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Can You Retire Early With 1 Million Dollars?

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Can You Retire With 1 Million Dollars?Can you retire early with 1 million dollars? That’s a tough question. A million dollars isn’t what it used to be. This is especially true when it comes to retiring early. Early retirement means you can have 40, 50, or more years in retirement. Those 1 million dollars will have to last a very long time. On the other hand, most people will never accumulate anywhere near a million dollars. Less than 10% of all US households are millionaires. You’re far ahead of most households if your net worth is over a million dollars. Early retirement is possible if you plan ahead.

Today, we’ll examine what it takes to retire early with 1 million dollars. But first, we’ll talk a bit about why people think they need a lot more.

Why people need more money

One of the most popular posts on Retire by 40 is this one – Can You Retire With 5 Million Dollars? Actually, it’s kind of an absurd question. Of course, you can retire with $5,000,000. That’s a lot of money. You can generate $200,000 per year using the 4% rule. Most people would be extremely happy with that kind of retirement income. That’s 5 times our annual expense! However, something strange happened with my poll. Vote to see the result.

How much do you need to retire right now?

View Results

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Over 10,000 people (70%) voted they need $5 million or more to retire right now. This is very surprising to me. It’s a huge percentage.

I think the result is skewed because of Google. Most readers get to this poll through Google search. They search for something like this – “Can I retire with 5 million dollars?” People who do this search are probably worth close to 5 million dollars. Of course, they’d vote for $5 million or more.

Most people worth $5 million dollars are used to living a $5 million lifestyle. I assume they drive luxury cars, live in a beautiful house, and spend a lot of money on entertainment. Once you get accustomed to that lifestyle, it can be very difficult to cut back.

The big lesson here is this – you need to keep your annual expense under control if you want to retire early with 1 million dollars.

Retire early with 1 million dollars

I know retiring early with 1 million dollars is possible. That’s what I did in 2012. I retired from my engineering career with about $1,250,000 in net worth. Most of that was invested. At the time, our home wasn’t worth much due to the subprime mortgage crisis. After 8 years, I’m still retired and haven’t had to beg for a job yet.

My early retirement has been successful so far. However, I had a lot of help. My wife hasn’t retired yet, I make some money from this blog, and the stock market did extremely well since I retired. These factors enabled us to avoid withdrawing from our retirement fund. No, this isn’t a traditional retirement. But that’s why it is successful. 1 million dollars is a lot of money but 50 years is a really long time. We need to be flexible and define our own retirement.

It’s still early yet in my retirement. I’m only 46 and I have many years left. We won’t know if this early retirement will be successful in the long term. However, I feel like I’m almost out of the wood. The first 10 years of retirement are the most dangerous. If everything looks good after 10 years, it’ll probably work out in the long term.

Here are some of the things I learn from 8 years of early retirement. To retire early with 1 million dollars, you’ll need to follow many of these.

Spend less than $40,000 per year

This is from the 4% safe withdrawal rule. If you spend less than 4% per year (plus inflation,) then your portfolio should last 30 years. This is just a guideline, but it’s a good one.

Here is what our annual expenses look like since I retired in 2012.

actual expense vs 4% SWR

We spent more than 4% some years and less in others. Overall, the trend looks good. Our spending is under control. We didn’t have a lot of lifestyle inflation over the last 8 years.

Tight control over lifestyle inflation

Lifestyle inflation is very dangerous for early retirement. We can see this from my $5 million dollars poll. People who spend $200,000 per year will have a very difficult time living on our budget. To retire with $1,000,000, you need to keep a tight rein on your spending. You need to track your expenses for a few years and make sure it doesn’t increase much more than inflation (2%.) If your annual expenses increase more than 2% every year, then you need to work on controlling lifestyle inflation first.

Enjoy cheap/free entertainment

One way to control your spending is to enjoy cheap/free entertainment. Our family loves reading, playing board games, and going to free events around town. Occasionally, we spend money on entertainment, but it’s a small part of our annual expense. If you want to retire early on $1 million, you’ll need to learn to enjoy cheap/free entertainment too.

