At a poker game recently, I heard the saddest thing I’ve heard in a while: “$10 million isn’t enough to retire early.”
Keep in mind, we were all sitting in San Francisco, which is an expensive city, but one of the cheapest international cities in the world. So I get it, context matters. But I couldn’t overstate how disappointing that statement really was.
No one at the nine-person table disagreed. Only one person questioned this before I intervened and said what clearly needed to be said: $10 million is absolutely enough to retire early.
What surprised me even more was that I was pretty sure most of the people at that table were not even worth anywhere near $10 million. Due to which the whole matter became even more tragic.
Can you imagine being 200 feet underwater, lungs burning, kicking and clawing your way to the surface, finally entering beautiful fresh air, and then announcing that it’s still not enough? This is a tragedy.
People throw out big numbers without doing the math
I think that’s what’s happening. People hear “$10 million” and it sounds rich. It seems that this is a number that brings you freedom. So they stick to it without actually running the numbers. And because no one around him holds back, the myth continues to grow. But because they also hear about people with $20 million, $50 million, and $100+ million, they suddenly think $10 million is not enough.
Let me push back.
If you have $10 million in investable assets today, you could park it in Treasury bills and generate about $460,000 a year in essentially risk-free, state-tax-free income. The treasury is the floor, not the ceiling because most people with $10 million will take more risk and may perform better over the long term.
Can a family of four live comfortably on $460,000 a year, having done nothing to earn it? Of course they could do that. It would be truly spectacular financial inefficiency not to do so.
My own family has been living happily on less than $460,000 a year since the birth of our son in 2017. Even after our daughter arrives and both kids enroll in an independent language immersion school, which costs $90,000 a year after taxes, we don’t need anywhere near $460,000.
We can live a good life on less than $100,000 and not feel deprived a day. That’s still $30,000 a month.
A realistic budget for a family of four
To make it concrete, here’s a realistic annual budget I put together for a FIRE family of four living on $360,000 in passive investment income in an expensive coastal city. This is a 3.6% safe withdrawal rate on $10 million in investable assets, which is reasonable. Many people who retire early are reluctant to withdraw even at a 4% or 5% rate, so that they can have a larger buffer.
The two largest line items are $88,000 in private grade school tuition for two children and $32,000 in unsubsidized health insurance. Yes, those numbers sting. But even with those costs, the math works.
The house is paid off, as it should be for anyone serious about early retirement. There is room for holidays, charity and comfortable living. If things get tight, you can reduce all three and find more affordable schooling. Public schools are absolutely fine.
The point is, if you’re making $360,000 a year from passive investing and never have to go into an office to earn it, your life is objectively good. And if you ever need more, you can do some consulting, pick up part-time work, or make money with a hobby. Options don’t disappear just because you stop working full-time.
Thankfully, at today’s risk-free rate of return, $10 million could generate $100,000 more than $360,000. That’s an extra ~$70,000 after taxes as you wish. That’s not scraping. He is thriving!
The real problem is the desire for more
So why can’t I convince a single person in real life to actually light a fire?
This is not mathematics. Once you do this the math becomes easier. Once again, it’s the desire for more, and especially, the desire to keep up with those around you.
When you live in cities like San Francisco or New York, your peer group consists of tech executives, successful founders, and finance professionals, making up your baseline for “normal.” Houses get bigger. The cars get better. Private school waiting lists have become more competitive. And suddenly $10 million starts to seem inadequate because you start comparing yourself to people who are worth more.
Lifestyle inflation is deadly because it doesn’t feel like inflation. It just feels like progress. It feels like you’re finally living the life you’ve always deserved. And by the time you realize the goalposts have moved again, you’ve committed to a lifestyle that you’ll have to keep working toward.
Reaching $10 Million Must Feel Like Winning
Reaching a net worth of $10 million almost puts you in the top 1% of American households. The range for the top 1% is between $11 and $13 million depending on the source, so $10 million gets you close.
And yet people with $10 million are still telling themselves it’s not enough. Meanwhile, people Without $10 million Nodding in agreement. Everyone loses.
Once you reach $10 million, especially if the bulk of it is in investable assets rather than tied up in your primary residence, you no longer need to worry. In bull market years, with double-digit percentage returns, money starts working harder than you can handle.
Your $10 Million Will Likely Keep Growing
And here’s another thing. Even if you withdraw at 4%, your net worth is still likely to grow because historical returns are higher. In 10 years, at an 8% annual return, your $10 million will turn into almost $21.6 million – more than doubling – even after Making $400,000 a year full time.
So if you’re lucky enough to reach that level, allow yourself to enjoy it. FIRE doesn’t mean doing nothing. It means having the freedom to choose what you do with your time. That is the whole point.
And if $10 million seems out of reach right now, that’s okay too. You can retire on very little with the right budget and the right mindset. Most people already could. He hasn’t done the math yet.
do the math.
Readers, Why do you think people with less than $10 million feel it’s still not enough to retire early? Have we been so thoroughly brainwashed that the top 2% of net worth feels inadequate? And how much of that dissatisfaction comes from constantly comparing ourselves to people one rung above us on the wealth ladder?
to background, I retired in 2012 with a net worth of about $3 million, which is equivalent to about $5 million today after adjusting for inflation. At the time it felt like it was more than enough, and it turned out to be largely due to investment growth and the supplemental retirement income earned along the way. What I can tell you from 14 years of experience is this: You will adjust. Financial needs and circumstances change, and you will change with them.
Know exactly where you stand financially
If you’re debating whether $10 million is enough to retire on, the first step is to know what you actually have. sign up for empowermentMy favorite free financial tool. I ran my 401(k) through its investment analyzer and discovered I was quietly paying thousands a year in unnecessary fees on active funds.
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