If you want to retire early, you must maximize the value of your after-tax investments (taxable investment portfolio and real estate portfolio). It is your taxable portfolio and investments that will generate the passive income necessary to retire early.
Better yet, you should try and follow an after-tax investment amounts by age guide to increase your chances of living a fantastic retirement lifestyle.
Pre-tax retirement accounts such as your standard IRA or 401(k) are nice. However, they won't get the job done unless you are planning on retiring after age 59.5. If you retire before 59.5, you may have to pay a 10% penalty if you withdraw from your funds early.
There is an exception to that rule, however, which allows an employee who retires, quits or is fired at age 55 to withdraw without a 10% penalty from their 401k called the “rule of 55.”
You can also utilize Rule 72(t) for early withdrawal. The distributions must be “substantially equal” payments based upon your life expectancy. Once the distributions begin, they must continue for a period of five years or until you reach age 59½, whichever is longer.
But these rules are crutches for those who've bungled their early retirement plans. A successful early retiree waits until at least 60 to access their pre-tax retirement accounts because they have an abundant amount in their after-tax investment accounts.
Let's first review how much you should have in your pre-tax retirement accounts by age as our foundation.
Pre-Tax Retirement Accounts By Age (Tax-Advantaged Accounts)
The below chart is my estimate for pre-tax retirement account amounts by age. I've used the standard 401(k) plan, but the numbers encapsulate all pre-tax retirement accounts. These are the amounts you need to comfortably retire after the age of 60.
In 2025, the maximum 401(k) employee contribution is now $23,500 a year. Take advantage! Just don't contribute so much that you face a liquidity crunch and can't retire earlier because you don't have a large enough taxable portfolio.
Assumptions from the chart:
- The Low End column accounts for lower maximum contribution amounts available to savers above 45 and/or lower returns.
- The Mid End column accounts for lower maximum contribution amounts available to savers below 45 and/or medium returns.
- The High End column accounts for higher maximum contribution amounts available to savers under the age of 25 and/or higher returns.
- After a couple years, one maximizes their contribution every year to their 401k plan without fail.
- Average starting working age is 22. But you can follow the number of years working as a different guideline if you graduate later or earlier.
- The rate of return assumptions are between 0% – 10%.
- Company match assumption is between 0% – 100% of contribution. As of 2025, the total maximum 401(k) contribution by the employer and employee is $70,000. The maximum employee contribution is $23,500, which means the employer can contribute up to $46,500 a year to your 401(k) in terms of a match or “profit sharing.” These maximum 401(k) contributions usually go up $500 – $1,000 every y ear. There is also a employee catch-up contribution if age 50 or older by year end.
- The Low, Mid, and High columns should successfully encapsulate about 80% of all 401K contributors who max out their contributions each year. There will be those with less, and those with larger balances thanks to higher returns and more generous company profit sharing.
After-Tax (Taxable) Investment Amounts By Age (Base Case)
Now that everyone agrees with my pre-tax retirement amounts, it's time to figure out what your after-tax investment amounts should be by age. These taxable investment amounts by age will help determine how much money you need to retire early.
After-tax investments include all stocks, bonds, rental property equity, business equity, and private investments. You could include your primary residence equity if you plan to rent out rooms or sell the property, but a conservative person would not.
For those who aspire to retire early, pre-tax retirement accounts should mentally be considered “bonus money.” If the money is there when you turn 60, wonderful. If it's not, no big deal because you didn't count on it to retire on in the first place.
Maxing out your 401(k) is something you should just do as soon as possible for as long as possible. It reduces your taxable income and often has a company match or profit sharing component. Never pass up free money.
Given after-tax investment money is what is required to generate passive income and live a comfortable life in early retirement, it is therefore logical that after-tax investment money equals a multiple of pre-tax money.
The greater the ratio of after-tax money to pre-tax money, the easier it will be to survive in retirement without a job.
After-Tax (Taxable) Investment Amounts By Age Chart
Have a look at my base case after-tax investment amounts chart. It will allow you to comfortably retire between 40 – 50 with a safe withdrawal rate of between 2% – 3%. This is the base case scenario. I've provided an aggressive scenario and a conservative scenario as well.
Your goal is to build a taxable investment portfolio equal to three times your tax-advantaged retirement portfolios if you want to retire early.
