How Much Money Do You Need to Never Work Again?

Apr 8, 2022


How much money do you require never to work again? I’m sure you’ve considered it. But have you ever done the calculations? 

Continue reading as we go through the numbers. They’re pretty interesting.

Even if you’re only thinking about a ride in the sunset for the rest of your life, you’ll likely discover the math fascinating. If you’re committed to making the dream happen, the results could be encouraging or an opportunity to wake up.

That is to say, be sure to buckle up!


How much will you require never to be able to work again? The easy answer

The typical American household will require an investment portfolio of $1,575,900 never again to work. In Canada, in contrast, families in Canada will require investments of $1,722,500.

Then, let’s talk about the process I used to arrive at these particular figures. After that, I’ll discuss the flaws in this approach. Then, I’ll help you develop more accurate statistics for yourself.

How did I come to these numbers?

Below is the formula that I employed:


year expenditure (or 0.04 is how much you’ll never need ever again

Let’s deconstruct it.

The first is the annual spending part. The amount that you require every year to sustain your lifestyle.

As per the U.S. Bureau of Labor Statistics, the typical American household spent $63,036 in 2019. Meanwhile, Statistics Canada puts the average household consumption in the north at $68,900.

These are the numbers I chose for my basic calculation.


The second part of the equation is the rule of 4.

In conciseness with this widely accepted idea, you can remove 4% of the value of your portfolio each year and not worry about running out of money.

To cease working, you’ll need an investment portfolio that is large enough to ensure that 4percent of its value corresponds to your annual expenses. My formula divides your yearly cost by 0.04 (4 %).


Let’s join these parts together today.

Here’s what my formula looked like while formulating the amount of money that an average American household will require to ensure that they never worked again:

$63,036 / 0.04 = $1,575,900

This is the same logic applied to the typical Canadian home:

$68,900 / 0.04 = $1,722,500

These are the formula that many retirement calculators utilize. It seems simple enough. This formula isn’t 100%, but it’s not bad.

This approach is ineffective.

There are a few problems with the formula above.

Inflation isn’t one of these, as it happens. It is the 4% rule that makes up for it by urging you to put your money in stocks and bonds.

Let’s look at the reasons for avoiding this type of simplistic calculation.

Problem#1: Your spending might not be normal

My calculations on the above-average household spending figures were taken from the American and Canadian federal governments.

Naturally, those who read this post will notice that the figures don’t match your budget. It’s the way the averages function.

It is possible to solve this issue by inserting your spending figures into the calculation. However, this could cause another problem.

Problem #2: Your spending may change in retirement

Retirement brings significant lifestyle adjustments. It is often assumed that the changes will result in less spending. It’s true in some instances, but not all the time.

Based on the Employee Benefit Research Institute’s 2020 Retirement Confidence Survey, 34% of retirees spend more than anticipated.

These can happen for a variety of reasons. While traveling to Europe and holiday houses in Florida are enjoyable, they can also push the cost of living far beyond pre-retirement.

Health issues also are more frequent as we get older. They can be costly to address.

Problem #3: The portfolio of investments could (justifiably) differ from the one the 4percent rule is based.

The 4% rule assumes that your investment portfolio comprises 60% stocks and 40% bonds. These aren’t necessarily the most effective method for everyone.

Risk-averse people typically tend to lean towards bonds. It’s ideal for limiting loss in the market. However, it can also restrict returns.

I’m not suggesting that those who aren’t should suck it up and invest more in stocks. It’s just a matter of recognizing that each deviation in the assumptions of the 4% rule could result in different outcomes. However, it’s prudent to follow a method in line with your tolerance to risk.

Problem #4: Your retirement duration could be different from the assumptions of the 4% rule.

Another assumption baked into the 4% rule is that your retirement is expected to last for 30 years.

If you’re retiring at age 65, it’s a high estimate given that the average lifespan of North Americans is around 78. In terms of your age, you might require a bit less than the 4% standard suggests.

However, when you’re reading this post, I guess that you’re planning to retire earlier than you did – maybe having 40 or 50 in your life. If that’s the case, this 4% rule could cause you to underestimate the amount needed to end your career.

Problem #5: “The 4% rule” is based on more interest rates than those currently in place

The rule of 4% dates back to the late 1990s. Although I’ve seen massive growth since then, U.S. interest rates haven’t. They’ve fallen, ranging from 8.1% in 1990 to the low of 0.7% in recent times.