Good health

Another big problem with early retirement is health care. A good health insurance plan isn’t cheap. If you’re healthy, you can go with a cheaper high deductible plan to save some money. Even with a good health plan, a chronic disease can cost a lot of money. It’s best to eat well, exercise regularly, and stay healthy. Luckily, I haven’t had to spend a lot of money on healthcare. You need to take care of your health and minimize health care expenses. Of course, health depends on genetic too. If your family history is full of expensive diseases, it might be best to keep working.

Earning money is good

Most people think you shouldn’t work after retirement. This is fine with traditional retirement. However, early retirement is a different story, especially with $1,000,000. It’s good to work a bit and earn some money while you’re young. This will enable you to minimize withdrawal in those crucial early years. I made money from blogging and other side gigs. It’s not a full retirement, but it’s a huge step down from working 60 hours per week as an engineer. Keep your eyes open. There are many opportunities to make money.

Staggered retirement

A big reason why I’m doing so well in retirement is thanks to my wife. She is still working and she isn’t ready to retire yet. Her income enabled us to save and invest more. If you’re married, it’s a really good idea to stagger your retirement. This might not work for every couple, though. Many couple wants to retire at the same time. That’s okay too. You have to figure out what works for you.

Kids?

We have one son and he hasn’t cost a lot of money yet. Daycare was expensive, but that expense went away when I became a stay-at-home dad. Other expenses haven’t been too bad. He wears out his clothes and shoes quickly, but kid stuff are pretty affordable. As for extracurricular activities, we only sign him up for one thing at a time. All in all, we haven’t spent a lot of money on our son yet. The big expense will come when he goes to college. We’re saving for that in his 529 college savings plan. If all goes well, we’ll have enough to fund 4 years of in-state College.

Early retirement will be harder with more kids. My brother has 3 kids and he won’t be able to retire for a long time.

Parents

Here is one that most people don’t think about much. Last year, we sent over $10,000 to my parents to help with health care and cost of living expenses. They didn’t save much for retirement and we’ll help out as much as we can. Luckily, they live in Thailand and the cost of living there is much cheaper than in the US. If your parents need help with their retirement, you’ll have to figure that into your budget.

Open to relocation

My brother lives in the Bay Area (expensive!) and he isn’t willing to move. That’s a big obstacle to early retirement. He needs to accumulate a much bigger retirement portfolio than we do, especially with 3 kids…

On the other hand, we live in Portland and we’re open to relocation. Portland is cheaper than the Bay Area, but it is still pretty expensive. Right now, we’ll stay here due to Mrs. RB40’s job and Junior’s school. Once Mrs. RB40 retires and Junior goes off to college, we’ll probably move to a more affordable location.

Luck

You will need a lot of luck to make early retirement work with a million dollars. I was very lucky that the stock market performed so well since 2012. Someone who retires in 2020 might not have the same luck. However, don’t be discouraged yet. The stock market might continue to do well for many years. Who knows? Also, you can overcome the sequence of return risk by going back to work during an economic downturn.

Early retirement is possible

In closing, it’s entirely possible to retire early with 1 million dollars. However, you have to control your spending and be flexible. If things start to go wrong, you need to react quickly. Fortunately, there are many options for early retirees. We can earn some money through gigs and hobbies. Also, we could cut expenses by moving to a cheaper location or cutting back on entertainment. I was lucky to retire in 2012, but others are braving it now. Here are some examples.

These folks are very good at controlling their expenses. I’m sure they are very adaptable too. Will all of us succeed? You’ll have to follow us and see.

What do you think? Can you retire early with 1 million dollars?

Planning for retirement? You need a good retirement calculator. Personal Capital has a great one. It will take all your accounts into the calculation and help you figure out if you’ll have a successful retirement. Sign up for a free account at Personal Capital if you don’t have one yet.

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.

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{ 62 comments… add one }
  • Gars February 28, 2020, 10:29 pm

    A million dollars will generate an immediate annuity of about $37,000 a year, indexed for 3% inflation so there you go….

