We’re Americans living in Europe and spend $70k living in a big city – do we have enough money saved to scale back from work?

A Reddit user is 44 years old and is tired of working.

He and his wife are living in Europe with a good amount of savings, and he’s trying to decide whether or not he has enough money to quit. There are a few issues, though, including the fact that if he left his high-paying job right now, he’d be very unlikely to find a similar one.

So, can he give up his job for good and start enjoying his life in Europe without worrying about continuing his career?

Always run the numbers first to decide if you can quit working

If you want to decide if you have enough money saved to stop working, you need to take a close look at your financial situation. The Redditor explained that he and his wife have two small children. While his wife is on maternity leave right now, she likely will continue working. However, she probably won’t earn more than $20K to $30K per year at most. 

The couple has a net worth of €2.7 million Euros, including €1.4 million in ETFs, €400K in stocks, €150K in employee stock shares; a €500K  appartment with no mortgage that he plans to sell so he can buy more ETFs, and a €200K apartment with an €80,000 mortgage and a tenant. His salary allows him to save around €80K per year, and he has a pension of €100,000 coming — but not for another 20 years.

His annual spending right now is around €70,000, including saving €5,000 for his kids. However, since his children are little, he expects their expenses to increase by around 10% to 20%. He also thinks that the family will have to spend more on healthcare when he retires.

Can he cover the costs at a safe withdrawal rate?

The key factor that’s going to determine if the Redditor can give up his job or not is whether he can live off the money he currently has invested.

Since his wife is likely to work and make €20K (assuming on the low-end) and he’ll probably need around €80K to €90K in annual spending to feel comfortable as his kids start to grow, he’s going to need his savings to produce around €70,000 after accounting for his wife’s pay. It makes good sense to err on the side of his wife making the least amount expected and to assume his spending will be at the upper end of what he expects — or even a little higher. After all, it’s always better to have extra money than to run out. 

Now, he has a net worth of €2.7 million, but not all of that is going to be able to support him. Specifically, if he sells his €500,000 home, he’s either going to need to buy someplace new with at least some of the proceeds or he’s going to significantly increase his housing costs. It’s also unclear when or if he’ll be able to access his €150K in employee stock shares or how much they will be worth when that happens. And, he didn’t mention whether the rental apartment is cash-flow positive or how much it makes. 

So, being conservative and assuming he has around €2.05 million if you take out the primary home and the stock options, his nest egg would produce around $75,850 at a safe 3.7% withdrawal rate. That’s pretty close to the amount he thinks the couple will need — so retiring early might be doable, but it is a risk.

Before jumping in and giving up his job, the poster may want to talk with a financial advisor. An advisor can offer invaluable insight into whether the math works to retire now and, if not, can work with the poster to look at the big picture and to find a way to set and follow clear financial goals to make the dream of early retirement happen ASAP.