I’m retiring before 40 in an expensive city with two young kids and $3.3 million saved – am I taking too much risk?

Retiring around two and a half decades earlier than the norm in an expensive city with multiple dependents can be tricky. And while a colossal nest egg worth $3.3 million seems sizeable enough to make it work, other factors must be considered before making the plunge into retirement. Most notably, lifestyle, investment risk tolerance, inheritance expectations, and all the sort.

In this piece, we’ll check out a Reddit user, 39, who’s hoping to achieve “chubby FIRE,” which is a slightly more “lux” version of FIRE (Financial Independence, Retire Early), in short order. Indeed, chubby FIRE entails a higher standard of living, though nothing that’s excessively opulent (that’s reserved for “fat FIRE”).

$3.3 million is more than enough for most to retire on. But not this Reddit user.

Typically, I’d say $3.3 million is more than enough to fund a comfortable early retirement. However, when it comes to our Reddit user, their lifestyle entails a magnitude of monthly spending that makes it a bit risky to pull the trigger on retirement as soon as next year.

High living costs, the threat of tariff-fuelled inflation, rising childcare costs, healthcare expenses, and soaring stock market volatility are all factors that could make for a rather stomach-churning early retirement. While it’s technically feasible if all goes right, I’d argue there are ways to take significant risk off the table that don’t involve pushing one’s retirement date further down the road.

So, in short, I do find it risky for this Reddit user to retire at 40, given their current expenses. Based on the 4% rule, a $3.3 million retirement fund would amount to $132,000 in annual pre-tax income. That’s enough to (barely) stay within the budget, but doesn’t seem to account for rising expenses and things that could go wrong. As such, I think visiting a financial advisor to shift some things around makes the most sense if this Reddit user is keen on retiring by age 40.

Downgrading the lifestyle to rein in those “chubby” monthly expenses

Undoubtedly, $3.3 million could fuel a fairly fat early retirement in most cities. If you’re in the big city where rents and food are well above the national average, though, one may only have enough to fund a moderate or even frugal lifestyle. With tariffs threatening to empty shelves and send prices on a broad range of goods skyrocketing, the budget could get even tighter. Indeed, the easy answer is to move cities so that one can afford a higher standard of living without having to worry about whether rising costs will cause them to raise the bar on their withdrawal rate.

Sure, shifting from a 4% drawdown to a 5% or 6% withdrawal rate could be feasible for some time. But higher withdrawals entail a greater magnitude of risk. And most financial advisors would probably be against drawing down excessive amounts from one’s nest egg to meet the rising costs of living. While increasing one’s exposure to equities (over bonds) could allow one to get a bit more aggressive with their withdrawal rates, I think doing so in a tariff war could prove incredibly risky, given the rising risk of recession and the potential for more pain in financial markets.

Currently, their equity exposure is already elevated, with $2.8 million in stocks (over 84% of the portfolio) and just $350,000 in bonds. For a soon-to-be 40-something retiree, I think there’s too much risk here, especially given a 50% crash (let’s not rule that out) would likely send our Reddit user right back to work.

The bottom line

If I were in the Reddit user’s shoes, I’d be inclined to move to a cheaper city than to stick around and raise that withdrawal rate to a level where the nest egg may be in a spot to crack open at the hands of one unexpected diagnosis. Of course, not everyone is ready and willing to get up and leave, especially if the children are settled in school and there’s family in the area.

In any case, spending less on discretionary goods may be enough to shore up extra cash to better prepare for hard times.

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