Enough Money to Retire and Enough Money to Die

The Two Phases of “Enough Money” in Financial Independence

What is enough money? In the pursuit of financial independence (FI), this question arises frequently. Many think of it as a single milestone—the moment you reach a specific savings threshold, like the 25x rule or following the 4% withdrawal rate. But once you’ve accumulated enough money to retire, a new question emerges: Is there another level to “enough” beyond simply covering your lifestyle costs? Financial freedom doesn’t end with retirement; it also involves planning for a fulfilling legacy and managing your finances through the rest of life.

In this article, we explore two definitions of “enough money”:

1. Enough to retire and live a life you enjoy without financial pressure.
2. Enough to die, which means having a plan for the wealth you leave behind.

Phase One: Reaching Enough Money to Retire

For most people, the first goal in the FI journey is accumulating enough wealth to stop working. Generally, how much money you need for financial independence is calculated using the 25x rule, where you save 25 times your annual expenses, or the 4% Rule, which assumes that withdrawing 4% of your retirement savings each year provides sustainable income over a long retirement.

Example Scenario: Let’s consider someone who has achieved financial independence at 43. They have saved enough so that their investments generate passive income that covers all of their living expenses. With careful management, they could maintain this income indefinitely, without returning to traditional work.

But having “enough to retire” often reveals new questions. This individual’s expenses are covered, but what’s next? Without additional spending, their net worth is likely to keep growing, which leads us to the second definition of “enough”—enough to align wealth with long-term goals beyond one’s own lifetime.

The Practical Implications of “Enough Money to Retire”

Once you have enough money to retire, the emphasis on wealth accumulation can shift. This stage often encourages FI enthusiasts to think about:

• Lowering portfolio risk: With a focus on maintaining rather than growing their wealth aggressively, people can prioritize lower-risk assets.
• Enjoying life experiences: A fulfilled life in retirement means spending on things that bring joy and purpose, while planning for a sustainable future.

“Once you’ve won the game, stop playing,” says Dr. William Bernstein, a renowned financial theorist. His message emphasizes that financial independence is a milestone, and from there, one can focus on living meaningfully rather than endlessly accumulating wealth.

Phase Two: Enough Money to Die

After achieving financial independence, wealth can continue to grow, creating the potential for a legacy. This is where legacy planning comes into play—having “enough to die” means planning the purpose and distribution of any remaining wealth. This includes deciding how much to leave for family, charities, or causes, and considering what legacy you want to leave behind.

Managing Post-FI Wealth Growth: People often find that as they age, their spending needs may decrease. According to a study by J.P. Morgan Asset Management, retirees spend, on average, 20% less annually by the time they reach their 80s compared to their 60s. This lower spending rate, coupled with investment growth, can lead to a significantly higher net worth in later years.

Practical Implications of “Enough Money to Die”

Those who reach FI may wish to spend their later years enjoying their wealth or using it to benefit others. Practical steps in managing this phase include:

1. Legacy Intentions: Deciding on an amount to pass on to loved ones or causes. For example, if someone wants to leave $500k to each of their children, they can plan current spending to align with that goal.
2. Annual Financial Review: Regularly reassessing legacy goals and adjusting for inflation, life changes, or shifts in personal values.
3. Prioritizing Life Experiences: Studies show that 80% of people’s regrets near the end of life relate not to money but to experiences they didn’t have. Spending on fulfilling experiences while health allows is a practical use of “enough money.”

Using Wealth to Prevent End-of-Life Regrets

In research on end-of-life reflections, Bronnie Ware, author of The Top Five Regrets of the Dying, found that many people regret working too hard, neglecting relationships, and not living true to themselves. Wealth can empower us to avoid these regrets by allowing us to:

• Spend quality time with loved ones.
• Pursue long-held dreams and hobbies.
• Make meaningful contributions to causes we care about.

“Once you have enough money, it’s never about the money,” says David Baughier. This highlights the importance of shifting from a wealth-focused mindset to a life-enriching one.

Moving from Wealth Accumulation to Life Accumulation

This concept encourages a major shift in mindset once you’ve reached FI. It’s less about adding to your balance sheet and more about creating a balance in life. For instance, if you’ve reached FI through a portfolio that generates passive income covering all living expenses and then some, consider:

• Reevaluating Lifestyle Goals: Determine how much additional spending on experiences, travel, or family time is feasible.
• Charitable Giving: Allocate part of your surplus to causes close to your heart.
• Reducing Portfolio Risk: Ensure that the funds for your legacy are safeguarded.

Some may question why others continue accumulating wealth even after reaching FI. Social media is filled with examples of people boasting about rental properties or millions in net worth. While wealth-building is admirable, FI encourages an evaluation of what money is for beyond accumulation.

End-of-Life Financial Planning Statistics

As people approach the end of life, they often reevaluate their wealth and what it means. Studies reveal:

• Only 33% of people have an end-of-life financial plan that includes clear legacy goals.
• 72% of retirees wish they had spent more on meaningful experiences and less on financial “security” in their earlier retirement years.
• People who set legacy goals are twice as likely to spend their later years in a state of emotional well-being.

These statistics reveal the importance of setting clear intentions for one’s wealth. Creating a plan for how much to leave behind, as well as how much to spend while alive, can help prevent regret and create a fulfilling post-FI life.

Practical Steps to Reevaluate Your Definition of Enough

Once you reach financial independence, consider the following steps to ensure your wealth is aligned with your evolving definition of “enough”:

1. Legacy Planning: Create a will or trust that clearly outlines your legacy goals.
2. Annual Spending Reviews: Assess your budget annually to ensure you’re living comfortably while keeping legacy goals in mind.
3. Experience-Focused Budgeting: Prioritize spending on experiences or goals that bring meaning to your life.
4. Reallocate Investments: As you age, consider safer, income-generating investments that can preserve your wealth for loved ones or causes.
5. Charitable Contributions: If your needs are covered, consider using excess funds to support meaningful causes.

Conclusion

Achieving financial independence is a remarkable accomplishment, but it’s just the beginning. Enough money has two layers: enough to retire and enough to leave a legacy. Moving from a wealth accumulation mindset to one focused on meaningful experiences and legacy planning can create a more fulfilling life and ensure that your wealth serves a lasting purpose.

In the end, “enough” is about more than a dollar amount; it’s a tool to live a life of purpose and leave the world a little better for those who come after. Embrace this perspective, and you’ll not only find peace in retirement but also joy in the legacy you’re building along the way.