Since I started Financial Samurai in 2009, I've encountered too many people who just focused on building up their tax-advantaged retirement portfolios. Decades later, when they no longer work at their soul-sucking job, they can't leave because they don't have enough taxable investments.
For 2025, that tax-free income amount is up to $68,860 for a single person and $126,700 for a married couple. That's a lot of money to live on, especially since the median income per person is around $43,000 before tax.
Recommended After-tax Investment Amounts In Your 20s
The hardest part about achieving financial independence is getting started. Your 20s is a time of uncertainty. You're not exactly sure what you want to do, where you want to live, and how you plan to get your finances in order. Maybe you have student loan debt as well.
The easiest way to get started is to read your employee handbook and contribute as much as possible to your company's pre-tax retirement accounts ASAP.
Since you have the lowest earnings power, it may be difficult to comfortably max out your 401(k). However, it is important to also build up after-tax investments at the same time. The ideal situation is to max out your 401(k) and then save 20% or more of your after-tax, after-401(k) income.
By the age of 30 or after eight years in the workforce, your goal should be to have as much in your after-tax investment accounts as you do in your pre-tax retirement accounts. In this chart, that figure is $150,000 + $150,000 = $300,000.
Recommended After-tax Investment Amounts In Your 30s
You should hopefully know what you want to do with your life by the time you hit 30 or after eight years worth of work experience. If not, retiring early will be difficult.
For this decade, your goal is to get your after-tax investment accounts equal to at least 2X your pre-tax retirement amounts by 40. Once your after-tax investment amount surpasses your pre-tax amounts, you will finally start feeling like early retirement is a possibility.
Recommended After-tax Investment Amounts In Your 40s
If all goes according to plan, you'll have accumulated between 2X – 3X in your after-tax investments. In such a scenario, you are free to leave work behind.
It's important not to hit the eject button before you hit at least a 3X ratio (~$1.5M). Otherwise, you'll likely experience a tremendous amount of anxiety in early retirement, which would defeat the purpose of retiring early. There are plenty of folks who decided to retire in their 30s because it was the fashionable thing to do and ended up decimating their wealth and their relationships.
There's often a lot of financial pressure in your 40s due to kids, aging parents, health problems, and so forth. Parental angst is high during this time! This is the sandwich decade that must be taken very seriously.
One thing to also note is that if you have too much capital outside your tax-advantaged retirement accounts, you likely won't receive any good financial aid for college. Therefore, you may want to be strategic in how you allocate your spending and net worth for two years before your child attends college.
Recommended After-tax Investment Amounts In Your 50s
If you've been wanting to retire, but still haven't, hopefully it's because you enjoy your job, enjoy the camaraderie, or are waiting for a meaningful pension that will set you up for life. Retiring in your 50s still feels great because it's still 5 – 15 years earlier than when the average person retires. We're also living longer as well.
I also stop the chart at age 60 because if you retire after age 60, then you're retiring at a fairly normal age. If you're retiring close to 60, there's really no need to accumulate much more than 3X your pre-tax retirement accounts in after-tax investments. This is because you'll be able to tap into your pre-tax retirement accounts penalty free. You'll also get to receive Social Security as early as 62.
However, I think for the average person, the best time to take Social Security is at full retirement age 66. Most of us should live to 80 or beyond.
Aggressive After-Tax (Taxable) Investments By Age Guide
For those who are younger, who don't feel like the amounts are enough in my first chart, or who have early retirement goals as soon as you graduate from school, below is a more aggressive after-tax investment guide to follow. Higher after-tax amounts are achieved through greater risk-taking, a side business, better returns, and greater luck.
This guide will allow you to comfortably retire between the ages of 35 – 45. It will depend on your level of frugality and responsibilities. Again, these numbers are based on firsthand experience and feedback from other early retirees.
Retiring at 30 (not recommended)
Theoretically, a 30-year-old with no spouse and no kids to care for could retire with $150,000 in pre-tax retirement accounts and $450,000 in after-tax investment accounts, especially if they geo-arbitrage to a lower cost area of the country or world.
But I wouldn't recommend retiring so early after spending so much money and time on education. You need more time for your investments to compound. “Lean FIRE” is a difficult way to live if you have aspirations to live a more comfortable life or start a family.