    I need at least twice that much.

  • Financial Samurai February 24, 2020, 3:33 am

    Definitely possible without a family or anybody to support. But today, given the 10-year bond yield is at 1.45%, $1 million only spits out close to poverty level wages. I would definitely need supplemental income to support the $1 million nest egg.

    $3 million is really the new $1 million. I feel folks are going to be sorely disappointed at how little $1 million provides once they get there.

    Sam

    • retirebyforty February 24, 2020, 9:53 am

      I agree with you about $3 million. That’s a lot more comfortable today. $1 million is a tight squeeze. If you’re flexible, you can do it. Work a bit and grow that $1 million.

  • Lin February 18, 2020, 8:22 am

    Great article! I am making 1 million my mental/official goal, though I plan to keep working after reaching it. I’m a therapist, so hopefully once my private practice is off the ground I can choose my hours fairly freely. 1 million would allow me even more freedom, and I think I’d feel like my husband and I could take some time off if something came up. At the moment we are both pretty focused on saving and don’t have enough “f you money” to be completely flexible job-wise.

  • I am thinking about retiring in several months …. so a good reminder 🙂

  • Jay @ OneMoreMillion February 16, 2020, 6:01 pm

    You are an inspiration to a lot of us. We started our FIRE journey with a goal of $1 million but man kids are expensive and we have two. Since we are young parents we decided to punt the idea of retiring by 40 and changed it to 48 (both kids will be off to college) and increased the goal to about $4M to accommodate for the lifestyle creep.

  • Jim Y February 14, 2020, 7:37 pm

    What I try to tell people is to look at what they are living on now and see how that would translate to retirement. Say you make 100K/year and save 20% in your 401k, and another 5K in your roth. Let’s assume you’re on high deduct plan and pack another 5K in there.

    You’re living on 100 – 25 (tax deferred) – 15 (assume 20% tax rate on 75K) = 60K. Now….look at your debt….got a car payment? Other loans? A house payment? Let’s say, for arguments sake, you have a house and a car and ~2K/month in payments (24k). If you could get rid of that, you could live on 36K…throw in a tiny adjustment for prop taxes and insurance not going away and you need about $40K to keep your lifestyle. 1M with 4% rule and no debt….boom!

    • Jim Y February 14, 2020, 7:41 pm

      I missed the Roth contribution in my totals, so 100K – 25K (401k plus HSA) – 15K taxes – 5K roth = 55K….so 35K. But….you will have to pay ~4-5K in taxes on that income (assuming most of it is 401K), so still ends up about the same.

  • americanseniorcitizen February 12, 2020, 3:47 pm

    Yes 1 million will be enough, and I live in Southern California. If you currently own a home in California, you can sell it, downsize and still keep the same property tax base (see my website americanseniorcitizen.com). We here in California have a wonderful property tax proposition called Proposition 13. There is also Prop 60 and Prop 90 that will explain how to downsize and keep your property tax base. This is the best way to retire in California. When I finally payoff my mortgage (3 years) I will be able to live on less than $30k per year. And since I live in an Active 55+ Community, I already have my gyms, pools (including indoor), tennis courts, bocci ball courts, and then if I decide to learn to golf, I also have 2 golf courses. This is what happens when you become debt free and learn to live below your means. Thanks Retireby40, this was a great article!

    • retirebyforty February 13, 2020, 6:19 am

      Thank you for your input. I didn’t know about Prop 60 and 90. That’s a great deal.
      The Active 55+ community is a great idea. My FIL is thinking about moving into one of those.
      It looks like once the housing cost is greatly reduced, the other stuff isn’t that expensive.
      Congratulations!

  • Kayla @ Family and FI February 12, 2020, 7:36 am

    My husband and I were once in an extremely tough financial period. We relied on food banks and I remember taking appetite suppressants so that I could make our groceries last longer. It’s not a cheerful story when I bring it up to people. However, we’ve developed some major financial IQ and managed to pay off almost $200,000 on one income in the last couple of years.

