One of the key conclusions from doing a deep-dive analysis of my IRA with Empower, is that I should be able to live it up more in retirement. In fact, we should all be able to live it up more in retirement based on a higher recommended safe withdrawal rate by Bill Bengen, one of America’s best retirement researchers.
Since 1999, I’ve always viewed all my tax-advantaged accounts as bonus money. My philosophy was simple: by not counting on these accounts to fund retirement, I’d be forced to build my taxable investment portfolio large enough to support an early retirement lifestyle. At the same time, by automatically maxing out my 401(k) every year, I’d ensure that life after 60 would be even more comfortable than if I hadn’t.
Yes, it can be hard to max out your 401(k) every year and expect nothing in return for decades. But early in my career, I realized there was no way I could last 40 years in banking with those hours and that level of stress. So I chose the easier of two hard paths: save aggressively and buy my freedom sooner.
Being Conservative And Living It Down In Early Retirement
Of course, when you retire at age 34, “freedom” still comes with limitations. Any withdrawal from a 401(k) or IRA before 59½ faces a 10% penalty plus taxes, so I wasn’t about to waste what I’d worked for. Instead, I devised five strategies for early retirement:
- Negotiated a severance package to cover living expenses for the first several years.
- Built multiple passive income streams to at least cover my basic living expenses.
- Earned supplemental income through Financial Samurai and occasional consulting.
- Encouraged my wife to work three more years before retiring herself at at 35.
- Cut expenses – most notably by downsizing homes in 2014 and renting out the old one for more semi-passive income.
At 34, I’d just cut off a major source of income and was worried I’d made a huge mistake. Therefore, it was only logical to be conservative in early retirement just in case.
In hindsight, I probably should’ve worked five more years. But fear of failure kept me disciplined, and by 2015, our finances had stabilized enough for my wife to also negotiate a six-figure severance and retire too. We took the leap of faith because we no longer wanted to spend time doing something we disliked.
Now It’s Finally Time To Live It Up
After another conversation with Bill Bengen, the father of the 4% Rule, I’ve decided it’s finally time to YOLO in retirement. I’m tired of always being so frugal and never allowing myself to spend on a few luxuries.
In his latest book A Richer Retirement, Bengen raises his SAFEMAX withdrawal rate from 4.15% to 4.7%, rounding up to 5%. His model assumes a 55% equities / 45% bonds portfolio – fairly conservative compared to my 99.8% equity-heavy IRA. A 5% SAFEMAX is considered the maximum annual withdrawal rate where I retiree won’t run out of money after 30 years.
A shift from a 4% to 5% withdrawal rate increases spending power by 25%. That’s like going from spending $60,000 a year to $75,000 on a $1.5 million portfolio, without running out of money. And that doesn’t even factor in Social Security or side hustle income, both of which improve your odds dramatically.
Since 2012, I haven’t touched my retirement principal. In fact, I’ve saved and invested roughly 30% of my supplemental income each year. For example, over the past decade, I’ve contributed an average of $16,000 annually into my Solo 401(k). The freelance income comes from the occasional consulting and book advance income.
You can listen to my conversation with Bill on Apple or Spotify, or click the button below. Your positive reviews are appreciated as each episode takes hours to record, edit, and produce. Let me know if you’re convinced that we should live it up more in retirement after listening.
Old Enough To Not Be So Frugal Anymore
What’s ironic about life is that the “old person” we used to imagine 20-30 years ago is now us. When that realization hits, it’s worth asking: did life turn out the way we hoped? If not, what are we waiting for?
At nearly 50, I don’t want to regret not living it up to the max. I’ve had 13 years to experience the ups and downs of life without a paycheck or benefits. From paying $2,500/month for unsubsidized health insurance to finding creative ways to keep contributing to tax-advantaged accounts, early retirement hasn’t always been easy, especially when we became Dual Unemployed Parents to two kids. But it looks like we’re going to make it without having to return to work.
With fewer years left to fund, being a near-50-year-old retiree is far easier than being a mid-30s retiree. You’re more experienced, more grounded, and less anxious about all the unknowns. That said, I still have 18 years until my youngest graduates from college. Then there are my parents—and everyone’s health—to think about.
