Stop Working Full-Time Earlier: How Much Do You Need?
Chill-tirement. Work less, later.
The ‘don’t blame me’ blurb: I am not a financial advisor, portfolio manager, or accountant. This is not tax or investment advice; it’s information to get you going. Please consult your trusty professional and do your due diligence. Carry-on!
Updated: August 2025
Gen Z, Millennials, and Xs: Let’s take a brief look at the magic formula: save smart now, let compound interest do the heavy lifting, and create an income stream that gives you options later. How much do you need to have saved, and how much will it pay you?
TL;DR - How Much You Need?
The idea is that your investments start paying you an income instead of working for a living.
You can safely withdraw around 5% a year from your retirement accounts, such as a 401(k), i401(k), Roth IRA, and/or a taxable brokerage account over 30 years without bottoming out your account. This is known as the 4% rule, but it has since been revised to 5%. More on that later.
Example: A $1 million balance = you can safely withdraw $50,000 every year.A 5% withdrawal rate should work during the worst possible stock market/economic conditions.
It’s not a hard and fast rule; it’s a guide, and we should have the flexibility to spend more or less.
59 1/2 is when you can start withdrawing from most retirement accounts. With a taxable brokerage account, you can sell and withdraw funds anytime.
Add in any income from other investments like rental property + social security + part-time work.
Chill-tirement
Retirement, as a term, has such a bad vibe. I think of some oldie hobbling out of their office building with a potted plant and a gold watch. The culture in the U.S. seems to be you work until you drop dead. I’m a U.S. citizen, but Australian by birth. In Australia, people tend to retire earlier and focus more on enjoying life. You can, too.
I don’t think about retiring; I think about more of a ‘Stage 2’, where I will work less, or switch to doing something lower income, but more fun. Like writing for this site. Chill-tirement.
One of the great things about being a freelancer or solopreneur is that we can adjust our workload. We don’t have to quit our jobs like staffers do and go from working 100% to 0%. We can start taking on fewer projects/gigs, work 3-6 months of the year, ditch the pain-in-the-ass clients, and do the jobs you want to.
The goal of investing is passive income. Your investments will pay you.
The goal for us freelancers and single-person businesses is to accumulate enough money in our retirement accounts, taxable brokerage account, plus any other investments like real estate (a rental property, invest in a private real estate syndicate, or invest with a platform like Fundrise.), so they begin to pay an income stream later in life.
For freelancers, single-person businesses, and spouses, the i401(k) is a great option. It’s a massive tax deduction, up to $77,500 in 2025 — Read the guide here.
You can begin to withdraw from retirement accounts at 59 1/2. Want to slow down before 59 1/2? You can use the same 5% rule and withdraw money from a non-retirement taxable brokerage account. Remember, if you hold your ETFs or shares for more than a year, you will pay only the capital gains tax, which is typically around 15%, not your personal effective tax rate, which is likely around 22-28%. Read the post on how your tax rates work here.
The 4% rule — Except it’s now around 5%
Luckily, there is a relatively easy-to-follow rule to give you an idea of how much you need.
It’s called The 4% Rule and was initially researched and developed by financial advisor Bill Bengen in 1994, although Bill maintains it’s a guide, not a rule. See the links below to hear Bengen talk about how it works and the research used to develop it.
Bengen has since revised the withdrawal rate to around 5% due to further research and changes in the stock and bond markets. His new book was published in August 2025, is A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More.
How does it work?
The now 5% withdrawal rate is designed to make your nest egg last through a 30-year retirement during the WORST possible market conditions. Think of it as your portfolio's worst-case survival rate.
Bengen studied the stock market from 1926. The worst-case scenario identified by Bengen was for retirees who began retirement in 1966. They faced the toughest conditions; poor market returns and high inflation eating their buying power. It’s the double whammy.
That’s right; the now 5% withdrawal rate should guarantee your money lasts 30 years, even if you enter retirement in terrible market/economic conditions.
In Bengen’s analysis of nearly 400 retirement scenarios, the average safe withdrawal rate historically was around 7%, meaning many retirees could have withdrawn much more—even though 5% represents a conservative floor.
This is often missed when people discuss the his rule, so listen up:
The worst-case scenario, which is the 1968 retiree, the original 4% rate would have worked.
For real?
Let’s do the easy math
Let’s use the 5% withdrawal figure: If you have a total of $1 million in your retirement and/or taxable brokerage accounts, you sell $50,000 of your portfolio in your first year.
If inflation rises 3% the next year, you would withdraw $51,500 ($50,000 x 1.03 = $51,500), and so on. The beauty lies in its simplicity.