    We became inspired when we found FI and FIRE and launched https://www.familyandfi.com to document our journey to financial independence. We are on the path to having the option to retire by 40. However, 1 Million won’t be enough for us.

    Also, if I may add a little food for thought for anyone thinking about FI…
    One thing that I found out as we started to pursue FIRE though is not everyone understands it and sometimes you will get someone who tries to put you down about it. We live a life of frugality to fast track FI and we get comments all the time about how we need to spend more money for “nicer things.” (My husband still drives a 2007.) On the flip side, sometimes when people find out how financially stable we are, we hear, “Oh you guys are rich – I can’t keep up with y’all!” Retiring early certainly isn’t understood by everyone, but it is completely possible if you study and have a steadfast strategy.

    • retirebyforty February 13, 2020, 6:21 am

      What’s your target? $2 million is a pretty good number if you’re frugal.
      Good luck!

  • Kim @ The Frugal Engineers February 11, 2020, 5:54 pm

    I once read a FIRE blogger mention having “a million dollars and a paid off house”. It stuck in my head, and we used that as a starting point for setting our own FIRE goals. Our FIRE budget includes annual spending of $42,500/year in a paid off house, so it’s not too far from that original marker.

    • retirebyforty February 13, 2020, 6:22 am

      That’s a good starting point, especially if you live in a low cost of living location. Great job!

  • jim February 11, 2020, 11:31 am

    It depends.

    30-40% of households live on less than 40k a year. I think they could manage retiring.
    And thats all households including families with 3+ people
    Its a lot easier for singles

    But then you gotta consider healthcare costs that may already be paid for by their jobs mostly. And what about housing? Does the $1M include a paid off house or is that seperate and are we paying rent out of our budget?
    Are you in a high cost or low cost area? $1M is impossible in San Jose. Much easier in the rural midwest.

    • retirebyforty February 13, 2020, 6:54 am

      That’s what I was thinking. People make do. Most retirees have much less than a million dollars. They get by on social security, side hustle, and family helpers. People get by somehow.

  • GYM February 10, 2020, 9:38 pm

    I think it’s possible definitely if you don’t plan to have kids and if the $1,000,000 is for one person. $1,000,000 investment portfolio is okay but if you don’t have a paid home I think it will be more difficult unless you are willing to do geoarbitrage and live in a very low cost of living rea.

  • Lilith February 10, 2020, 9:09 pm

    I think 1 million is doable if you are used to living lean and find entertainment in simpler things. We have around 1 million not including our paid off house. I think we can retire with 40k annual except for health insurance. We have a toddler and my husband will keep his job for another 10 years, hopefully by then there will be some sort of affordable healthcare.

  • drplastickpicker February 10, 2020, 8:54 pm

    I used to think $5 million would not be enough. We live in so cal so it’s expensive. Now that we are not consuming much due to the environment, traveling less due to the environment, and I am just ocean plastic picking/beach cleaning for exercise and fun and blogging for fun – I think $5 million would be enough. The only thing if one of the kids wants to go to medical school and we wanted to help, that would be very expensive. Its like 90000 a year now for private medical school and even UCSF is +70000 with everything included.

  • Corgidad February 10, 2020, 6:38 pm

    My wife and I retired about a year ago. We are 48 and 52. No kids. I will say it’s been quite different than we have expected. We retired with 1.7m and are now over 2.1m. Neither of us have any income except investment in stock market. Our insurance for the first 7 months was a big expense at $1100/month but now we have better insurance and it’s only $105/month (thanks ObamaCare!!). We had to wait till January for that to kick in.

  • Notretired_yet February 10, 2020, 6:07 pm

    I like you blog, but I don’t fully agree when you write: “I know retiring early with 1 million dollars is possible. That’s what I did in 2012. I retired from my engineering career with about $1,250,000 in net worth.”
    If looking at your household, you are not really retired. You had a job change. From working full time you became a part time blogger. And your wife is still full time working.
    Else many households could be considered as retired. E.g. my wife gave up her job to full time take care of our kids and run the household, while I’m still working full time. If we would use your definition from my wife’s perspective we are retired…

  • Jim @ Route To Retire February 10, 2020, 9:32 am

    Hoo-boy, this was a nail-biter… if you had said it wasn’t possible to retire on $1 million, that would have been a real letdown for us! 😉

    Our net worth is just over $1.3 million right now and it’s now been just over a year since I retired. Although it’s an exciting feat to have reached the infamous 7 figures, in all reality, it’s not a ton of dough for a retired family of three.

