Married with 2 young kids, making $400k a year with $6 million saved — retire now or keep grinding?

A Reddit user with a generous net worth recently posted a question looking for advice about a big life choice.

The poster explained he’s worth around $6 million, not including equity in his primary home. His wealth is mostly in the form of rental real estate and investment accounts. He lives in a high-cost-of-living area, is the sole breadwinner for his family, and earns around $400,000 per year, not including private restricted stock units. He’s tired of the politics at work and, despite having two young kids at home, is considering leaving work in his 40s to retire early. 

His frustration with his job and his large account balances naturally have him wondering whether he should just stop working now — especially since his annual spending needs are around $170,000 and he earns $100K in annual income from his real estate investments alone. So, should he quit, or should he keep working?

The case for quitting

There is absolutely a case to be made that the Redditor has worked hard, built a stable nest egg, and deserves to be able to walk away from work if it’s no longer making him happy. Assuming his real estate continues to produce the $100K he said it provides, and assuming he sticks with his $170K in spending, his investments would only need to produce $70,000 a year in added income.

Since he said he has $2.5 million in investment accounts, those accounts alone could offer more than he needs. Assuming he withdrew 3.7% from his investment accounts, he’d have $92,500 in income without having to touch his 401(k) funds. 

When you have enough money to live on comfortably for life and you no longer enjoy your job, having the ability to walk away can be priceless. It’s the payoff for your earlier investing efforts, which you likely embarked upon to provide you with the very freedom you’re looking to take advantage of. The Redditor put himself in a position where he could be financially free, so continuing to work at an unsatisfactory job seems pointless. 

The case for sticking it out

For one thing, the Reddit user’s expenses may increase. He says he has two young children, but he did not mention college savings accounts among his assets. He may decide he wants to pay for his children to attend an expensive private school, or pay for them to go to college without student loans. This could push his spending up dramatically, making it harder to live within his means. 

He also has health insurance to think about. If his employer is subsidizing coverage now, he may be shocked to discover how expensive it is to insure a family of four on the individual health insurance market — and his family may also be surprised to discover how much less is typically covered under individual plans rather than group plans. If the poster has to start shelling out for expensive health insurance premiums, this could also make it harder for his money to last.

There’s also the fact that retiring in your 40s could leave you bored and unfulfilled. Without work providing a purpose, the Redditor may become dissatisfied with life — or may start spending more to fill the void. Once he has stepped away from his job, going back to work may simply not be an option either, which means he could lose the chance at a lucrative and fulfilling career. 

Ultimately, the individual posting the question is the only one who can really decide how likely it is that his $6 million net worth will be enough to provide a comfortable future. A consultation with a financial advisor could help the poster to figure out what’s best for his finances long-term and, if necessary, the advisor can help him work out a plan to make sure he can live within his means after early retirement so he doesn’t end up regretting it.