Personal Finance

I'm 38 with a $3 million portfolio and a fully paid for million-dollar home - would you retire now if you were me?

Kristin Hitchcock

Published: December 5, 2024 12:25 pm

Recently, I came across a Reddit post on the r/ChubbyFIRE that caught my attention: a 38-year-old with a $4M net worth is questioning whether they can retire early or if they should aim for $5M. Married with a three-year-old child, the poster highlights a portfolio of $3M, a fully paid-for $1M home, and $10K in cash savings (reduced due to a generous one-time family expense).

While this is a very common post in early-retirement subreddits, this post was unique because of the poster’s main concern: missing their child’s early years while working grueling 80-hour weeks in a high-cost-of-living (HCOL) area.

Working 80 hours a week is a lot! But my advice probably isn’t what the poster wants to hear. Let’s look at their financial readiness and see if they can sustain their desired lifestyle. Remember, this is just an opinion piece and not financial advice:

24/7 Wall St. Key Points

• Just because you have millions doesn’t necessarily mean you can retire! You need to consider if your savings can comfortably support your current spending level and potential future expenses. 
• There are many potential options for someone looking to retire early that doesn’t quite have enough, such as cutting back on spending or relocating. 
• Also: Take this quiz to see if you’re on track to retire (Sponsored)

1. Assessing Financial Readiness

Early retirement is all about whether your savings can sustain your lifestyle. How do you determine that? Math. Here’s a breakdown:

• Income Needs: The Redditor responded that their current expenses are around $100k. However, this is likely to increase in the future with inflation and rising healthcare costs, especially since the poster is so young. I’d aim for closer to $150k. 
• 4% Rule: Based on the 4% rule, $3M could provide $120K/year. However, this may not suffice in an HCOL area or cover rising costs like college tuition.

I’d recommend that the poster take a solid look at their finances and predict what their expenses would be in the future. While this isn’t 100% possible, he should have an idea of what expenses will decrease (or disappear) and what expenses will go up. Right now, it does look like he has enough to retire.

2. The Emotional Cost of Working

Of course, this poster’s main concern is about limited time with their young child. He wants to take a step back from financial concerns and focus on family priorities. 

That said, his current working schedule is very intense, at 80 hours a week. I would absolutely recommend that he cut back on his hours or find a new job to accommodate his needs. This would give him more family time while helping him continue to grow his net worth. 

I recommend reflecting on whether reaching $5M is worth the personal sacrifice or if adjustments to current spending could make $4M sufficient. While we don’t know exactly how much he’s making, I bet it’s likely more than he needs! In this case, he could “partially retire” by working a less demanding job. 

We recommend a part-time or lower-stress job often to those trying to retire early. Sometimes, working hard towards an early retirement just isn’t worth it. 

3. High-Cost-of-Living Challenges

Living in a high-cost-of-living area is challenging! He could consider moving to a lower-cost area to reduce his expenses and make early retirement more feasible. He could also identify non-essential spending to trim back on his budget and make early retirement more feasible while still living in the same area. 

Either way, it’s much harder to retire somewhere that’s expensive and a more budget-friendly area. Moving may be a solid option, especially if he does decide to retire. 

What would I recommend? Run a scenario analysis with your financial advisor to compare the impact of staying versus relocating on your retirement timeline. Relocating may be exactly what you need to make retirement more doable.

4. Accounting for Long-Term Costs

Your financial plan must include future expenses like college tuition, healthcare, and inflation. College tuition is a one-time expense, while healthcare and inflation can both eat into retirement savings. Healthcare costs tend to rise with age!

A private college education could cost upwards of $300K. Factor this into your financial planning. College education expenses will likely continue to inflate and become higher, as well. 

Health insurance premiums and unexpected medical costs can add up quickly, especially before Medicare eligibility at age 65.

To retire comfortably, your portfolio has to account for these future costs.