    Personally, I think we’ll be Ok. You mentioned controlling expenses, pulling out less than 4%, good health, and being adaptable. We’re good on all counts and relocating to Panama has definitely been helpful.

    That said, it doesn’t mean I think we’re rich. We’re still very careful and I do still think quite a bit about sequence of returns risk and that the market could collapse tomorrow. But we have a bucket strategy in place to help mitigate this and I’m sure we’ll make at least some sort of income along the way.

    Life’s short… I’m going to enjoy the time with my family right now. I’ll keep a close eye on things in the meantime and make changes as needed. If it comes down to it, I’ll get a part-time job… not the end of the world.

    Thanks for the shout-out, btw – very much appreciated!

    • retirebyforty February 10, 2020, 11:48 am

      Thanks for the update. I think you’ll be ok too.
      You are vigilant and control your spending very well.
      As long as you’re adaptable, you should be fine. If it means working a bit, then so be it.

  • freddy smidlap February 10, 2020, 7:24 am

    i could do it for sure if i were single. i think the two of us could do it but it wouldn’t be as much fun as we enjoy some things that cost some money. 50k for the two of us feels like a life of luxury and basically that means buying good wine and a steak from the store once a week.

    i agree with trying to stagger retirement if you’re part of a couple. mrs. me is 5 years older and i ask her every year how long she wants to keep working part-time. basically it’s for her pocket money so we don’t have to figure much out. i stay out of what she spends and just know we could live well on what i take home.

    • retirebyforty February 10, 2020, 11:46 am

      I’m not sure if being single really makes a big difference. It’s easier in the short term, but you need to budget for dating and more. That’s not cheap. If you get married and have kids later, then it might be the end of retirement. 🙂

      • Frogdancer Jones February 10, 2020, 12:47 pm

        Haha! Not every single person is interested in dating!
        Some of us have worked out that being single has many advantages.
        🙂

  • Ed February 10, 2020, 6:49 am

    I think it’s possible, but that’s a little too lean for us. We’re over the $1m already, but still accumulating for now. We want to spend a little more, and have a target withdrawal rate closer to 3% than 4%. We could choose to go now and be fine, but we wouldn’t be living the life we want. Fortunately, we don’t mind working a bit longer. You did it the right way – cut back your work, but continued with sources of income.

    • retirebyforty February 10, 2020, 11:45 am

      Thanks for your input. If you don’t mind working longer to pad your retirement portfolio, then that’s the way to go.

  • nicoleandmaggie February 10, 2020, 6:37 am

    Well, if one of the two of us is still working, the other could stop with less than a million saved. For both of us to stop working, I think we’d need 5 million because we’d want to move to a different state where housing is expensive.

    • retirebyforty February 10, 2020, 11:44 am

      That’s unusual. Moving to a more expensive location after retirement. Where do you want to move to? I’m curious.

      • nicoleandmaggie February 10, 2020, 12:24 pm

        Someplace fun with good weather and great restaurants and amazing libraries. Maybe Santa Monica or San Diego. Possibly SF Bay if we want to keep employment opportunities open for DH. Or who knows, Portland or Seattle given the state of global warming.

  • Ian February 10, 2020, 6:27 am

    Just to set the scene….I am 80 and live in the UK, which is a completely different scenario than retiring in the US. I worked full time for 45 years so I am entitled to the maximum state pension which is linked to inflation and is currently paying me £231 per week. On top of this I have a very small private pension as I was unable to save much during my working life. Up to now I have topped up my pension by working part time jobs for around 15 hours a week. We have lived a perfectly contented life over the past 15 years with this level of income. There are a number of benefits you receive from the State as you get older. To answer your question it is all about what you expect from retirement three cruises a year or three long weekend breaks? You have also got to work the system….this is touched upon in one of my articles ’10 Ways To Save Money In Retirement’ I would also recommend Affiliate Marketing as a great way to earn a substantial income in retirement from home.

