Is The Million Dollar Barrier Keeping You From Early Retirement?


It seems to be widely accepted that it takes at least a million dollars to afford early retirement. But is saving that much money really necessary? The million dollar barrier is something that most people can’t overcome to achieve their early retirement dream. Maybe it’s time to just stop chasing other people’s numbers. This million dollar thinking gets its traction from the often repeated safe withdrawal rate of 3% to 4%. With this safe withdrawal strategy, depending on the percentage one settles on, a million dollars would allow for $30,000 to $40,000 a year in inflation adjusted retirement income. Not to live a wealthy lifestyle but an amount many feel they could manage a decent life with.

Having a million dollar portfolio is definitely excellent guidance to follow if you have the income and time to hit it. It sure makes early retirement a lot easier to call and hats off to those who do. But generalized guidance or consensus about a minimum early retirement savings number doesn’t fit everyone’s situation. People have unique variables that should drive their early retirement savings target.

I retired early at the age of 51 with far less than a million dollars after 31 years of honoring my end of the career-driven devil’s bargain in the corporate world. What I did was look past the million dollar barrier. I took a hard look at what early retirement really is and what it would take to have it.

Is The Million Dollar Barrier Keeping You From Early Retirement?

Bypassing The Early Retirement Million Dollar Barrier

Early retirement still takes saving a considerable percentage of your income to achieve. For the working class there is only one way to early retirement. It’s the same advise every early retirement enthusiast preaches.

Make as much money as you can

You can make more money to amp up your early retirement plan in a couple of ways.

  • Dive deep into the devil’s bargain working overtime or increasing your skills and then killing business objectives to climb the career ladder.
  • Leverage your skills to jump somewhere else that pays much more.
  • Work a second job.
  • Start a paying side hustle.
Cut your spending

Not just a little, but in a big way. Embrace frugal living and a happiness focused lifestyle instead of the stuff-ownership lifestyle of a consumerist world. Take it as far as you can without feeling you’re living a deprived life. A sustainable budget and happy lifestyle is the long-view goal.

Be debt-free

Killing debt is a must. Even better if you can also pay off your mortgage. Any debt that isn’t associated to income producing rental properties needs to disappear. Not only does vanquishing your debt for all time free-up more money while you are working to save for retirement, but it also reduces your lifestyle cost. This then reduces the amount you will need for financial support in retirement.

Become a super saver

Saving 10% to 15% of your income for retirement is an awesome start. It’s especially a great percentage when paying off all your debt. But once debt is dead you have to put on the cape and go full super saver. This is the only way to build any sizable portfolio before you are age 65 or older. It will take having a strategic retirement savings plan and investing wisely.   

Get your healthcare figured out

Most importantly stay healthy. Healthcare cost is a bear to deal with outside of work. If you have a retirement healthcare benefit at your or your spouse’s employer then do what you have to in order to secure that benefit. Others who have successfully lowered their lifestyle costs should get to know the ACA healthcare subsidy thresholds and use them. If “THEY” finally kill the ACA or your taxable income is above subsidy earnings thresholds then use a healthcare broker like eHealth to find the best rate. Don’t forget to plan for possible long-term care down the road.  

The Big Problem With The Common Early Retirement Advice

For most people, doing all the above may never result in a million dollar early retirement portfolio.

Most of us don’t make enough to save enough in dollars to hit the million dollar mark before we are well into our 60s. Especially if we didn’t start aggressively saving in our 20s. I never had a 6 figure salary while saving for my early retirement. I saved throughout my career but like most people it was a huge achievement just to hit the yearly 401K maximum contribution amount. Even with putting in herculean savings efforts, the most I could save was about $20,000 a year until the last few years of my career where it was around $30,000. That was 50% of my take-home pay.

Life, kids, all the stuff we do to financially to cover raising a family and making a life has costs. Even with a frugal lifestyle, without having a huge salary it’s tough to support saving enough in dollar amounts to hit a million dollars.

Obviously time matters.

The sooner you invest the easier it is to save a large amount of money, as compounding interests and gains dramatically adds up. My earlier 401K contributions, although smaller, really increased. But it is all relative to how much is there in a dollar amount to grow. Saving 30% to 50% of your income is impressive, but not so much when comparing your saved dollar amount to the million dollar mark. My $20,000 to $30,000 sure wasn’t.

Even if there had been an impressive uninterrupted 8% return for each year (there wasn’t) my yearly contributions would each take 9 years to double. After aggressively saving for the last 10 years of my career I didn’t want to stay in the rat race another 9 or 10 years to break through the million dollar barrier. The math towards a million dollar portfolio only works if you can contribute and invest high dollar amounts over lots of time.

Shift Your Early Retirement Thinking

If you have the time and income to save a million dollars or more then that’s awesome. By all means go for it. But that’s a tall order for most of the financially responsible working class. Early retirement needs to take a different mental and financial approach. It also takes honesty with ourselves and what’s really going on in the early retirement game.

First off, all the standard early retirement advice mentioned above is a must. The budgeting, debt elimination, super saving, all of it. The shift comes in the million dollar or more portfolio thinking. Here’s the million dollar barrier busting approach I took.

