The Meager Take-Home Pay Route


For those of us who don't find a million in the street, let's make a couple assumptions. Say you're 26 years old and make a cozy $40,000 a year. We'll also assume that one of the reasons you're looking for the ability to quit any time you like is that your raises are only keeping pace with inflation. If you invest 10% of your salary ($4,000) in the Million Dollar Route portfolio (the 10.6% annual return model), it'll take you 31-1/2 years to reach a million. Even adjusting for bigger raises and contributions higher than 10%, that's too long—fifty-eight's too old to tell your boss where to go scratch.

But could you make do with only $400,000 and live off its income? Yes, if you're willing to depart from the formula a bit. Let's say you don't need to live off the interest income entirely, but are willing—or even eager—to continue earning some money doing whatever it is you now fill your day with. Say you quit and earn only half of what you used to—freelance writing for fancy websites, for example. And say you scrimp enough to increase your yearly investment to 15% ($6,000). Then you're only 20 years away from the $400,000 you'll need.

Once there, you'll no longer be the spring chicken you are today, so you'll want to dump your nest egg into a safer mix than the portfolio that got you here. Say you find a stable bond fund that's paying a dependable 7.5%. Your $400,000 will throw off $31,500 a year for you to guiltlessly enjoy. Supplemented with the 20 grand you're making with your part-time knitting gig, you're actually earning better than 25% more than you did working full-time. Once again, it'd be smart to reinvest enough of your return to cover the ravages of inflation, but even without that 3.1%, you're still at $37,600—only a couple grand less than before and you'll be a lot closer to doing what you want to do.

Two grand for twenty hours less grunt work a week and the freedom to come and go as you please? Hope the door doesn't hit you on the way out.

Obviously, these numbers vary wildly with your situation. If you make less than $40,000 or can save less, it'll take longer. But the point remains—the ability to support yourself is the best kind of freedom. So even if you never quit, even if you carry your ability to do so like Linus carries a blanket, the knowledge that you can has within it the power to put you at ease with the world. And that's my definition of security.