    • retirebyforty February 10, 2020, 11:43 am

      Thank you for your input.
      Pension and state benefits will help tremendously. That’s how most retirees fund their cost of living.
      For us, we should get good Social Security benefits once we’re 67. It’s the early years that’s more difficult. We still have 20 years left in that zone.

  • David @iretiredyoung February 10, 2020, 5:19 am

    I think we could retire on a million dollars, although that would require some adjustment to what we currently spend but I’ve no doubt we could adjust our expenditure if we needed to.
    Definitely helpful are to have a home without a mortgage and kids who are grown up. Free medical treatment is also a big plus.

    • retirebyforty February 10, 2020, 11:40 am

      Those factors you mention are great.
      – no mortgage
      – kids are independent
      – free/cheap healthcare
      Retiring on $1 million would be much more doable then. Healthcare is a huge issue in the US.

  • SWFL Financial Coaching February 10, 2020, 4:58 am

    Yes! We could retire with $1 million dollars right now. Your poll shows that 95% of the general population doesn’t know finances. It’s not that it’s bad to have more, but knowing what a minimum is is good for planning. All those people who think they need $5,000,000 will despair their whole life because 99% of those people will never get there.

  • Tom @ Dividends Diversify February 10, 2020, 4:41 am

    Hi Joe. I definitely think you can retire with $1 million. Since only ~10-15% of the US population are millionaires, people are doing it every day. The question is will $1 million support the lifestyle a retiree desires? And that is very specific to the individual. Tom

    • retirebyforty February 10, 2020, 11:36 am

      You hit the nail right on the head. $40,000/year isn’t that much. Some people can enjoy that kind of lifestyle, some people can’t handle it. It depends on the family.

  • constance munoz February 10, 2020, 4:16 am

    well we thought 1 million would be enough, but learning fast it isnt, we both retired at 55, we both have pensions, I have SSDI of 1850, plus pulling off of one of my husband pension plans, we bring in 42,000 a year and have a million in savings and investments. we moved to mexico 2 years ago. just in the two years we have been here, prices have tripled due to all the americans and canadians moving here. we moved to puerto vallarta. we can easily live here even with the increase in costs, but one thing we didnt factor was a year before retirement i developed lupus and hasimotos which are pre existing. my husband was able to get expat insurance, but i was not able too. even with all the money we have invested we could have several big health issues and be cleaned out, because we are so young, that money to last for me and major medical issues, this money isnt enough to last us for 30 to 40 years, and healthcare even if private is not as good as in the usa. example if you cant get people to donate blood, you dont get blood plain and simple and their rules are so strict for donating blood, i have a friend now in the hospital, 3 weeks she has needed 6 units and we have been begging people on social media to donate, my husband was the only one, she will die in this hospital. They are trying to sell her condo now to take care of her. They sucked her savings account dry in the private hospital and then kicked her out and put into the poor mexican hospital. with the costs in mexico going up so fast, i have never seen anything like it, seriously our rent went from 400 usa to 1000 usa in 2 years of living here, there are no laws or rules for raising rent, well they say they cant raise over 6 percent but they do, there is no way to inforce the rules here. so with that and the not so good care here, i know, i will get back lash because everyone swears by the healthcare in mexico, but as a nurse i have seen the REAL healthcare here,not the rose colored glass version. I love love mexico and it makes my heart sad, but we have to return to the states and hubby go back into the work force, we cant afford the insurance in the states, which is why he has to go back to work. i am not a medicare for all person at all, but something has to be done about healthcare in the states, because we could easily stay retired in the states, if healthcare insurance wouldnt take up such a huge chunk of our money..so no 1 million isnt enough to retire on. sad to be leaving mexico

    • retirebyforty February 10, 2020, 11:35 am

      Thank you for the update. I’m sorry to hear that it’s not working out.
      Healthcare is a huge issue. If you have any health problems, it’s probably best to keep working.
      Wow, Mexico inflation sounds really high. That’s another problem with moving to another country. Inflation could increase dramatically. Please keep us updated.

