Financial Independence Guide: Retire Early in Your 40s
The path to Financial Independence is simple, but not easy. Photo by Galen Crout on Unsplash.
Reading time: 9 minutes
Disclaimer: I am not a financial adviser, and this content is for informational and educational purposes only. Please consult a qualified financial adviser for personalized advice tailored to your situation.
Author’s note: I’ve been pursuing Financial Independence since 2019 and writing data-driven, research-backed articles on this blog for the past 3 years—sharing tools, lessons, and real-world case studies to help others retire early on their own terms.
🌿 Thanks for reading The Good Life Journey. I share weekly insights on money, purpose, and health, to help you build a life that compounds meaning over time. If this resonates, join readers from over 100 countries and subscribe to access our free FI tools and newsletter.
Start Your FI Journey: Motivation & First Steps
Before we dive into the numbers, let’s be clear: by the end of this post you will understand the simple math behind pursuing Financial Independence—including how much you need to retire and how long it will take you to get there (see teaser figure below).
You’ll also begin to answer: How do I retire early on a normal salary? Is retiring at 55 realistic? and other commonly-asked questions regarding the FIRE (Financial Independence, Retire Early) movement.
But before the formulas and savings rates, it’s important to start with why—because without the right motivation, no plan will stick.
Screenshot of our free, subscription-based Financial Independence Calculator. Implementing a 50% savings rate can shorten your career by multiple decades, but having more moderate savings rates will also allow you to retire very early.
Why FI Matters: Break Free from the 9‑to‑5 Trap
Most people sleepwalk through their careers—trading time for money, energy for status, and their healthiest years for a retirement that comes too late. In fact, according to recent polls, 77% of workers feel disengaged and unfulfilled in their jobs—many of them are “quiet quitting”. For many, work is a necessity that is disconnected from purpose or joy. Overworking is literally one of the top regrets of the dying. On top of this, the truth is that our healthy years in retirement aren’t as long as most people imagine. What if there were a better way?
Financial independence offers flexibility: on a normal salary you can work less, retire early—even in your 40s—and redesign life outside the 9‑to‑5 grind. In fact, with the right savings rate and lifestyle choices, retiring by age 45 is more achievable than many think. At its core, its about building enough financial security to reclaim your time—and live with more intention, freedom, and energy.
Whether your dream is to retire early, take a two-year mini-retirement, travel the world, raise your kids on your terms, start a small business, or pivot into a career you actually love—pursuing FI puts you in the driver’s seat to redesign the life you want to live.
Some may love their current job but still crave more balance. Many feel stuck, plagued by the “Sunday scaries”—or outright burnout—and dream of walking away from their corporate 9-to-5. Some simply have a long list of interests they’d love to dedicate more time to.
Whatever your motivation, pursuing FI gives you back what matters most: agency. You decide when to retire, how to spend your days, and what kind of fulfilling activities to pursue in early retirement—both in retirement and on the way there.
To understand the power of Financial Independence, we also need to question the norms that keep us working so much in the first place. Why do we continue to collectively work such long hours, despite the massive productivity gains enabled by modern technology over the last century?
Shouldn’t the goal of technological improvements be to make our lives easier, so that we may toil less and have more time to enjoy a meaningful live? This question is becoming especially relevant with the rise of AI, which is already reshaping how we work and think about financial independence.
Despite the incredible gains in productivity over the last century, humans continue to overwork. Photo by Tima Miroshnichenko on Pexels.
The Hidden Drivers of Overwork: Status, Consumption & Identity
We’ve never been more productive as a species. Thanks to technological change and economic growth, the average worker today generates more output in fewer hours than ever before. And yet—here we are, working just as much or more. Why?
As we explored in Why We Still Work So Hard, a major reason—among other factors—is status. Nowadays, we aren’t just working to meet our needs, we also work to signal success and to keep up with others—with friends, colleagues, neighbors, and social media. Much of this signaling follows predictable status games that quietly shape how we spend, work, and define success. One of the issues is that our status-related consumption has kept up or even outpaced our productivity gains.
It’s these consumption patterns that keeps us stuck on the work treadmill. Generally, most of us chase higher salaries throughout our career only to then upgrade our lifestyles—instead of buying back our time. This is the essence of lifestyle inflation, which quietly stretches your FI timeline even as your income grows.
As anthropologist James Suzman highlights, traditional hunter-gatherer societies typically worked just 15–20 hours a week to meet their needs. While they had fewer possessions than we do, they lived with more time, less stress, and a deeper connection to the world around them.
In contrast, modern societies—despite astonishing technological progress—seem to have strayed from what truly matters. We've traded simplicity for busyness, and in the process, confused productivity with purpose.
Modern work—at least in developed countries—is no longer about survival, but about identity and cultural inertia. But what if we could rewrite that script?
