Can money ever be enough? There is no outright answer to this question because it depends on many factors, including your lifestyle, financial goals, and where you live.
However, employees in high-stress jobs are increasingly adopting the FIRE (financial independence retire early) strategy. This strategy enables them to accumulate a fortune that can last them for the rest of their lives, and they retire early.
You could be among the people who want to retire early, but you do not know how much money is enough to never work again.
- Even the richest people may never have enough money or stop working.
- However, approximations indicate that you need $2,700,000 to survive for the rest of your life without working if you are 30-40 years old, $1,990,000 if you are between 40 and 50 years, and $1,300,000 if you are above 50 years.
- These approximations support the 4% rule of retirement.
- The approximations need to be adjusted for inflation and lifestyle preferences.
Do the richest people have enough money?
The logic behind the FIRE strategy is to accumulate a fortune that will last you for the rest of your life. Some say a million dollars is enough to quit a job or retire and never work again.
However, it does not seem true because there are dollar millionaires and billionaires who keep working despite being very rich. Since billion dollars are the highest level of fortune that any human has ever accumulated, why haven’t billionaires stopped working?
Dollar billionaires can say they have enough money to never work again. With a billion dollars, they can live a good life anywhere and never work again.
However, there are very few dollar billionaires in the world. Surprisingly, they still work and run businesses because money is never enough. Consider the following statistics from Forbes Magazine in 2023.
|Number of dollar billionaires in 2023
|Percentage of the total population
|Rest of the world
How much money is enough to never work again?
If a dollar billion is the amount needed to never work again, then only a small number of people in the world would achieve this feat. Therefore, it seems unrealistic, meaning that the amount of money you need to never work again may not be what people think.
The next question is, what amount of money can sustain you for life without ever working again? Here, you must consider the cost of living before making conclusions.
The cost of living in the United States
Consider the following approximations to determine if the amount you have can sustain you for the rest of your life without ever working again.
CNBC reported that Americans need at least $68,499 per year to live comfortably in the United States. The expenses are even higher in some cities because the cost of living varies with the city.
For instance, young and single urban professionals need at least $80,000 per year to live comfortably in major cities like New York and Los Angeles. Those with families need at least $150,000 per year to pay for their expenses comfortably.
In short, one must save a good amount of money to live comfortably without ever working again. The amount you need will depend on where you live, age, spending behaviors, family status, and many other factors.
Approximating the amount of money you need based on your age
With the above statistics from CNBC, you can calculate the amount of money you need to never work again. The assumption is that the average life expectancy in the US is 79 years and the average expenses are $68,499 per year.
Therefore, if you are between 30 and 40 years of age, you need at least $2,700,000 to survive without working for the rest of your life. If you are aged between 40 and 50, you need at least $1,990,000 to live a comfortable life without working.
Those aged above 50 can live comfortably without ever working if they have saved at least $1,300,000. The summary of the approximate money you need to live comfortably without working again is shown in the table below.
Table 1: A summary of the calculations
|Amount of money you need to never work again
|$2,700,000 – $3,360,000
|$1,300,000 – 1,990,000
|Above 60 years
|At least $ 1,300,000
However, these are only approximations based on a number of assumptions. Therefore, they may not apply to everyone because people live differently. To know if these figures apply to you, you need to consider the 4% rule, inflation, and lifestyle preferences.
The 4% rule
The 4% rule helps you determine the amount you can spend each year without running out of money after retirement. It was developed in the mid-1990s as financial experts tried to explain how retirement savings can outlast an individual.
This rule states that if you withdraw 4% of your retirement savings portfolio every year, it will not be exhausted in fewer than 33 years.
Therefore, you need to ask yourself if a 60-year-old senior with a $1,300,000 savings portfolio can withdraw 4% of his or her savings and never exhaust it in fewer than 33 years. The answer is yes because the portfolio will not be exhausted for at least 33 years if the withdrawal is kept at 4% per year.
After all, the average life expectancy in the US is 79 years, meaning that not all 60-year-olds will live up to 93 years. Therefore, a good number of them will live comfortably and never exhaust their money at the time of death.
Now that the approximations have been proved, you need to consider the two factors that make the value of money saved fluctuate. These factors are inflation and lifestyle preferences.
Inflation causes an increase in the general prices of goods and services. Therefore, inflation lowers your purchasing power. The reality is that inflation will always occur because no country is immune to inflation.
Therefore, you have to factor in inflation adjustment in your calculations. You can do a quick research and see that inflation in the United States averages 3.8%.
This means that prices of goods and services will likely increase by 3.8% every year. If you are budgeting for 30 years, you need to adjust the amount by 3.8% annual inflation.
For instance, if you are aged 60 years, you need $1,300,000 in savings to never work again for the entire of your life. However, the value of that money will depreciate every year due to inflation. Therefore, you need to save more than that by 3.8% per year.
You are factoring in inflation to ensure that you will retain your purchasing power despite the inflation. In so doing, you will live a comfortable life for over 30 years without ever working again.
Besides inflation, you need to consider your lifestyle. It goes without saying that your lifestyle determines if your money can sustain you for the rest of your life without ever working again.
Some people prefer modest lifestyles, while others prefer flashy lifestyles. Those who opt for modest lifestyles are at an advantage because they can survive with little money. On the contrary, flashy spenders need to have a lot of money to avoid exhausting their savings.
If your lifestyle involves heavy spending, you may never have enough money to the point that you do not need to work again. Additionally, you may need to save a higher amount than the estimated value because you will spend a lot more.
There are also social and psychological factors that determine the amount you need to have in order to never work again. For instance, do you value financial status and economic rank or living a happy and fulfilling life?
Those who value happiness over money may not be bothered by saving a lot of money. Moreover, they may be quick to retire early or quit their jobs if they are stressful because they do not value money over their happiness.
Ask yourself, what does your lifestyle say about you? When you get the answer, you will know if the above approximations apply to you or whether you need to quit work without considering the savings.
The bottom line
It seems that money can never be enough because even billionaires keep working and running their businesses despite their enormous fortunes. However, that does not mean there is no limit to the amount of money you can have and never need to work again.
By using the available data on the cost of living in the US, it is estimated that you need $2,700,000 to survive for the rest of your life without working if you are 30-40 years, $1,990,000 if you are aged between 40 and 50, and $1,300,000 if you are above 60 years.
These approximations have been proved by the 4% rule of retirement. However, these approximations may change with time due to inflation and lifestyle preferences.