Personal Finance

We each earn $500k in California and want to retire early in 10 years when we turn 40 — is this achievable?

Maurie Backman

Published: January 9, 2025 9:47 am

Key Points from 24/7 Wall St.

• Retiring at 40 is doable, but there are challenges to consider.
• Aim to max out tax-advantaged retirement accounts and invest aggressively.
• Consider relocating to an area with a lower cost of living once you’re no longer pursuing a paycheck.
• Also: Take this quiz to see if you’re on track to retire (Sponsored)

A lot of people dream of retiring early, but on an average income, it’s not always doable. But what if you and your spouse each earn $500,000 a year? With a $1 million income that’s managed wisely, early retirement suddenly becomes a lot more realistic.

Such is the situation a couple is asking about in this Reddit post. They each earn $500,000 a year but are located in California, where living costs are high. They’re 30 years old and want to retire at 40, and they have a young child and a mortgage to think about.

My initial reaction here is that their plan is achievable. But it depends on how well they manage their money in the next 10 years.

When you’re committed to the goal

The problem with living in certain parts of California is that a starter home can cost $1.5 million or more, leaving you with very expensive mortgage payments. Based on this couple’s income, I’m going to assume that they have hefty mortgage payments due to living in a tech hub, as well as expensive childcare costs, since they’re both working and say they have an infant.

Even so, they’re in a great position to save a lot of money in the next 10 years and retire at 40. So to that end, I’d advise them to first max out whatever tax-advantaged savings plans they have access to, like 401(k)s and HSAs. They should also invest their money in a diversified portfolio of stocks, or load up on S&P 500 ETFs (though right now, stocks are expensive, and with only a 10-year window, they’ll need to be a little careful there).

But all told, even when we account for taxes (this couple is clearly in a high bracket), housing costs, and childcare expenses, there’s still a lot of opportunity to bank some serious money and set the stage for a joint retirement at age 40. It’s just a matter of committing to that goal and spending very carefully outside of essential expenses.

Know what challenges await

While this very high-earning couple could conceivably retire at 40, they should be aware of the pitfalls they might encounter. They have one child already, and they don’t say whether they intend to have more. But not working means having to cover the cost of health insurance for a family, and that’s not an inexpensive prospect.

Retiring at 40 also means having to stretch their savings for many years before government benefits like Social Security come into play. That could mean having to make serious lifestyle changes.

One thing this couple should strongly consider is relocating once they’re retired to an area of the country that’s less expensive. If they’re not working, there shouldn’t be a need to live someplace like California, since access to work (or a lack thereof) shouldn’t be an issue.

The couple should also consider starting their own business or doing contact work once they’re retired to generate some income and keep their options open. They don’t necessarily have to pull the same schedules they’re maintaining now. But 40 is young to retire. As their child gets older, they may realize they want to do more with their time.

Finally, I’d tell this couple — and anyone else in a similar boat — to talk to a financial advisor for personalized advice. The decision to retire very early is a loaded one, and an advisor can help identify the pros and cons and make sure the math really works.