In this way, the assumption of the 4% rule’s 40% allocation to bonds might not yield high enough returns to guarantee financial security at retirement.

Look over the fantastic article by Plant Money Seeds for a detailed look at some other points you need to be aware of in implementing the 4-4% rule.

Solutions to these problems

You might wonder why I took all day discussing a strategy that doesn’t work.

I hope to get people thinking about many facets of planning to achieve financial independence. The next step is to provide suggestions for dealing with these issues and eventually obtaining enough money to stay out of the hustle.

Strategies to calculate your financial independence more precisely.

You should consult in conjunction with an adviser.

While bloggers such as myself provide some ideas, A professional advisor to retirement gives you a customized solution and direction. They’ll assist you in determining the number of financial independence you need and then achieve it. Then ensure that your money will last.

Professional guidance is highly vital. Without a well-thought-out strategy, Even the most knowledgeable people stumble through their retirements due to poor financial decisions. Don’t be among them.

Be aware of the assets you’ll keep the money you earn in

As I said earlier, the four-percent rule’s portfolio comprised of 60% stocks and 40% bonds might not be the right choice for every person. Consult with an advisor to determine what investment strategy will match your risk-taking capacity during retirement.

Since your investment portfolio is likely to become your primary source of income when you retire, this is one of the most crucial actions to take when knowing how much you will never need. A lower expected return could require higher levels of amount.

Find out how retirement will affect your costs of living.

Your living expenses are bound to increase in retirement. It increases or decreases depending on numerous personal variables, including your lifestyle, goals, and health.

Don’t overestimate the expense your company is currently covering healthcare costs. Other aspects worth paying particular focus on include

  • what happens to your loan if it is retired
  • how often you’d like to travel
  • whether you’ll require an automobile
  • any one-time costs that may arise (i.e., improvements or investing in the business of a child, etc.)

A reliable forecast of how much you will need to live in the future can simplify your retirement. Incorporate that number in the formula I’ve employed throughout this article (annual expenditure / 0.04) to figure out how much you’ll require not to work for another day.

Remember that your retirement savings will fluctuate throughout the years. As you get older, the cost of healthcare is likely to increase as well, such as.

View your retirement in stages

You can consider the different expenses during retirement by breaking down the process into distinct stages. The experts generally draw some distinctions.

These phases are primarily based on age, and experts believe you’ll retire around 60. If you’re retiring earlier, certain things could alter. For instance, you could enjoy a longer time in retirement before the cost of healthcare increases. These are the kinds of things you should discuss WITH your adviser.


These are the phase you’re probably in at the moment. You’re now a fully-fledged worker with at the very least some years remaining before you retire. That’s not something you’ll have to take on immediately.

It’s easy to forget about retirement planning at this moment. However, you’ll regret it as you’ve likely noticed small things you need to think about. Make sure you take care of them today, and you’ll be enjoying your retirement with ease.

The beginning of retirement

At this point, you’re retired! If you decide to go to bed early, your health is likely to be in good health.

According to financial experts who spoke in The New York Times, most retirees see their budget increase the most at this point. You will lose any health insurance benefits provided by your employer and could indulge in spending sprees to take advantage of the freedom you’ve gained.

While you surely should pamper yourself, be careful about the financial responsibility. Otherwise, you could spend too much money in a short time.

Middle retirement

Your lifestyle is likely to stabilize at this moment. The data taken from the U.S Bureau of Labor Statistics indicates that most costs (except housing and healthcare) drop at this point also.

The last time of retiring

Healthcare cost rises in the latter part of retirement, particularly if they suffer from a significant illness. When it comes to spending, you’ll need to review your savings at this point to ensure that it’s not drained.

Account for tax payments

Many people put aside money for retirement in tax-deferred accounts. If you reside within the United States, there are several options available.

The smallest amount of tax you have to pay on the funds in these accounts will still impact the amount of money you must have to work for a while. When your retirement funds are in non-tax-advantaged financial vehicles, this effect is much more significant.

These are the times your retirement advisor can be of great help. They can help you determine the tax impact on your independence numbers.

Change your withdrawal rate depending on the need.

You should now know that about the rule of 44%. It’s best used as a guideline. It is possible to make changes when needed.

Your portfolio is a variable. Another is the rate you withdraw (the proportion of your portfolio you take out annually to cover living expenses).

