Retire at 40 on $80K? 2,000 Simulated Markets Put the Median at 43

A 25-year-old earns $80,000 a year, spends $40,000, and invests the other $40,000. That’s a 50% savings rate. The usual FIRE rule of thumb (a steady 5% real return, 4% withdrawals, so a $1M target) says financial independence is about 17 years away: retire at 42, close enough to call it 40.

We put those exact numbers into the FIRE calculator with its default market settings and read off what 2,000 simulated markets say.

The rule of thumb vs the simulation

The calculator draws each year’s return from a normal distribution with a 7% average and 15% standard deviation, plus inflation averaging 2.5%. Everything is in today’s dollars, so the $1M target rises with inflation along each path.

The median is only one year behind the rule of thumb. The spread is the real news: an 11-year range between lucky and unlucky markets, for the same person making the same choices.

And hitting the number is the easy part. Of the paths that retire, 39% run out of money before 90. That’s a 45-to-50-year retirement on a withdrawal rate that was tested on 30-year ones.

The first five years decide most of it

We split the retired paths by their average real return in the first five years of retirement:

Three out of four paths that ran out had below-median returns in those first five years. This is sequence-of-returns risk: a bad stretch right after you stop working forces you to sell a shrunken portfolio to pay the bills, and later good years work on a smaller base. Bengen’s 1994 withdrawal-rate paper (PDF) and the Trinity Study both found the same thing in historical data.

What actually raises the odds

We re-ran the scenario changing one thing at a time. The calculator has no input for part-time income or for “keep working after you hit the number”, so for those rows we used a copy of its simulation loop with that one option added:

Cutting spending gets you out three years sooner but doesn’t make the money last longer: the earlier you retire, the longer the portfolio has to survive. Part-time income helps, but $15K covers only the first few years and the effect fades. The biggest single lever is the boring one: more years of saving and fewer years of withdrawing.

Where this scenario doesn’t hold

• Healthcare in the US. A household retiring at 43 buys about 22 years of private insurance before Medicare. Adding $14K a year to retirement spending, with the same $1M target, drops survival from 61% to 37%. Budget it into the target from the start.
• Dependents. $40K of spending is one person. Children add years of higher spending and usually lower savings.
• Social Security. The simulation ignores it. Benefits from 62 or 67 cover part of the spending for the last 20+ years, which raises real-world survival above these numbers.
• The model itself. Returns are normally distributed with 15% volatility, roughly an all-stock portfolio. A bond allocation lowers both volatility and expected return; real markets have fatter tails than a normal curve.

What to actually do

1. Put your own income, spending and savings into the FIRE calculator, and read the survival rate, not just the target.
2. Set the withdrawal rate to 3.5% and see how many years it adds. That’s the price of moving survival from 61% to the low 70s.
3. Add pre-Medicare healthcare to your retirement spending before you trust any number.
4. Decide in advance what you’ll do if the first five years go badly: part-time work, lower spending, or both.
5. For the horizon question in more depth, see why early retirees need more than 25× expenses.