Work-Free Wealth

Income Investing for Financial Independence and Early Retirement

How to get to 5 million without going back to work

The early retirement /financial independence lifestyle is great.  You like your new life, new hobbies, ways to stay engaged – everything you want in your lifestyle.  Too bad that none of your hobbies pay you anything.  In fact, they cost you a bit more money when you anticipated.  Which is a problem if you did not have a margin of safety built-in after leaving work.  But even with a margin of safety, you have been used to growing your money for so long and now you have this disconcerting feeling creep up on you: what if I want to grow my money but I don’t want to go back to work.  Is that even possible?   Let’s look a theoretical scenario for an early retiree with the following account balances and the wish to get to 5 million net worth

  • Taxable Account used for living expenses (at least until 59 1/2):  $1,000,000
  • Tax-Advantaged Accounts (401k, IRA, Roth IRA,): $1,000,000
  • Current Living Expenses: $44,000

Below are 2 basic simulations that show the time it takes to reach 5 million net worth.  The first scenario assumes the good life with absolutely zero work income and the second scenario assumes a 100 k income of which 30% go towards increasing the investment balance every year.

The calculations assume an 8% average growth rate and 3% inflation for a nominal rate of return of 5%.   I know you would rather have a Monte Carlo simulation, etc… but I like simplicity and nobody knows the future anyway.


It takes 16 years to get to 5 million without any work and 11 years with a 100k annual salary.  Wow!!  What a nice surprise.  Obviously it could take a lot longer depending on how the sequence of return risk plays out.  The real point here is that once you reach a certain level of networth, your fate is tied to investment returns far more than to the job market.


Figure 1: Portfolio Growth without Income


Figure 2: Portfolio Growth with 100k Income

Feel free to drop me a note if you would like the spreadsheet that I used for the calculation.



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