      • Joe February 10, 2020, 1:37 pm

        That is an issue with early retirement, many times you don’t know you will have health issues until you have been out of work so long that you and/or spouse can’t go back to work. The healthcare expenses are so high in the US that most early retirees have to rely on luck. For those that don’t want to rely on luck, need to plan for full unsubsidized premiums and max out of pocket expenses every year. For my family of 3 in California, that’s about 40k annually. So a 1 million portfolio just to cover health expenses.

        • retirebyforty February 10, 2020, 1:44 pm

          Wow, $40k/year is very expensive.
          I checked and the premium will be about $10,000 per year for the 3 of us here.
          If you’re talking max out of pocket, that’s another story. At that point, it might be cheaper to seek healthcare somewhere else. We could get private care in Thailand for a much more affordable price. Assuming nothing too exotic, of course.
          Healthcare is a huge issue.
          Thanks for your input.

          • constance munoz February 10, 2020, 2:10 pm

            We looked at thailand first before mexico because we loved it there, i think alot harder to learn thai than spanish. Isnt thailand now requiring you to have some type of expat insurance now to obtain a retirement visa there?

          • retirebyforty February 10, 2020, 4:01 pm

            I don’t think you need to show health insurance to get a retirement visa. You need to show fund in the bank (Thailand) or income.

          • Joe February 11, 2020, 2:24 pm

            Yes, I was adding in the max out of pocket into the total. Our premiums are $20k a year, plus another $16,300 for max out of pocket. We have not hit max out of pocket but we are lucky to have no serious health issues yet.

            Once you have serious health issues, it may be difficult to travel for health care depending on how sudden or severe the health issue is. It also wouldn’t be a good time to try to accustom oneself to a foreign culture or health system. So if the plan is to get health care at some other country, best to settle there and be familiar with the system before a serious health issue. Also at the other country you may not have access to members of your family for help if needed.

            As an early retiree with a family, these are all issues I’ve thought through.

  • Xrayvsn February 10, 2020, 3:42 am

    For me I am pretty conservative and want many multiple margins of safety built in. A lean FIRE type early retirement is not for me because I do not want to stress as much about money after the ability for me to return to work as evaporated.

    I agree with Mr Tako that a better SWR is in the 3.5% range for those that retire early. The 4% rule was meant to cover 30 years and it was also created in a different economic time (where bonds were making more money than they are now.)

    Studies have shown that $90k/yr is where happiness is maximized so $2.6M investible portfolio (home not included) would be an ideal spot. I’m over that now but continue to work because I want to pad it even more.

    • retirebyforty February 10, 2020, 11:32 am

      Thanks for your input. What’s your target? $5 million?
      You can do it because you have great income. It isn’t possible for most people.
      I think it’s good that you’re conservative. It’s safer.

      • Xrayvsn February 11, 2020, 3:28 am

        When I first set out I chose $5M because it seemed like a good number. But soon after I changed it to $4M net worth (investible and not including primary residence). As I am approaching that number ahead of schedule I’m not sure what the target is anymore as I had planned to work till my daughter goes to college (4 more years).

  • Dave @ Accidental FIRE February 10, 2020, 2:15 am

    I could do it as I generally keep my expenses under $40,000k per year. Numerous folks in the FI community did it as well, including MMM. But as you clearly stated, if you retire with a million or less you’d have to be very very vigilant about keeping lifestyle inflation at bay.

    • retirebyforty February 10, 2020, 11:31 am

      Lifestyle inflation is a big issue. If you let it increase, it’s very hard to cut back.

  • Mr. Tako February 10, 2020, 1:29 am

    Living off old rules-of-thumb is dangerous. Many experts agree that the 4% rule is probably not going to work in today’s environment (myself included).