See: The Three Levels Of Financial Independence: Because Money Is Only Part Of The Equation
Retiring at 35 (not ideal, but doable)
By age 30, one should finally gain the confidence and expertise to really start earning an accelerated income. Your 30s is a time for rapid wealth accumulation. If you retire at age 35, you'll have at least socked away an extra five good years of earnings.
But unless you have something you really want to do after retirement, retiring at age 35 also is a little premature. Your $1,200,000 in after-tax investments based on a 4X multiple will only bring in about $36,000 – $60,000 depending on risk. Therefore, you will likely need to supplement that income with part-time work and side hustles.
The good thing is that most people I know who've left Corporate America around 35 have easily been able to find things they enjoy doing which also pays them supplemental income. Online freelance work is a trend that is here to stay. If you've been able to retire at 35, you should have at least one valuable skill to sell.
Retiring at 40 – 50 (green light):
The closer you get to 40, the more comfortable you will feel with retiring because you've not only spent more years working than you've spent in grade school and college, you've also built up a more robust net worth thanks to more years of compounded returns and savings.
After at least 18 years of working, you won't have as much wonder or regret leaving a job behind. You'll probably welcome a break from the mundane in order to travel or spend more time with family.
With around $2,500,000 in after-tax investments and at least $500,000 in pre-tax bonus money, you have enough to live a relatively frugal life with a family. $2,500,000 will generate at least $75,000 a year risk-free and up to $125,000 a year in income based on a slightly more aggressive 5% annual rate of return.
Once Social Security kicks in, you'll earn an extra $1,000 – $3,000/month in spending money. Conceivably, you'll never have to touch principal now that the risk-free rate is over 3%.
40 is still young enough to start a business or do some part-time consulting if so desired. Worst case, you can always go back to work as well. If you can hang on long enough, the ideal age to retire is between 41 – 45 to minimize regret and maximize happiness. Having a net worth between $3,000,000 – $5,250,000 should be enough.
Regarding the large net worth figures at the end
Getting to $10,000,000 – $20,000,000 by age 60 in my charts seems farfetched. Plenty needs to go smoothly with your job, your investments, or your business. For example, to grow your after-tax investment amount from $5,000,000 to $15,000,000 in 10 years requires annual contributions of $115,000 plus 10% compound annual returns.
These large figures should give folks some insight into the power of compound returns over time. As a result of compounding, it's a mistake to retire before the age of 40 if you don't have alternative means to earn and invest. Earning your 5th million is much easier than earning your first. At 41, I feel my life has just begun.
For those who are willing to retire at let's say 40, their net worth will likely be capped at around $2,000,000 – $3,000,000 or at least grow much slower as they spend their passive income and potentially their principal.
In other words, if you retire early, it's likely you will give up millions of dollars of future wealth for the freedom you'll enjoy today. You must be OK with this. That said, I do make an argument the ideal net worth to retire is $10 million and above.
Conservative Taxable Investment Amounts By Age Guide
Finally, for those who live in a lower cost area of the country, who plan to retire in a lower cost area of the country, and/or who simply have much lower overall living expenses, this guide may be more appropriate for you. In this scenario, I would not retire before the age of 45 and without at least a 3X multiple.
Retiring in your mid-40s is the best age to retire early. You are young enough where you can probably still do everything you want. You're also old enough where you've had over 20 years of compounding to help you build wealth.
Putting Early Retirement In Perspective
82% of Americans retire after the age of 61. Therefore, if you somehow feel irked by my money targets, it's understandable because most Americans won't retire early. Just remember that this is a financial independence site that focuses on living one's best life as soon as possible. The Financial Samurai community does not strive to be average.
Since 2012, I have met only a handful of people who retired early and then ended up going back to work full-time because they couldn't find something meaningful to do with their free time.
The second most common reason for going back to work is usually a miscalculation of the amount they needed to feel financially independent, hence the purpose of this post. Those who miscalculated tend to skew under age 35.
Key Points To Remember About Saving For Retirement
1) Passive income is everything if you truly want to live a carefree retirement lifestyle.
Shoot to have as much in after-tax investments as you do in pre-tax investments by age 30. Don't get to a 1X multiple because you have so little in pre-tax investments. Get to at least a 1X multiple because you have been aggressively contributing to both. Focus on building your passive income investments.
