Hey everyone, I’m interested in the classic FIRE dilemma: For anyone on the path to financial independence (whether you’ve reached CostFIRE, LeanFIRE, or are still getting there), is working "one more year" really worth it? We know an extra year of work can grow your portfolio and potentially improve your spending power and lifestyle down the road.
Even after reaching your full FIRE number, it might still be worth continuing to work if you have a big salary or are young enough to benefit from compounding and savings growth. But how do you quantify whether that trade-off between time spent working and lifestyle improvements gained actually makes sense? Eventually you need to consider your finite lifespan.
I’d love to hear about tools or methods to make this decision more data-driven instead of just relying on gut feeling. Are there any online calculators that help evaluate if putting in an extra year of work is worth it?
How to quantitatively evaluate if working "one more year" is worth it?
byu/GrindingForFreedom infinancialindependence
Posted by GrindingForFreedom
7 Comments
For me I worked a bit longer to pay off a few things around the house, new HVAC, water heater etc. A couple of home renovation projects on the master bathroom, kitchen, etc. We upgraded our cars and built a larger cushion of cash in my savings account.
After that any more work I couldn’t really add more to my portfolio that would matter.
Financially, it is unambiguously better to work longer. More time earning and saving and less time withdrawing. So the choice comes down to unquantifiable things like freedom, quality of life, risk tolerance, health and longevity, etc. I don’t think you can reduce it to a calculation.
For anything short term above my target SWR. So I plan to do a year of international traveling, so that’s additional cost above my typical lifestyle, so I’m planning to go a extra number of months so that the cost is covered. I might buy a new car, so I would look to cover that as well.
Anything longer term should be covered under your standard cost of living that you multiply by 25 (for 4%).
We were debating if we should retire end of 2025 or end of 2026 and asked our fee-based financial advisor. She ran calculations with her fancy software and with her advice, we decided to pull the trigger in 2025. It helps that our “nut” (basic living expenses like house, etc.) is pretty small and there is a lot of space to pull back spending on things like going out to bars and restaurants, travel, etc. if needed.
I know many people on here eschew getting an advisor, but we don’t want to stop work just based on our own instincts. I feel much better having an expert check our work. Between being in our 50’s, downturn in the economy, and my husband working in a ever changing field where you have to keep up on your skills – I don’t think “If needed, I’ll just get another job!” is as easy as people say it would be.
There will be lots of opinions and thoughts. I’ll give you my personal view.
Beyond age 50, if what you are adding to your invested assets is less than 10% of the total value of your invested assets, it is no longer worth it.
Beyond that age, at greater than 20% and you’re healthy, below 60, you don’t feel oppressed by your job, and the added assets will meaningfully change your retirement lifestyle or your ability to help your kids and family members, it is likely worth it.
Between 10-20% is a grey area.
And overall it is a sliding scale and very personal (health, family, etc) as the extra money may not mean a lot to you, but could to your kids, by way of an example.
*”Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”*
Charles Dickens – “David Copperfield”
Adding an extra margin of safety is worth it.
If you have determined that, say, $1.5m is your fire number, then going past that to $1.6m is worth it. But then getting to $2.5m is not worth it.
For a long long time, the limiting resource in my life was money.
Now it is health.
While I understand what you’re asking, the answer comes down to whatever your goals are: retire with zero, pass along a down payment to your children, fund 529 to fully pay off college, pass down generational wealth.
My recommendation is to use the trinity study and simulate across the entire dataset to look at risk exposure. [The Poor Swiss](https://thepoorswiss.com/updated-trinity-study/) took a stab at putting tools together. This will tell you your success rate based on historical performance, caveat that historical performance does not dictate future performance. From that you can determine how you want to handle retirement: more risk higher potential gains, lower withdrawal, extend income one year.