Before you can chase a number, you need to know what it is.
“Enough to retire” is not a number. Neither is “a lot” or “comfortable.” The whole point of FI is turning a vague feeling into a concrete target and then building a plan to hit it.
Here’s how I worked out ours.
Start With Spending#
The 4% rule is the bedrock of most FI calculations. It says a portfolio of 25x your annual expenses should sustain indefinite withdrawals at a 4% rate. It’s based on the Trinity Study and decades of market data. Not perfect, but a solid starting point.
The first question isn’t “how much do I need?” It’s “how much do I spend?”
By the time we hit FI, the plan is to have the mortgage paid off. So the number that matters is what we spend on everything except the mortgage. That averages around $4,000/month, or $48,000/year.
The Calculation#
Annual spend x 25 = FI number
$48,000 x 25 = $1,200,000
An ETF portfolio of $1,200,000 drawing down at 4% per year should cover living expenses with the mortgage already gone and the house owned outright.
What Counts, and What Doesn’t#
The FI number is ETF portfolio only. Here’s what we’re leaving out and why.
The house. It’s our home. We live in it. You can’t sell your house and live in it at the same time, so it doesn’t go in the number even though it sits on the net worth sheet.
Super. It’s real money, but it’s locked away until we’re 60. The FI plan doesn’t depend on accessing it early. Super becomes a bonus that makes the back half of life more comfortable, but we’re not building the whole plan around accessing it.
So the target is straightforward: pay off the mortgage and build the ETF portfolio to $1,200,000.
What FI Actually Means for Us#
This isn’t about retiring at 35 and never working again. It’s about having enough that work becomes optional. Walking away from a job that isn’t working. Taking time off when a kid is sick without running the numbers first. Doing things because they’re worth doing, not because the mortgage says so.
A paid-off home in South East Queensland, $1,200,000 in ETFs, and two kids who’ve hopefully stopped being quite so expensive. That’s the picture.
I’ll update the number as things change. Kids grow up, the mortgage shrinks, expenses shift. It’s a target, not a contract.