Cost of Lifestyle Dictates Retirement Savings Needed, Not The Million Dollar Consensus

Your retirement lifestyle cost is the key to early retirement. The lower your cost the less your required portfolio total will be. The quick and dirty calculation based on the 4% withdrawal rate is to take your yearly lifestyle budget amount and multiply it by 25. When I did that the result was close to a million dollars and my portfolio was short. Yet when running my savings total against my funding needs in the awesome FireCalc retirement calculator I came in with a 100% success result.

I ran it to age 90 and included the amount from my full retirement age Social Security estimate. I even reduced that estimate by 20% just in case they cut payments. Why did I included Social Security? Social Security is the country’s workforce mandatory retirement account. We were forced to pay into it for decades with the promise it would be there to help pay for our retirement. I count it because I played by their rules and yes, I do expect it.

The problem I found with the 4% rule is it assumes we take that amount with inflation adjustments each year. I take the position that it may be a more valid guideline after starting Social Security benefit payments. Without a million dollars in the bank my needed early retirement funding was closer to a 5.5% withdrawal rate. But I knew that wasn’t a static withdrawal rate throughout my long retirement. It was temporary. Many things would change over the years. There could be a mortgage payoff or downsizing our home. I took my budget amount and instead multiplied it by 20 for a closer down and dirty estimate. Then I ran my assumptions through FireCalc.

Retirement is the absence of needing to work, not the absence of work.

I knew that retiring young with all my go-getter energy and drive wouldn’t disappear when I walked away from the rat race. I always knew I would do what I call the “retire early and often” thing. There were things I wanted to learn and experience that would also pay me something when doing it.

I think whenever you read about successful early retirees they all have some kind of paying pursuit that they passionately engage in or occasionally take on. Some of the posted blog income of early retirement gurus is very impressive. Other early retirees clearly have self employment or freelance activities that they happily do.

Not everyone will have an appetite to work in their early retirement. It is something that needs to be calculated into an early retirement funding strategy. It has been some time since I last engaged in a paying pursuit. I will say that working in retirement is a lot more fun than working was before retirement. When something interesting comes up I will definitely consider it. Keeping an open mind to the possibility goes a long way to realizing you probably won’t need a million dollars before you can retire early.

With my first early retirement I took 5 months off to decompress and celebrate. Then I did just as I always believed and planned on doing. I started my first opportunity of interest and passion, followed by an encore career, and a couple of early retirement side hustle gigs before retiring again. I used my earned income to payoff my mortgage which lowered my lifestyle cost and increased my net worth. Then everything I earned went right back into my portfolio. This again helped reduce my overall withdrawal rate from what started as my non-million dollar portfolio.

Reducing Your Portfolio Target Amount

A million dollar or more portfolio may be needed depending on your lifestyle cost. That may be more dictated by where you live than by your frugality skills. I live in a high-cost/high-income county of Colorado. It is close to our children and their families. Had we bought a more expensive home we wouldn’t have been able to pay it down low enough to still retire early. I didn’t have to make the decision about moving to a lower cost house or location to reduce my lifestyle cost. However, that is something that is on the table if reducing cost is necessary in the future.

I have also found that we have trimmed even more cost from our budget since retiring early. We constantly reassess our happiness focused lifestyle. That and we have the time to look for better deals.

Last Words

By all means, if you can do it, go ahead and set a million dollar goal. I obviously have different views regarding early retirement and bypassing the million dollar barrier. It has worked for me but I am sure that some will question my reasoning.

  • Risky? I suppose, but so is early retirement. Traditionalist and early retirement naysayers will say so, but it was all calculated.
  • Worth it? No question about it, YES!

Obviously it goes without saying – What worked for me isn’t guaranteed to work for everyone else. We are all bound to the economy and market volatility so a wise investment strategy is paramount.

Hopefully describing the way I approached conquering the million dollar barrier will give you ideas of how you can craft your own successful early retirement strategy.

As to my portfolio health today – Overall up about 25% since my first early retirement and now at a 3.8% withdrawal rate. I’m still 7 years away from my Social Security. Maybe I gambled going against the million dollar consensus, but it sure has paid off. I have enjoyed my time in employment liberation and time is something that we can spend and invest but can’t get back once passed.

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4 thoughts on “Is The Million Dollar Barrier Keeping You From Early Retirement?

  1. That was a well written and well thought out post. There are a lot of rules of thumb in the early retirement community but the million dollar one doesn’t even qualify in my opinion. I have friends who can live on twenty thousand a year and some acquaintences that spend millions every year but could easily spend tens of millions and would still keep getting richer. Personal finance is so personal, and you explained it extremely well. Especially that retirement isn’t necessarily a set it and forget it lifestyle. New careers and side gigs can come and go as need or interest dictate. My side gigs are some of my favorite hobbies right now. So cool you are living the dream and having it work for you. Me too.

    1. Thanks for the comment Steveark. The great thing about retiring young is we do have a lot of living left to live. Much will happen and many things change. I think too many people get hung-up on the word Retired and apply old age thinking about retirement. Save enough to fund your lifestyle, let go of greed and ego, and cut lose the meaningless obligation of work that isn’t doing it for you anymore.

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