Decision Guide · Reviewed 6 September 2026
The 4% rule: If you can live on 4% of portfolio annually, you likely have enough to retire early.
$1M portfolio = $40K/year sustainable. $1.5M = $60K/year. But test against low-return scenarios (0–3% years) and confirm healthcare/taxation. Early retirement is possible at 30–50 with discipline, but requires margin for error.
4% rule calculation
| Portfolio | 4% Annual Spending | Monthly Budget | Safe? |
|---|---|---|---|
| $500,000 | $20,000 | $1,667 | Only if expenses ≤ $1,667 |
| $750,000 | $30,000 | $2,500 | Tight if expenses higher |
| $1,000,000 | $40,000 | $3,333 | Comfortable (US median ~$5K) |
| $1,500,000 | $60,000 | $5,000 | Comfortable, safe |
Critical checks before retiring
- Healthcare: Can you afford ACA/private insurance until Medicare at 65? Budget $400–$800/month per person.
- Taxes: Account for taxes on withdrawals (Traditional IRA) or state income tax (if you move).
- Longevity: Portfolio must last 50+ years. Market has had 20-year low-return periods; confirm survival.
- Flexibility: If market crashes (2008-style), can you cut expenses 20–30%? Or work part-time?
- Social Security: Delay claiming to 70 if possible (8% annual increase). Plan on lower early retirement income.
Reality check: Sequence of returns risk
Retiring right before 2008 crash was brutal (portfolio down 50%, you're withdrawing 4%). Test if you can survive worst market timing (retire, then crash occurs immediately). Most early retirees survived 2008; strategy works. But it's stressful.
When you likely have enough
- Portfolio 25–30× annual expenses (4% rule)
- Expenses < 50% current income (easy to sustain)
- Healthcare plan (ACA or employer coverage)
- Multiple income sources (Social Security, rental, pension)
- Flexible spending (can cut 20% if needed)
When you likely DON'T have enough
- Portfolio < 20× annual expenses (2% withdrawal = unsustainable)
- No healthcare plan (costs $500–$800/month)
- Market crash immediately after retirement (sequence risk)
- Inflexible spending (can't reduce even 5%)
Recommendation: Calculate 25× annual expenses. If you have it and can live on withdrawals, early retirement is possible. Do 1–2 year test run (reduce work, live on 4% withdrawals) before fully retiring. Margin for error essential.