Is my $5 million net worth enough to actually retire?

For everyone who lives or aspires to achieve financial independence and retire early in the “FIRE” movement, you must set a target net worth number. The goal is that once you hit this number, you have “made it” as far as being able to retire comfortably and not have to work a full-time job ever again. 

If you jump into this post on r/ChubbyFIRE, you’ll find a Redditor who has hit a $5 million net worth. With this money, the goal is to live on a $200,000 annual spend, but they are unsure if it’s enough. Given monthly necessities, medical costs, entertainment, travel, and more, they aren’t sure if they can call it quits. 

Hitting a ChubbyFIRE Milestone

According to the ChubbyFIRE subreddit, having a net worth of at least $3 million to $5 million qualifies as ChubbyFIRE. This answers the Redditor’s first question, as to whether they are truly a member of this club. 

However, their question extends beyond just a minimum net worth and labeling themselves as a member of the ChubbyFIRE club. Instead, they are also concerned that at a $5 million net worth, this gives them an annual $200,000 spend based on the 4% safe withdrawal rate rule. 

Even as the Redditor self-describes their family as being pretty frugal with things like clothing and having only one car, they are concerned about their financial standing in other aspects. This includes, but is not limited to, medical, dental, physical therapy, veterinary bills, groceries, dining out, educational toys, and anything else their only child might need as they grow older. 

She says it’s safe to say that they don’t do anything all that luxurious, except for splurging on holiday gifts. Given this, she’s trying to determine what is missing in their retirement plan. 

Setting Realistic Spend Goals

As the comment section in this post quickly points out, a $200,000 SWR is before taxes, so it’s far more likely this number is closer to $160,000. Depending on state taxes, capital gains, and any other considerations the Redditor doesn’t detail, their “real” number could be a little more or a little less. 

While it’s safe to say that they are chubby, it’s far more important to focus on the spending itself. A significant consideration here is where this family lives, as this also defines what is considered chubby. Even so, it’s clear from the Redditor’s own comments that she believes the family is living within their means. In fact, she goes on to argue that she does not have “more than enough money,” but can spend more if she wants to. 

The good news is that it appears she is accounting for spending with her husband out of the $200,000. Given this, they are accounting for the tax burden before anything else. Still, it’s clear that they need to be careful and not get carried away, regardless of what the Redditor claims. 

How to Move Forward 

If this Redditor hasn’t already done so, the family really needs to contact a financial advisor. It’s essential to work with someone who can clearly plan out their future. How long do they want this $5 million to last? Do they want to set up an estate and an inheritance plan for their only child? All of these questions need to be discussed with a professional. 

Additionally, the family should focus on establishing a detailed budget to track their discretionary spending. This might help them discover that paying for pet insurance is a better way to spend than paying for vet bills out of pocket. They might also realize they are overspending on meals and groceries and can cut down. It’s helpful to visualize where the money is going to see if there is anywhere they can create a financial buffer. 

Perhaps most importantly, without knowing the age of this Redditor, it’s hard to say anything for certain, but they really need to consider long-term medical expenses. Depending on their age and health, they may want to set aside some of this money for future medical costs. This is another area where a financial advisor can provide valuable guidance.

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