Below is my estimated passive investment income amounts for 2024. Due to a bear market and rising interest rates, ironically, it's easier to generate more passive income. So long as the stock market doesn't crater by much more than 35% from peak-to-trough, I should be able to generate more passive income.
2) 40 years old with a 4X multiple is ideal.
Don't retire before you hit at least a 3X multiple. Ideally, you'll be able to get to a 4X multiple ($1M – $4M in after-tax) between ages 35 -50. If you do, there's no reason to continue working at a job you don't absolutely love.
Once you've achieve the minimum investment threshold amount, work becomes more optional. As a result, it is OK to take some risks with a new job that pays less. You may want to start an entrepreneurial endeavor.
Or you may even completely retire and do nothing. However, after about three years of doing nothing, you will get bored and want to do something productive again.
3) Earning supplemental income in early retirement is extremely common and beneficial.
Almost everybody I know who has retired early found something they love doing part-time that generates income. The younger you retire, the higher the likelihood you'll end up generating supplemental income. You've got energy and drive. This supplemental income dramatically extends the life of your financial nest egg.
You can retire with less than my guide suggests if you have other means of earning extra income. Every $10,000 in supplemental income you make equals $250,000 in capital at a 4% withdrawal rate.
4) Bad things that cost money tend to happen in higher frequency the older you get.
Not only must you take care of yourself, you may have parents and children to take care of as well. Therefore, believe the figures in the chart are not only realistic, but necessary. For those who wish to retire early comfortably, follow the chart. Do not extrapolate the returns of the past 10 years into the indefinite future. If you do, this will be one of your biggest financial mistakes.
5) Focus on the after-tax columns.
If for whatever reason your pre-tax retirement accounts are short of my targets, then simply focus on the after-tax column. As an early retiree, you won't be pilfering your pre-tax retirement accounts anyway. Therefore, it doesn't really matter unless you have some serious financial emergency.
6) Make a judgement call on the amounts in my guides based on your overall living costs.
If you plan to retire in places like San Francisco, Manhattan, and Honolulu, you may want to focus on the more aggressive guide. If you plan to retire in places like Omaha, Des Moines, Dallas, and Ft. Lauderdale, the conservative guide is more appropriate.
If you and your life partner are a team, then my guides can be the combined total amounts for both of you. If you plan to retire between 55 – 60 years old, you most likely do not need as much as my charts indicate. My charts are guides, not early retirement law.
7) The longer you work, the less you need.
Your net worth may start to skyrocket the older you get due to the power of compounding. Therefore, you need less money the later you retire. You also have less life to cover.
People suffer from the “one more year syndrome” all the time due to this fact. Therefore, the hardest part about retiring early is overcoming the mental fear. If you follow the numbers in my guide, you will more easily handle the psychological aspect of the transition.
8) A safe withdrawal rate less than 4%.
The risk-free rate of return (10-year US treasury bond) is now around 4%. Therefore, you can withdraw 4% from your after-tax investment accounts every year and never touch principal.
Keep the maximum withdrawal rate at 4% if you don't plan on making any supplemental income in retirement. By the time you turn 60, your pre-tax retirement accounts will provide you an extra financial boost if necessary.
Given interest rates have come way down after the pandemic, it's wise to lower your safe withdrawal rate. The first couple years takes a lot of adjusting. By keeping your safe withdrawal rate low, you learn to better live within your means.
9) Retire with a severance package.
I retired at 34 because I was able to negotiate a severance package worth about six years of normal living expenses. The severance package was like retiring at 40.
If you are going to quit your job and retire anyway, you might as well try to negotiate a severance. I wrote an entire book highlighting different severance negotiation strategies. It feels amazing to retire from a job with money in your pocket.
10) Build momentum.
It may feel daunting to max out your tax-advantaged retirement accounts and build a taxable investment portfolio for passive income. However, all good things take a lot of effort.
Once you get to the minimum investment portfolio amount of $300,000, you will start to build a lot of momentum. You will feel motivated to grow your taxable portfolio to $500,000, then to $1+ million. Half the battle of achieving financial independence is staying disciplined for the long term.
Retiring In 2025 And Beyond
Now that I do have children, I'm aiming for consistent passive income closer to $300,000. This is what it costs if we are to stay retired in San Francisco.
I love myself a good challenge passive income challenge. Financial Samurai has been a great source for generating supplemental retirement income until we can relocate to Honolulu.