Santorini, Greece. In our recent analysis, Greece was one of the 5 top retirement hotspots in Europe. Photo by orva studio on Unsplash.
Money, Time & Value: Why Every Euro Spent Costs Time
Your time is your life. Each hour you spend working for money is an hour of life energy you’ve traded away and can’t get back. This is a central insight from Vicky Robin’s classic Your Money or Your Life.
We’re generally encouraged to see the connection between how we earn, how we spend, and how we feel. But when you zoom out you realize that every financial decision is also a life decision.
Spending $75 on a pair of shoes might cost you several hours of work—linking spending decisions directly to life energy. Upgrading your car might cost an entire year of life. We should be much more intentional about our spending—we’re not just spending money, we are spending our life.
On the flip side, reducing your spending not only translates to requiring a smaller nest egg upon retirement, but it also means you get there faster, because you are able to save and invest more each month. As we’ll see further on, small changes in monthly spending can enable you to retire substantially earlier than what is the norm (70+ in many countries).
The power of pursuing Financial Independence is that you stop spending (and working) blindly, and start instead to make intentional trade-offs between your time and consumption. When you fully internalize how this relationship works, money becomes a tool—not the goal. Freedom, not consumption, becomes the metric of success.
This shift in perspective naturally leads to the core math behind FI—and how changing just a few key variables can transform your timeline.
What does your early retirement look like? Photo by Matthieu Da Cruz on Unsplash.
* Further Reading – Article continues below *
The FI Equation: Expenses, Savings Rate & Time
At its core, Financial Independence is driven by a few key variables: how much you spend, how much you save, and how long you can maintain that balance. The more you save and the less you need, the faster you reach your FI number, also known as the Financial Independence “Crossover Point”.
The FI equation is very simple, but its consistent implementation is not. You’re not just battling against the math, but also against habits, lifestyle expectations, and social norms. Lifestyle creep is one of the biggest of these silent forces—eroding savings rates and delaying financial independence without you noticing. The good news is that once you internalize the fundamentals, you can start designing your own timeline to financial freedom.
Your savings rate is the single most important lever on your path to FI—especially if you’re asking: How to retire early on a normal salary? The savings rate can be defined as the percentage of your net take-home pay that you consistently save and invest. Using a Financial Independence Calculator, you can model your early retirement timeline based on income, expenses, and expected investment returns.
The key takeaway, as illustrated below in Figure 1, is that your savings rate (%) has a non-linear relationship with the timeline to reaching financial independence. Lowering your lifestyle costs helps you save and invest more and reduces the total investment needed for retirement. This dual effect is what creates the non-linear relationship.
Figure 1. Non-linear relationship between savings rate and years to Financial Independence (FI). Graph from Networthify’s early retirement calculator.
To increase your savings rate, first you need to know your numbers. That means tracking how much you earn and how much you spend. It may sound tedious, but so does spending 10+ years unnecessarily in a job you’re not passionate about.
Don’t worry, this practice becomes a habit very quickly and—once you have a system set in place—should not take more than 30 minutes at the end of each month. Tracking your expenses and savings rate gives you clarity, helps you spot waste, and shows where small changes can make a big difference. Without tracking, you’re flying blind.
Once you’ve tracked your income and expenses, plug them into a Financial Independence Calculator (see Figure 2) to estimate how many years it will take to reach your FI goal, based on your current lifestyle. In the following section we provide a step-by-step example.
Even if that timeline says 20, 30, or 40 years, don’t be discouraged yet. Remember what we said about the non-linear relationship between savings rate and timeline to FI—just increasing your savings rate by 5-10% percentage points makes a tremendous difference.
Little by little, you will find ways to accelerate it over time, especially once you see the results of smart decisions made consistently. If you struggle with adjsuting your savings rate, I recommend following the 1% Savings Method. Before you know it you will have reached your first $100K invested—and everything starts to snowball in your favor from there.
Cappadocia, Turkey. For some, the idea of continuous traveling while they’re still young and healthy is their motivation for Financial Independence and early retirement. Photo by Mesut Kaya on Unsplash.
Calculate Your FI Number: Use the 4% Rule & Beyond
Your Financial Independence or FI number represents the amount of money you need invested to support a desired lifestyle indefinitely without relying on earned income from a job. A common starting point is the popular 4% rule (of thumb).
To calculate your FI number and see how much you need to FIRE (Financial Independence, Retire Early), divide your annual expenses by 0.04 (or multiply by 25). If your annual spend is $40,000 you’ll need $1M invested to finance your lifestyle in (early) retirement. This assumes a balanced portfolio generating enough returns to sustain you through retirement while adjusting for inflation.
The 4% rule arose from analzing historical returns data over 30-year periods, but we shouldn’t see it as gospel. Depending on market conditions, personal risk tolerance, retirement timeline, and other factors, some prefer using more conservative Safe Withdrawal Rates (SWR)—for example, 3.5%.
