My lifelong goal has been to retire with $5 million in the bank – once I hit that number, should I stop saving?

A Reddit poster asked recently if they should stop saving once they were on track to hit their target investment account balance. 

The poster said their goal was to amass $5 million and that they were close enough to that number. They were so close, in fact, that a few more years of compound growth would allow them to hit their goal without putting any additional money into their investment accounts. Since they were already on track, they wanted to stop investing, except for 401(k) contributions to earn matching funds. Instead, they want to spend all they earn while letting their account grow on its own. 

So, should the poster follow through with this plan? Is it OK to stop saving and investing once you have enough or should you keep working to grow your account balance bigger?

Investing aggressively early means your money can work for you

Deciding whether to stop saving once you’ve hit your goal number is a personal choice. Obviously, you must make absolutely sure your targeted amount is sufficient to support you and that you haven’t overlooked anything, such as failing to consider the impact of taxes or long-term care costs. If you’ve carefully run the numbers on your own or worked with a financial advisor and are 100% confident your nest egg is sufficient, then it’s up to you whether to discontinue your savings efforts. 

Having the freedom to save less is actually one reason why it is so beneficial to invest early and aggressively. If you put enough money into assets that earn returns, eventually, your assets can work for you and grow your wealth without any involvement on your part. If you invest $100,000 by the time you are 25, for example, then you could end up with over $4.5 million by 65 even without investing another dime if you earn 10% average annual returns. This, in theory, is a lot easier than saving $6,547.35 every month to end up with the same $4.5 million if you don’t start investing until you are 45.

Compound growth is the phenomenon that explains why you end up so much better off if you invest early. Your money earns returns, which can be reinvested to earn more returns. Compound growth is so powerful that, once you have enough invested, your investments can often make more money than you earn with your labor. 

If you’re in a position where your investments are enough, you still likely should keep investing enough to earn your 401(k) match and claim tax-breaks for retirement savings, since otherwise you are leaving free money on the table. Beyond that, though, you can keep saving if you decide you want to run up the numbers even more — say to leave an inheritance or make charitable contributions or enjoy an even richer life in retirement — but, you definitely don’t have to. 

Building the life you want is more important than the size of your account balance

One of the reasons to save a big nest egg is to have financial freedom and to live the life you want. The reality is that there’s always going to be a way to grow your wealth, even if you have billions. However, at some point, the price of doing so may not be worth it.

It’s worth sacrificing to save the money you need to be financially secure. But, once you have done that, then investing more for the sake of it may not be something that you desire– and that’s OK. 

You have one life to live, and winning doesn’t amount to leaving that life with the biggest account balance possible. It’s about using your money in the way that provides the most security and value, both now and in the future.  With the poster achieving financial success already, his choice to enjoy the rest of his money is his alone and there are no wrong answers about what he does with it.