Thanks Jordan :) Have a great weekend my friend!

PS – I liked the honest “What shits me to tears” phrase. Keep up the personality!

-Jordan, FIRE Your Own Way

Thanks for reading :) Glad you’re thinking the same!

That’s an awesome way to explain it. Thank you! Work truly is optional when you hit FI. And people definitely need time away from everything to start figuring out what makes them most happy. Love your attitude about giving back and helping others – that’s the most satisfying job of all. :)

Good call including income tax in your projection, but I think you’re overestimating.
1) for the income level you state the marginal federal tax rate is 22%, not 24%.
2) Even the 22% is the MARGINAL rate. It does not apply to the entire income.

Plugging the numbers into the income tax calculator at smartasset.com for my state of Idaho that had roughly 7% tax, and remembering to add back the FICA taxes that you will not need to pay on your 401k withdrawal, it looks like they would need a $146,000 income to support $120,000 of spending.

Your main point still stands though. 25x 146,000 equals 3.65 million dollars, which is a lot of money. Supporting $10k/mo takes a big nest egg… Cut that spending in half and the target is much more reasonable!

Cheers!

Great article Joel! I agree with all points, but would like to add some thoughts on #2.

It seems that every financial independence blog I have read feels the need to distance themselves from the “Retire Early” side of the FIRE coin. I would like to challenge that.

The whole point of the FI side of the FIRE coin for me is to Retire Early from mandatory work, and I’m not ashamed to say it.

I don’t want to sit around sipping pina coladas on a beach 100% of the time after I retire (although I certainly wouldn’t turn down a pina colada if one were offered… :) ). I have a long list of things I want to accomplish in my life that will not fit into a 50 hour a week + family lifestyle. Many of The things I long to do involve volunteering or finding ways to give back and help others.

I believe that most people are good people. Just about everyone will take a break after finishing their working career, but once they get bored with the break and don’t need anything else for themselves the next natural question to ask is “How do I give back and improve the world?”

The RE side of the FIRE coin opens up the time and space to consider that question. The more people that consider that question the better off we will all be.

So if somebody asks me if Financial Independence is all about Retiring Early, my answer will be “hell yeah!… At least for me!”

Thanks for adding this! Yes, there’s a massive difference between tax “deferred” and tax “avoidance”. This is a classic mistake many people make, especially those planning to have high annual expenses later in life. If you haven’t paid taxes on large portions of your wealth, your FI number needs to be higher to account for that.

Younger workers seem to think “tax-deferred” means “tax-free.” They put money into retirement plans without planning a withdrawal strategy.

I wouldn’t be surprised if future income taxes are much higher so this may become even worse.

Even now if your state tax is 6% and your Fed is 24% that’s 30% to the government.

I sometimes ask doctors how much they would need to support that level of spending ($10K/mo). They all underestimate the nest egg.

Even when I tell them to consider the tax. They might think they need $120 K or maybe $150K pretax. The actual number is more like $171K. ($120K / (1- tax))

That requires over $4M with a 4% withdrawal and over $5M with a 3% withdrawal.

Thanks for the encouragement KJ! I try and learn from all feedback, both good and bad – that’s how I grow and get better. :)

Have a good one, friend! It’s a great day, to have a great day!