Be flexible:
If the stock market has a terrible year or two, lowering your withdrawal rate during that time is a good idea. If you need your money to last more than 30 years, use a lower withdrawal rate. This is what Bengen meant by saying it’s a guide, not a rule.
Your total income in chill-tirement:
Here is a very basic retirement income scenario just to give you an idea of how it will work down the track. Remember, a CFP is your friend when you want to create a real plan.
5% withdrawal rate from retirement accounts, such as your i401(k), Roth IRA, and other retirement accounts from old employers and/or a taxable brokerage account.
Total of all accounts: $1.2 million = $60,000/year withdrawalApproximate Social Security (official calculator here or log in to your Social Security account for a projection) = $30,000/year
Income from other investments like real estate = $20,000/year
Part-time work = $10,000/year
Total income for the first year = $120,000
If you’re approaching retirement in three to five years, I suggest consulting with a Certified Financial Planner (CFP) for a comprehensive plan with a one-time fee. A CFP is legally required to act in your best interest. Not all financial advisors are.
Some general points to mull over:
The 5% rate is not a hard rule; it’s a rough guide. You could withdraw more or less, depending on your situation.
You can withdraw from most retirement accounts starting at age 59 1/2.
Taxes: If the i401(k) is a traditional pre-tax, you do have to pay income tax when you withdraw money; it becomes income. Don’t worry; the tax rates you pay will be a lot less than you were paying in your prime earning years, as you’re earning less and will be in lower tax brackets. Read about your tax rates and how they work here.
Funds withdrawn from a Roth i401(k) or Roth IRA, incur no tax. (Note: for most of us, the pre-tax i401(k) is the way to go because of the enormous tax deduction we get every year while in our prime high-dollar earning years.)
For tax efficiency, it’s suggested you should withdraw from taxable accounts first, then tax-deferred accounts, and finally Roth accounts. This is again where a CFP comes in to create a plan.
If you work part-time and earn some money on the side, you can either spend more or withdraw less from your investment accounts.
At 62, you can begin to draw on Social Security. The longer you wait to withdraw, the more you get, but it doesn’t always make sense to wait. Another CFP convo to have.
If and when the market drops (and it will), then it makes sense to lower your withdrawal rate until it starts to recover. This is something to consider.
Conversely, if the market is gangbusters, perhaps take a little more out and have fun.
Finishing up
This is not a definitive guide to retirement. It’s just to give you a rough idea of how much you need to invest and the income you will create for yourself later in life.
Investing $23,000/year for 25 years at an 8% growth rate will get you $1.7 million. At a 5% withdrawal rate, that’s $85,000 of income per year. Play around with the compound interest calculator here and try different scenarios to see how your money can grow.
Me: Since 2015, when I went freelance, I invested $43k to $60k per year in the i401(k), plus $7,000 in a Backdoor Roth IRA. In 2025, I am going for the max. i401(k) contribution of $77,500. Remember, that’s a tax deduction of $77,500!
Read about starting your i401(k) here. Start contributing with whatever you can, it all counts.
Want to dig a little deeper?
There are some fantastic free websites that will plan and track your retirement outlook. I’ve written about the Empower Dashboard here. I have been using it since 2016 and love it. I have also just started using Boldin, a website created to help you plan your retirement. There is a basic free version.
Retirement planning online tools
Empower Dashboard (Formerly Personal Capital)
www.empower.com
Boldin Retirement Planner
https://www.boldin.com
Books
There is a lot out there on retirement. Here are three I recommend:
’How to Retire’ — 20 Lessons for a Happy, Successful and Wealthy Retirement’ by Christine Benz — https://amzn.to/41PXQJZ
‘Control Your Retirement Destiny’: Achieving Financial Security Before the Big Transition’ by Dana Anspach — https://amzn.to/3DC7ztn
‘A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More’ by Bill Bengen — https://a.co/d/aXnc9vc
Podcast links
These podcasts are a bit investment-wonky, but you can listen to Bill Bengen actually discuss the 4% rule.
Bogleheads Live chat with Bill Bengen here
Financial Samurai talks to Bill Bengen here
Financial Samurai follow-up blog post on the 4% rule here
Financial Samurai interview with Boldin CEO Steve Chen here
Follow-up blog post on the Boldin planner here
Bogleheads on Investing conversation with ‘How to Retire’ author Christine Benz here
* I receive a small referral amount to my Fundrise balance if you open a Fundrise account. They also give you the same amount to invest!
The Amazon links pay a small referral fee.