Your Retirement Portfolio Will Likely Keep Growing
After 13+ years of leaving my principal untouched, my retirement accounts have grown meaningfully alongside the markets. If I’d put my entire $3 million net worth in the S&P 500 in 2012 and withdrawn a steady-state $120,000 a year, the portfolio would be worth about $13 million today. That’s how powerful compounding can be. Meanwhile, Bill’s SAFEMAX research assumes the withdrawal rate increases with inflation.
| Year | Start Balance | Withdrawal | S&P 500 Return % | End Balance |
|---|---|---|---|---|
| 2012 | $3,000,000 | $120,000 | 16.0% | $3,340,800 |
| 2013 | 3,340,800 | 120,000 | 32.4% | 4,257,939 |
| 2014 | 4,257,939 | 120,000 | 13.7% | 4,710,691 |
| 2015 | 4,710,691 | 120,000 | 1.4% | 4,648,859 |
| 2016 | 4,648,859 | 120,000 | 12.0% | 5,090,784 |
| 2017 | 5,090,784 | 120,000 | 21.8% | 6,051,854 |
| 2018 | 6,051,854 | 120,000 | -4.4% | 5,665,569 |
| 2019 | 5,665,569 | 120,000 | 31.5% | 7,279,067 |
| 2020 | 7,279,067 | 120,000 | 18.4% | 8,445,000 |
| 2021 | 8,445,000 | 120,000 | 28.7% | 10,685,715 |
| 2022 | 10,685,715 | 120,000 | -18.1% | 8,670,573 |
| 2023 | 8,670,573 | 120,000 | 26.3% | 10,783,444 |
| 2024 | 10,783,444 | 120,000 | 15.0% | 12,285,460 |
| 2025 | 12,285,460 | 120,000 | 10.0% | 13,550,006 |
- 5% withdrawal rate: ~$10 million today from $3 million in 2012
- 7% withdrawal rate (average of 400 retirees Bengen originally studied): ~$4 million today
Return Profile Of A More Traditional Retirement Portfolio Structure
Of course, I didn’t have the guts to go 100% equities when I left my job. We had recently gone through the global financial crisis and I was still highly uncertain about the future. So here’s what the results look like using a more realistic 60/40 retirement portfolio with real 2012–2024 60/40 returns (~8.2% average) and a projected +6% in 2025:
| Withdrawal Rate | 2025 Ending Balance |
|---|---|
| 4% | $5,959,300 |
| 5% | $5,146,696 |
| 6% | $4,438,007 |
| 7% | $3,820,844 |
Even with a balanced portfolio and regular withdrawals, the principal still doubled from $3 million to $6 million at 4% after just 13 years. So a 5% withdrawal rate doesn’t seem unreasonable, as I’d still end up with a ~70% higher net worth 13 years later!
And if I live for 50 years after retiring in 2012 and withdrawing at 4%, my net worth grows to a whopping $38 million nominal using a 8.2% annual return (historical 60/40 annual return), or $12-$13 million inflation-adjusted real value. Therefore, clearly, if historical return assumptions of a 60/40 portfolio hold true, then a 4% SWR is too conservative.
Retirees Have The Ability To Adapt To Hardship
It’s been an incredible run since 2012, fueled by one of the most powerful bull markets in history. Sure, we had dips in 2018, early 2020, and 2022, but overall, investors have been richly rewarded.
Could we face another “lost decade” ahead? Possibly, with the S&P 500 trading at roughly 23X forward earnings. Ironically, it’s far better to retire during a bear market than during a bull market. If you retire in a bear market, it shows your finances are strong enough to withstand existing volatility. But if you retire in a bull market, you face a greater risk of drawdowns just when you start withdrawing.
The good thing is, most of us can adapt. Instead of withdrawing a steady 5% each year, we can pull back during tough times. We can also find ways to generate supplemental income – like teaching tennis in my case – if necessary.
One thing I didn’t fully grasp when I interviewed Bill Bengen was why the success rate of a 7% withdrawal rate was only about 50% in his book, even though only one household out of the 400 he studied actually ran out of money in his original research. The key difference lies in his model’s assumptions: every household lives exactly 30 years after retirement and never deviates from a fixed, inflation-adjusted 7% withdrawal rate. In reality, not everyone lives that long, and most people naturally adjust spending based on market conditions. As a result, only
Today, with AI-driven productivity gains, the future might once again surprise us. I’m even willing to invest in AI companies for my children, to help save them from a life of disappointment.
It’s Time To Enjoy What We’ve Built
If you’ve invested diligently since 2012, chances are you’re sitting on far more wealth than you expected. We’ve worked hard, saved consistently, and benefited from one of the greatest bull markets in history.
So maybe now’s the time to ease up on the frugality, enjoy the fruits of your discipline, and live it up a little more.
Because if we’ve already done the hard part – saving, investing, and staying disciplined – then the next challenge is learning how to enjoy our wealth without guilt.
Fellow retirees, how have your investment portfolios and net worths done since you retired? Have any of you actually seen a meaningful decline in your portfolio or overall net worth? If not, why aren’t more people retiring earlier or spending more freely in retirement? The math clearly shows that if you stay invested, there’s a good chance you’ll end up even wealthier the longer you live.
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