If I hadn't received a severance package, I most likely would have worked for three more years. During this time, I would have saved at least 50% of my income.
My after-tax investment accounts would end up being 5X my pre-tax investment accounts. Thankfully, it's been a raging bull market since I left, so my multiple has continued to expand.
Leaving a steady paycheck is not easy, especially if you've had one for decades. But if you hit these target multiples, I promise you that everything will turn out all right in the end. If things are not all right, then it is not yet the end!
Where I'm Investing Now In My After-Tax Investments
My main focus is on buying multifamily properties through private real estate funds. I want to own real assets that generate steady rental income.
Private real estate is also much more stable than public stocks and public REITs. With the real estate market currently weak due to elevated mortgage rates, I'm taking advantage by dollar-cost averaging.
Below are my two favorite real estate crowdfunding platforms.
Fundrise: A way for all investors to diversify into real estate through private real estate funds. Fundrise has been around since 2012 and now manages over $3.3 billion for over 500,000 investors. For most people, investing in a diversified fund is one of the best ways to gain real estate exposure. With inflation picking up post pandemic, exposure is the most important thing.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. For those who have more capital and like to invest in specific commercial real estate projects, CrowdStreet is a great way to go.
Both platforms are Financial Samurai sponsors and Financial Samurai is a six-figure investor in Fundrise funds. I've personally invested $954,000 in real estate crowdfunding to earn income passively and diversify away from San Francisco real estate.
Use The Best Retirement Planner: Boldin
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There's no more powerful retirement planning tool to help you finish rich than Boldin today.
For more nuanced personal finance content, join 60,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. Everything is written based off firsthand experience. After-tax investment amounts by age is a FS original post.
Hi Sam, nice post. Quick question. In this calculation I suppose you are accounting for primary mortgage to be still paid with the savings? What age do you suggest paying off mortgage
One factor to consider is that not all folks would have so many working years in US at the age you mentioned, so that skews the numbers a bit
What kind of distribution yield are you getting on your private real estate investments (btwn Fundrise & Crowdstreet)? Capital appreciation is great, but cash flow is very important to someone who is looking to #FIRE. TYIA.
I’ve been investing in private real estate since 2016, and things to a huge 2021, my distribution year-old is about 12%.
I just got a large $100,000 plus real estate capital distribution in 2024. It couldn’t have come at a better time as well. Liquidity is tight after buying another house in 2023.
Sam,
I’m 41 and my wife is 34. We’re approaching a SWR that covers our current expenses but our ratio of pre to post tax is nearly 1:1.
This is largely due to the match / direct contribution policy of the company we mutually work for. They match 5% and direct contribute 4% which has proven to be a wonderful benefit for early high earners. Doing the right thing to maximize the tax shield makes it hard for us to ever approach a 3x multiplier despite a really high after tax savings rate.
What should we be targeting as a vehicle to achieve the right balance? We do have access to a MBDR and can leverage a Roth Ladder while we draw down the post tax. Anything else we should be thinking about?
Should I be counting my Roth IRA amount in my after tax account total since you can withdraw principal after 5 years and before 59.5?
Yes I think it’s fine to count your Roth IRA balance.
Wait…I’m confused. Can’t Roth IRA contributions be withdrawn tax and penalty free at any time? The 5 year rule applies to earnings.
Yes they can.
Can someone clarify the after tax calculation? Is this a typical tax situation? Take the example where you are invested in stocks – if you take 4% of your portfolio out every year then you would not have very many capital gains on this, at least in the early years. Your actual gains you pay taxes on might be quite small. Am I thinking of this incorrectly?
I don’t know about other cultures; but as an Asian American who lived most of my teen years in East Asia, I appreciate how you mentioned the “taking care of parents” part. Appreciating and giving back to parents is such an important mental responsibility in my family. This is the first website I see FIRE doesn’t mean all money for myself and my kids.
Adding to this: How should one budget/allocate funds as parents move towards old age.
I see some FP mention buying LTC insurance.
Curious to your approach.
Using the Rule of 55 is an option for me, but I am curious whether if I utilize a reverse rollover to move my Traditional IRA funds into my employer’s 401(k) before I leave, will those funds also be available penalty free?