Based on Fidelity Investments, you generally would like to limit your withdrawals to 4%-5 percent. Some experts, like Wade Pfau in this interview with the morning star, advise aiming for a withdrawal rate as low as 3percent.

If we modify our original formula based on the reduced standard, the typical American household would need $2,101.200 to stay in retirement.

Canadians would require $2,296,666.

Also, talk to your financial advisor for the best withdrawal rate. It’s based on variables like your portfolio and the amount of money you anticipate expenditure.

You should consider your planned retirement date.

Early retirement sounds like the perfect dream to realize. It is.

But, it also significantly influences how much you’ll need to earn before ever working ever again. Quitting your job in your 40s or 30s will require enormous planning, preparation, and money.

As I’ve mentioned before, concepts such as”the 4% rule” generally suppose you’ll have around 30 years left. Take a look at this article from the Mad Fientist to get some ideas for adapting this idea to a more extended retirement. In a nutshell, suggests:

  • a more aggressive portfolio allocation (80% stocks, 20% bonds)
  • leaving the possibility of work open
  • remaining flexible

Take a look at whether not working is the ultimate goal.

If you’re planning to retire, you should consider whether you’ll ever want to go back to work. Perhaps you are unhappy with the job you do, in contrast to the concept of working in general?

Additionally, do you have an interest you’d like to pursue more but couldn’t since it’s not enough to make a living? Even a tiny amount of extra income (i.e., $1,000 per month for doing something you enjoy) can boost the returns of your investment portfolio and make early retirement possible. Here’s how you can get inventive.

Tips to accumulate enough wealth never to have to work ever again

Then, let’s explore ways of making enough money to put it all in and then retire with dignity.

Begin saving as early as you can

In the realm of financial planning, time is your partner. Even if you don’t desire to retire young, putting off the process of planning, saving, and investing can be a mistake (see my first paragraph of this post).

Plan your strategy and put the plan in motion as soon as is possible. Make sure you are organized and consistent in your spending!

Stay clear of creepy lifestyles during your working days.

Life cringe is taking pay increases and putting them toward spending on discretionary items instead of boosting savings.

For instance, your monthly income was increased by $2,000, and you decide to invest the entire amount towards an upgrade to your BMW lease. These are known as lifestyle creeps.

Even those who are financially responsible and believe that their income prospects will only increase as time goes on fall victim to this pattern. If you’re planning on retiring early, you should avoid it. Use the increase in your salary to build an investment portfolio to assist you during retirement.

Live below your means.

In connection with the idea of living a healthy lifestyle is the ideal living in a way below your means. In essence, it’s spending less than what you earn. It’s the only way to have enough money that you never need to work a second time.

These aren’t only about saving. It’s also about developing habits. If you’re living over your budget while working, you’ll likely do similar in retirement.

Read the blog post to learn concrete steps for living within your means.

Take a look at miniature retirements as you go along.

I’ve mentioned earlier that expenses for a living tend to get more expensive early in retirement as people revel in having more freedom. If you fall out of the loop in this regard, your retirement may become a total loss.

Establishing a healthy budget that lasts into retirement is worthwhile. It is also a good idea to think about removing items from your bucket list for your life rather than waiting until retirement.

A dream trip for a month in Europe? What better time to take a sabbatical between jobs and get it done?

If you’re a thrifty person, you’ll probably think this is a hugely irresponsible decision. If handled correctly, it could turn out to be precisely the opposite!

Here’s a possible plan of action that incorporates these mini-retirement milestones:

  1. Determine how much you’ll need to make sure you never work again.
  2. Plan out a strategy to save money and invest it so you will be able to reach that amount.
  3. Plan for mini-retirements along the process as the need arises. Set your savings goals for the month to ensure you stay in the right direction to reach your goal of financial independence.

This method provides you with the benefit of being capable of compensating and course-correcting when you’re still in the prime of your earnings.

Consider significant purchases (like cars and houses) with care.

Large purchases such as homes and automobiles could significantly impact your ability to build enough wealth to retire. Do not overeat than you’re able to chew. Utilize your savings by not making large monthly payments to build up your freedom fund.


I hope that this article will help you think more in a new way about how much you’ll never need ever again.

Writing this article helped make early retirement more achievable for me. We tend to think of wealth in the form of billionaires such as Jeff Bezos and Elon Musk. You could attain your goals using much smaller sums accrued over time.