    Most seem to believe that 3-3.5% is more realistic given the current economic environment. Using this revised estimate, a person with a $1 million dollar retirement fund would have to live off $30,000 – $35,000. That’s not easy to do in the U.S.

    This is for one person of course. If you start adding a spouse and kids, then a sum above $2 million is far more realistic. Need I mention that median income in the U.S. is $60,000. That alone points to a number over $2 million for most average households.

    Let’s stop with the $1 million dollar myth already.

    • retirebyforty February 10, 2020, 11:30 am

      I think the 4% rule is a pretty good guideline. You need to be vigilant and react if things go wrong, though.
      3-3.5% is safer, but I don’t think it’s necessary. Most retirees would be fine with 4% and maybe cut back to 3% during the down years.
      It’d better to accumulate $2 million, but that’s very difficult. Not many people can do it. One million is much easier. Once you get there, it’s okay to downshift like I did. It should work out for most people.

  • Mr. Nomad Numbers @ NomadNumbers February 10, 2020, 1:07 am

    Hi Joe. Thank you very much for calling out our spending report in your post!

    As a couple that doesn’t have kids, I’m pretty comfortable to say that you can retire with a portfolio that generates $40K of passive income per year without living miserably. $40K was our initial spending goal before we decided to retire in summer 2018. As you share with your readers, we’ve been well under that number since we started our nomadic journey and we are really happy with this new lifestyle. For instance, thanks to AirBnB we get great monthly discounts for the places we stayed at and they come with all the major amenities you would expect to be liveable like a kitchen, a working space, good wifi and so on. (details: https://www.nomadnumbers.com/top-airbnb-stays-around-the-world/). Long term travel also comes with two major advantages: the cost of healthcare insurance is pretty cheap (compared to what we used to pay in the US) since we pay about $3K / year to get covered anywhere in the world (details: https://www.nomadnumbers.com/why-long-term-travel-is-the-best-health-insurance-plan-you-can-get/). Another advantage is travel rewards that have helped us saved thousands of dollars each year. (In 2019 along we save 10K in airfare cost – details: https://www.nomadnumbers.com/2019-end-of-year-travel-rewards-report-10k-in-free-travel-money/)

    Since we are very transparent about our numbers, your readers can check our detailed cost of living where we share each $ we spent in each city we have been visited so far (details: https://www.nomadnumbers.com/tag/costofliving).

    Last but not least, while kids might be more expensive, it doesn’t have to be that much. Justin (from RootOfGood) who retired in 2013 is spending about $5K per kid while living in the USA (details: https://rootofgood.com/cost-of-kids-in-retirement/).

    Ultimately it is all about making smart decisions and designing the life you truly want for yourself and not what others want your life to be. For us, we always wanted to travel and FI + geo-arbitrage has helped us to get there sooner than we thought and now we are very grateful for the life we hope to enjoy for many decades to come 🙂

  • Anne February 10, 2020, 12:08 am

    Great article!
    Healthcare and kids are my two categories I worry the most about in early retirement.
    Personally, $1M is not enough to retire off of in Los Angeles. I would like to retire with more than that so that I have more flexibility in my budget in LA and travel regularly, but am also open to living abroad or in a lower cost of living area in the US. Just depends on how quickly burnout happens from my 9-5 job.

    • retirebyforty February 10, 2020, 11:26 am

      Los Angeles is expensive. I think relocating to a cheaper area would help out a lot.

  • Andy February 9, 2020, 11:55 pm

    Youre not retired. You are just living on one income. Millions of people with kids do that every day.

  • Financial Freedom Countdown February 9, 2020, 10:25 pm

    I can retire with $1M dollars. But I am single and my house is paid for which is worth another million. So technically I could move out of the San Francisco Bay area or even have room mates (since it is a 3/2 house) if needed.

    P.S. If that is you in the cover pic then you need to blog at your fitby40 how to do it 🙂

    • retirebyforty February 10, 2020, 11:22 am

      It’s easier for a single person, but there are issues too. What if you get married and/or have kids later. You never know what will happen, right?
      No, that’s not me. 🙂

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