Father & Daughter Walking on Beach

How Much Money Do You Need To Never Work Again?

Spoiler: it is probably less than you think!

Retiring young is the dream, right? Yet so few of us take the time to sit down and calculate how much money we would need and what steps are needed to get there. 

Traditionally we see people talking about the 4% rule, in which a financial planner might suggest that you require enough saved so that you only need to withdraw 4% at most each year. 

With this in mind let’s do the math for how much someone who is 50 years old would need in order to enjoy their goal of $100,000 per year for living expenses. 

This would mean that the person needs to save a total of $2,500,000 to retire, with 4% of that value equaling their desired yearly spend of $100,000 per year. 

If their money was simply sitting in a bank account that earned zero interest. This would only give them enough money to live until they were 75 years old. This also does not account for inflation and the inevitable rise of living costs over the coming years. 

Not ideal now, is it? So how can we improve on this thinking? 

Just a quick reminder that we are not financial advisors, so this is nothing more than us sharing our opinions and experiences. You should always do your own research when it comes to investing so that you have all the facts and can make your own educated decision on what is best for you and your situation.

Put Your Money To Work In Order To Retire Earlier

In this next scenario, let’s look at someone who is investing in traditional low risk investments like bonds or T-bills. The returns for these could be anywhere from 0.5% APY to around 5% APY. 

For our example let’s calculate using the higher end of that scale. In this case 5%. 

If we go back to using our original $2,500,000 savings goal where we only need to take out 4% per year, this will mean that we never actually need to dip into our saved amount of money, and our overall balance would be growing by 1% per year after our $100,000 withdrawal. 

Because our funds are now earning passive interest, we can take a step back and reevaluate the original amount needed to retire. 

If we started with a lower amount of $2,000,000, had it earning the same 5% per year with bonds, then the interest earned per year would be the $100,000 amount that we want to live off of. 

This will let you live the life you want, without ever having to touch your savings if you manage things well. 

Saving up $2,000,000 to retire early may still seem a bit out of reach for some people, so what other ways can we put our money to work in order to lower that amount dramatically? 

Dividend Stocks vs Index Funds

Playing the stock market brings with it more risk, as the value of the stocks you are buying can go both up and down in value. 

Index funds like the S&P 500 help spread the risk by buying up tiny amounts of the top 500 stocks and while long term the overall trend has been up for the S&P 500, you’ll have years where your holdings might go up 50% in value, though you could also have years where you lose money.  

For this reason, it’s recommended you don’t put all your funds into this kind of investment for your retirement. That is, unless you are okay with riding the ups and downs with increased uncertainty on how your funds will fair. 

Dividend stocks are similar, in that their price will vary, though the bonus is that you’ll also receive further income in the form of dividends paid to you for being a shareholder. The annual yields are usually not particularly high, so unless you get in on a stock that is also trending long term upwards you could find yourself losing money and not having enough to live out the rest of your life free of having a job. 

High Yield Crypto Savings Account

Crypto is a bit like the wild west of finance and you really must do your research before throwing your money at things that sounds too good to be true. 

Saying that, there are plenty of great options to take advantage of that beat out most of what you’ll find in the traditional finance world. 

Some crypto projects have native staking, this means that you hold the keys to your coins with no need to trust any third parties, while your coins earn passive interest over time. 

While the interest rates are great in most cases, you are still leaving yourself open to price volatility just like with the stock market. 

So how do we earn the great yields that crypto has to offer, without having to deal with the usual price volatility? 

Stable Coins Pegged to USD, GBP, CAD & EURO

Stable coins allow us to earn those high crypto yields, but with assets that are pegged to the price of our local currency. Eliminating the price volatility, therefore making things much easier to predict and manage. 

Enter Freeway.io – Crypto Yields Up To 43% APY

Freeway has been winning awards for their groundbreaking crypto staking platform and it’s easy to see why when you dive deeper into the rewards offered and how they manage to offer such great rates. 

Going back to doing the math on How Much Money We Need to Never Work Again and things start to look much more achievable.  

Using a USD stable coin as an example – At 43% APY we would only need to save up $233,000 instead of our earlier $2,000,00 to earn the same $100,000 per year for our early retirement. 

That is a dramatic difference! 

So what’s the catch?  

Well in order to get the full 43% APY from Freeway, you also need to buy and hold some of their freeway token FWT. Your balance of FWT must equal 5% or more of your stable coin holdings to unlock the bonus rewards. 

So then, if we have our $233,000 of stable coins in Freeway, we will also need around $12,000 worth of FWT in our account. Round that up to $17,000 to add a little bit of a buffer and that means in total we would need to save a total of $250,000 USD to achieve our goal of financial freedom and $100,000/year in passive income. This also allows us to never need to touch our original investment, instead living only off the interest earned. 

There is a lot more to learn about Freeway, but we highly recommend you jump over and look at their website. In terms of truly passive income, Freeway has by far been the best performer over the past year for us, bringing in exceptionally reliable income every hour on the hour. 

Check out our Deep Dive into Freeway.io Blog Post Here

So which option should you choose to reach your goal and retire early?

We suggest you think about taking a hybrid approach based on your own unique financial situation. It’s probably a clever idea to never put all your funds into one place. Mix and match to give yourself some of that juicy high yield from Freeway along with some of the rock-solid stability found via bonds and T-bills, or the upward trending indexes like the S&P 500.