Pexels

If you have a clear understanding of your typical monthly spending, it’s pretty easy to calculate when you would have enough to retire. But how do you decide how much is really enough?

Let’s start with a simple example:

A nest egg of $2 million would provide income of $80,000 per year in retirement (using the 4% withdrawal rate).

That’d be a pretty comfortable retirement. However, once you have $2 million you’re really starting to get to the steep part of the compound interest rate curve (if a reasonable amount of it is invested). 10% returns on $2 million would be $200,000 per year, and that extra two-hundred grand is also compounding! If you continued working for just another 4 years, even if you spent your whole paycheck you’d have almost $3 million.

So, say you’re looking to FIRE (Financial Independence, Retire Early), and your target is to retire at 40 with $2 million…

  • You could instead retire at 44 with $3 million.
  • Or at 47 with $4 million! 
  • Or at 49 with just under $5 million!!
  • If you stuck it out until the average retirement age of 61, you could have OVER $16 MILLION.

So the question really is, what’s more valuable? Your money (and the things you can buy with it) or your time?

I haven’t decided for myself yet, but I’m leaning towards a “lean FIRE”. I actually like to work, I just want to work on things that mean more to me, sort of like I described in my blog Quit Your Job Sooner. That said, I expect to continue earning some income after FIRE and don’t need to have as much in savings.

What about you? Would you retire as soon as you have enough to get by, or stick it out for a few more years and retire on a yacht?

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