Your charts are for high living areas. We live in a low cost area. Our monthly living expenses are <4000/month including housing, meals, transportation, and health insurance. Your plans also neglect any pension and possible Social Security Income. My planner and I figure that I only need $1M and a part time job to retire at age 60 and be funded to age 90. This is a far cry from the $4M you list. People need to be realistic about their expenses and their sources of income in retirement.
Have you retired yet? If not, life might be different than you imagine.
Also, look at the lower end column if you live in a LCOL area.
Hi Sam,
I’m a recent reader and have loved scouring your posts for the past few weeks; thanks so much!
As an Aerospace Engineer 6 years out of college, I have been investing 16% of my salary into my 401k since I began working (now I will be increasing that to 19k/year per your articles). I have always elected to contribute via Roth 401k. Could you elaborate on if you recommend this vs before tax contributions, and why? (personally I figured I’m making less now than I plan to be making at retirement, hence I’d rather pay my taxes now)
I appreciate the insight,
Jacob
Hi Sam,
I’m a recent reader and have loved scouring your posts for the past few weeks. As a frugal Aerospace Engineer 6 years out of college, I have been investing 16% of my salary into my 401k since I began working (now I will be increasing that to the 19k/year value per your recommendations). I have always elected to contribute via Roth 401k, could you elaborate on if you recommend this vs before tax contributions and why? (personally I figured I’m making less now than I plan to be making at retirement, hence I’d rather pay my taxes now)
I appreciate the insight,
Jacob
Hi Sam,
Great article! I have access to partake in the mega backdoor. I am curious as to your thoughts on whether you think this is a good option for early retirement? On one hand it allows for more tax deferred gains but makes it harder to hit the thresholds you list above in after tax accounts.
I FIRE’d at 53, my wife is 64, and we were able to do it with a combination of pre-tax savings and real estate. During our highest earning decade, each year we would max out my wife’s 401K on a catch-up-basis and contribute to earn the max matching contribution for mine. (our highest combined income was around $250K/yr.) With both of us working and saving and getting stock in our Fortune 500 companies, and a big increase in our residential and rental property value, we grew our net worth from about $100K to $2M+ in just over 10 years.
For us, rental real estate has been the best performing asset since it consistently spins off cash, and [in our case] increases in value over time. We were able to accumulate enough savings to buy a few properties in ’09, when the market tanked, using some of our stock and 401K savings as a down payment and financing the rest.
Buying real estate is the definition of financial leverage for the non-wealthy. Mostly with OPM, we doubled the value of our invested capital in less than three years and developed a consistent stream of revenue for retirement. It is the real-estate equivalent of buying stock on margin, using your local banker as the financier. You share the risk and keep all the profits. Just as with stock, timing is everything in Real Estate too.
Honestly, even with these investments, I don’t think we would have been able to retire early in San Diego on that alone. We were also super fortunate to inherit some property from our parents that grew our portfolio by an additional four rental homes in N.C. (about $1.1M) and $350K cash. This is what got us over the hump for early retirement in beautiful North County.
I learned about real estate from my Dad who lucked into buying some rental property in California in the 70’s. It became the basis for my parent’s retirement and eventually funded the purchase of several rental homes in North Carolina. I was the beneficiary of this learning experience and it has been the path, and foundation, of our financial success.
The challenge in Real Estate is in getting the best total return on investment over time – the ratio of rent to value – which can vary wildly by market/region. Hence we live in CA and our rentals are in NC. In many markets, the growth of the value of properties is outpacing the increases in rent, lowering the total return on invested capital to below-market rates. The security and monthly return of rental income then comes at a premium.
Landlords often feel like geniuses in a ‘down’ market and suckers in an ‘up’ one.
One last point – our wealth has no value to us when we’re gone. We have no kids. In this situation, we have the opportunity to use our rental property during our most active years for the recurring income we need, and we can deplete our liquid assets slowly over time for the bucket list and unforeseen expenses. I want my net worth to go down before I do.
Hopefully I’ll live long enough to start selling and donating all of our properties in anticipation of the dirt nap. I’ll know it is time when all of my frivolous expenses start to disappear.
Happy investing!
