Personal Finance

We have $7 million saved for retirement - can I afford to not work anymore if I get laid off?

Kristin Hitchcock

Published: November 24, 2024 11:01 am

24/7 Wall St. Key Takeaways:

• Financial independence is more than just a math problem. It’s about balancing wealth, personal well-being, and lifestyle.
• It’s important to realize that financial goals can change at any time. Just because you originally planned to retire several years in the future doesn’t mean that timeline can’t be sped up. 
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

In all my years of covering retirement, I’ve found that many high-net-worth individuals have a problem retiring even when they have plenty of money. When you’ve spent your whole life earning money, it is a big shift to suddenly start spending it!

A recent Reddit post I came across emphasized this exact problem! The Reddit user’s financial situation paints a strong picture of wealth-building success, but it also highlights the challenges of overcoming burnout, high expenses, and the emotional side of retirement. 

Here’s what you can learn from their story and my advice to those in a similar situation. Remember, this is just my advice and not financial advice.

1. Wealth Brings Options, But Burnout Adds Complexity

With a net worth of $8M+ (excluding their home) and dual high incomes, this family is well-positioned for financial independence. That said, the Redditor is complaining about burnout in their high-stress job, and they’re seriously wondering if they can retire now or find a lower-stress job instead. 

The Redditor expresses that they might get laid off shortly. But, even if they don’t, they wonder if it’s okay to step away “early.”

Even with significant wealth, burnout is real. Regularly assess your well-being and consider what trade-offs you’re willing to make to sustain your financial plan. Finances aren’t everything. 

2. Account for High Expenses in Your FIRE Plan

This couple spends a lot of money. Their annual expenses of $250K–$300K reflect a luxurious lifestyle, including private school, travel, and mortgage payments. These costs will probably remain around the same after retirement, though they may lessen once the kids are out of the house. 

As you might expect, having higher expenses makes it harder to reach financial goals. When you spend more money, you’ll need to save more money. A high spending baseline means you need a bigger cushion. 

3. Address Concentration Risk in Investments

The user’s $4.3M in stocks/ETFs is heavily concentrated in company stock. This is a big risk if the company underperforms. I do not recommend having a high concentration in one stock. 

Diversifying investments is on their to-do list but hasn’t been addressed yet. I’d recommend doing this as early as possible to reduce the impact of market volatility. Concentrating all your stock in one company can quickly derail your financial plan. 

4. Don’t Overlook Healthcare Costs

Healthcare is a huge expense in early retirement, as you lose access to employer-sponsored health insurance. Private health insurance can cost thousands a month. That’s a lot! Health expenses will probably increase as both partners age, as well.

Therefore, be sure to plan healthcare costs into your budget. This is the main reason the Redditor is planning on their spouse working for at least a few more years. They can utilize her health insurance! 

5. Severance and Partial Work

If laid off, the user could receive $500K–$1M in severance, which could bridge the gap to retirement. These windfalls should not be counted on, but they can be a nice bump when they happen. 

Redditors could also consider shifting to a lower-stress job for a few years, which can provide extra income while supporting their mental health. Part-time work is one of our common suggestions for those who are almost financially independent but feeling burnout. 

6. Reassess Your Timeline and Priorities

Originally, the Redditor was planning on retiring when the kids were in college. This reflects their personal values of working hard, which they want to pass on to their kids. However, while they could continue to work, they might want to cut back sooner for their mental health. 

Financial independence is about not being a slave to a paycheck. The user has plenty of money saved up for retirement, and a few more years likely won’t make a huge difference. If their burnout is significant enough, it might be time for them to relook at their timeline.