Saw your name on MarketWatch earlier today. Go Sam.
https://www.marketwatch.com/story/these-numbers-show-suze-orman-is-right-about-needing-5-million-to-retire-2018-10-15
Thanks for posting this Sam! I wish posts like this were popular, as we need more straight shooting numbers about potential scenarios. Just because we are interested in FIRE doesn’t mean we only want pipe smoke ;)
It was of many suits by the same person against numerous homeowners of a condo, over several years, who never won a case against any of them. You can file a suit against anyone yourself for $300 or so. Not much chance of losing, but talking to the attorney I got a first hand look at my exposure. He said all assets not legally “free from attachment” are always exposed to civil litigation, and there is pretty much no way recategorize once it starts. That condo wasn’t my primary residence, so that was first on the list, etc. He said even though it is supposed to be a “jury of your peers”, they may not be good peers if you have more assets than average. No actual loss for me, but it was an awakening. Didn’t have an umbrella policy, but sometimes that becomes a target that causes litigation anyway. Someone can always ask for pain and suffering in the millions too. Since an actual experience like this is so infrequent, not may people wake up on the exposure, and maybe part of the legal profession likes it that way. Med schools teach doctors how to mitigate this. It strongly depends on the state you live in, but you have to know rules there. I am 50.
Got it. Sounds like life has been kind of difficult for you. Glad you didn’t lose any money. For haps this is your second chance to get a umbrella policy and protect yourself.
Have you retired or are you still working?
Self employed now, engineering consultant. Less money than in corporate life but MUCH happier. Business keeps growing. I could plunge into supplying materials, and take more of a risk. I can definitely relate and really like your articles. They give me confidence. I amazed at the way my friends in corporate life still think about the world. They are stressed and entitled at the same time, while I forage on whatever I find, unrestrained.
I hate to bring this up, but feel I should. Retirement accounts tend to have more legal protections that regular after tax accounts. A 401k is Federally protected, IRAs vary by state, and after tax varies by state, but typically has fairly low thresholds of protection. I live in a 1% fault state, which means when multiple parties are involved (think multi car pileup with injuries), people can be forced to pay not proportionate to damage, but proportional to ability to pay. This can go well beyond insurance limits. Look into the various asset protections doctors use, since they are typically the most exposed to litigation. Remember, once you get pulled into litigation, its way too late to do anything about it.
Can you share your experiences about getting pulled into litigation and what happened to your finances?
Did your car insurance, home insurance, and umbrella policy not protect you?
How old are you now?
thanks
Great post as usual. Really helpful to get some hard numbers and different options based on aggressiveness.
I particularly love the chart showing how half of Americans actually retire between 61-65.
Sometimes I find myself in a bubble of “Retire Early content” where I assume everyone has F.I. on their mind.
At work, there is even a Financial Independence group!
I wonder if in 20 years that graph will change a bit as F.I. becomes more and more popular.
Thanks. Early retirement definitely is a bubble. My fear is that I write about early retirement and then people think it’s easy, or don’t know the downsides, and then just blow themselves up without doing the map.
It’s not easy to get to these numbers. But I really think people need to get to these numbers in order to not have a mental breakdown once they retire.
Here is an example: https://www.keepthrifty.com/mini-retirement-mental-breakdown/
Did he say dumb down? Sorry Andrew for not being at your level of intelligence. I only have a bachelors and an MBA, maybe I should have gone for the PHD.
Financial Samurai – haha any regrets of leaving early. I think my wife wanted to leave ten years ago but I think we were always in that one year syndrome you mentioned especially with my disorder. Now her company transferred a lot of her work to Southern California so we are hoping for a lay-off of package. I purchased your book on negotiating a severance so I am going to reread it.
And I like your posts just Needed clarification. Also like the way you get back so quickly to my replies
I am so totally confused by these charts. First why would you need more as you age to retire early? I think it would be less. And why would you need more in your after tax accounts at age 60? I would think you would need less because you only because you don’t have to take RMDs until you reach 70.
I am 65, retired because of a disability, I receive 24,000 dollars in Social Security annually. My wife is 62 but will retire next year at the cobra window. We have $1,100,000 in after tax money, and $2,500,000 in pre-tax 401Ks, and IRAS. Where do we stand in your tables? Maybe I am reading it wrong.
Sorry for your confusion.
This post is for people who want to retire way before 60 (retire early). Because “Retire Early” comes towards the end in my title, perhaps you missed it. Given people want to retire early, these people need to build up after-tax investment accounts to earn passive income to survive.
From the post:
Regarding the large net worth figures at the end: Getting to $10,000,000 – $20,000,000 by age 60 in my charts seems farfetched.
These large figures should give folks some insight into the power of compound returns over time. For those who are willing to retire at let’s say 40, their net worth will likely be capped at around $2,000,000 – $3,000,000 or at least grow much slower as they spend their passive income and potentially their principal.
I think having $3.6M dollars is pretty good for you guys at 65 and 62. The question is: do you have any regrets retiring in your 60s? If not, all is good.
I knew in my mid-30s that I would regret not taking the leap of faith because I was bored and tired of the work. So I left.
If you have any tips on how to make the post easier for you to understand, I’d love to hear them. I’m sure you’re not the only one confused, despite my best attempts.
Perhaps a summary of the key points in the beginning with more emphasis on early retirement in the subtitles? I should make the post shorter too, but then people miss out on the details. But then, people don’t bother to read the details in longer posts. Hmmm. Suggestions welcome!
I am impressed how you continuously explain over and over again to readers what you have already written in your post. That must take a lot of patience.
I for one don’t want you to dumb down the post too much. It is interesting to see however the people aren’t willing to thoroughly read before commenting. You might want to just ignore or deny the comments all together to save yourself time and hassle.
If people don’t understand, then I’m not writing clearly enough, and that’s on me.
I spoke to a couple Teachers, and they said it’s best to only move as fast as the slowest student in the room. Otherwise, they will be leaving kids behind, and that’s not fair to them.
So it’s a great balance between providing enough detail for substance, and writing short enough content that’s entertaining that gets the point across.
My plan is to write longer content and then shorter posts to mix things up.
Thanks, Mark, for your comments and questions.
I, too, was a bit confused. Sounds like you’re on track for a good retirement.
Thanks, FS, for clarifying.
I’m on target! I don’t hold any equities outside of retirement and 529 plans, but I’ve got real estate investments for my after tax investments. I have a separate account for my real estate and reinvest 100% of the income, as I mentally allocate real estate investments as my early retirement plan. Plus rental real estate provides a nice current tax benefit between depreciation and expenses. I allow myself/family to spend my paychecks since 401k and 529 contributions are taken directly from paychecks, and real estate income is a separate bank account. My spouse is a spender, so we still “get” to live paycheck to paycheck, but not really.
The data in the chart titled “Half of Americans retired between ages 61 and 65” adds up to more than 100%. Also the age group 50-54 is listed twice which may explain the >100% total. Interesting chart nonetheless. Can you provide URL to the report which produced it? I would like the read the source material.
F.S. dropping down the gauntlet again!
Just when I meet & exceed the “average network for the above average couple” I see this!
Now I see I don’t have nearly enough post tax and looks like I never will. Darn.
But Networth targets appear to be on track.
After tax savings is tough!
This year is the first year @28 that I fee I have gained momentum here.
Going to be tough to catch up to tax advantaged accounts by 30. The good news is those are healthy.
I guess mental accounting can paint the picture that after tax could be the same as taxable.
We are looking to buy property 2 and rent out our first so that immediately juices the after tax picture as you described it.
Regardless the name of the game is put it away. It feels awesome to load a brokerage account and save for a down payment.
I am secretly crossing my fingers for better RE deals to come, we will see.
Fun post.
I’m between the regular and conservative charts. I agree the focus should be on after-tax if you plan to retire early. I don’t have plans for that. I like what I do enough to continue working for the long-term. In my opinion, no one (or maybe a teeny tiny tiny percentage of people) LOVES their job, that is a myth.
We’re 40 and 41 and live in the Southeast but are sadly no where near these after tax account #s. We have about $175K in after tax investment accounts and cash (and another $175K in 529 accounts for 3 kids) and $550K in retirement funds + a state pension of about $12K per year. Home equity is about $450K – $500K. DH went to law school and has been working for 16 years so if I look at even the low cost chart we should have double the amount in after tax accounts than we have. We’ll keep plugging away.
That state pension…. how much will it be paying in 10 years? Could be a real key wealth booster. People underestimate the value of their pension, especially private sector workers who don’t have one.
Instead of following by age, follow by years worked.
Check out the third chart I created for those who live in low cost areas and plan to retire in low cost areas. Once you have your housing down, retirement life doesn’t cost much at all.