Notice though that the more conservative SWR you use, the larger portfolio you will need to target and the longer it will take to get there. There’s no free lunch here. The same holds for your asset allocation—holding a higher share of bonds can bring peace of mind but also quietly extends the years it takes to reach full financial independence.
There is substantial nuance related to the chosen SWR. For the sake of this introductionary article, we’ll continue using the 4% approach in our calculations, but be aware that there is an updated “4.7% rule” and that other withdrawal strategies exist that allow for less conservative SWR—for instance, the Variable Percentage Withdrawal (VPW) or a withdrawal strategy that uses guardrails.
Case Study: Mapping a Real FI Timeline with Our Calculator
Let’s use a case study with a realistic salary scenario to demonstrate how someone on a $90K net salary could retire early. We’ll use our Financial Independence Calculator—free for newsletter subscribers—and assume an individual or household with the following characteristics:
Current Age: 25
Net Annual Income: $90,000
Current Portfolio Value: $0
Current Annual Expenses / Expenses in Retirement: $80,000
Annual Return on Investment: 7%
Safe Withdrawal Rate: 4%
Current Country: United States
Considering a $90,000 annual net salary, and that they invest into low-cost, diversified index funds with a 7% real return, they could hit their $2,000,000 FI number ($80,000/0.04) in approximately 40 years at age 65 (Figure 2). This is definitely not a very exciting starting point—our baseline scenario. But now is when the magic happens.
Figure 2: Baseline timeline to Financial Independence as per our free, subscription-based FI Calculator. Under the assumptions of this case study, the worker would reach Financial Independence in about 40 years at age 65. Not great.
The individual in our case study feels overwhelmed by this timeline. She doesn’t enjoy nor find meaning in her corporate 50+ hours per week job, and acknowledges that spending most of her paycheck each month isn’t buying her sustained happiness either.
After devouring Your Money or Your Life she decides to pursue Financial Independence and sets about tracking and optimizing her expenses—to align them intentionally with what truly brings her joy, and eliminate what doesn’t.
At first, she cancels unused subscriptions and looks at other low-hanging fruit savings potential. In just one afternoon, she manages to reduce her budget by $5,000 annually ($415 monthly) and reruns the numbers in our calculator.
Shockingly, she realizes that with these changes that don’t affect her lifestyle in a meaningful way, her timeline to Financial Independence has been reduced by nearly 7 years.
7 years less to work just by tackling some wasteful spending—how can that be? Her savings rate went from 11.1% to 16.7% and her target portfolio from $2M to $1.87M. Again, of all the levers to early retirement, the savings rate is by far the most important one to focus on.
Figure 3: Timeline to Financial Independence as per our free, subscription-based FI Calculator. By adjusting the monthly spend slightly, the working career just got reduced by nearly 7 years.
From here, it all depends on how motivated she is to accelerate her timeline. If she embraces frugality further, implementing a 25%, 35%, and 50% savings rate would render FI timelines of 27.1, 21.4, and 14.9 years. We already saw the shape of the non-linear relationship between savings rate and time to retirement (Figure 1).
One of the most powerful features of these tools is that they help you uncover your low-hanging fruit—those recurring costs or lifestyle upgrades that quietly delay your freedom. Cutting or optimizing just a few of them can shave years of your path to retirement. Suddenly, reducing a $150/month expense isn’t just about saving cash, it could mean retiring 2-3 years sooner.
With this information, we’d better make sure our spending and budgeting is aligned with what truly brings us joy—and be ruthless with the rest. Even if you’re starting from zero, this process builds momentum. And as your numbers improve, so does your motivation. FI becomes less of a dream and more of a timeline.
The best way to implement a desired savings rate is to follow a pay-yourself-first budget. Even small changes in lifestyle on a middle-class income make early retirement realistic, not just a fantasy.
You don’t need to budget obsessively or live like a monk—just build a simple system to track where your money is going. The first expense of a pay-yourself-first budget is your investments. The moment your salary comes in, be sure that your first expense is “paying yourself first”, transferring the funds to your monthly investment contributions. The rest of your budget you can spend as you like.
Bali, Indonesia. Looking to retire abroad with FIRE? Check out our ranking of the best places to retire early in Asia.
How Geographic Arbitrage Can Cut Years Off Your Retirement Timeline
This is certainly not required (and not for everyone), but one of the most underutilized levers in the FI tool kit is geographic arbitrage (including seasonal geographic arbitrage)—moving to a location with a lower cost of living while maintaining the same income or investment returns. For some, retiring abroad can not only be more enriching, but you can gain access to a better or more relaxed lifestyle.
Have you considered retiring in Europe (e.g., Portugal or Spain), Asia (Thailand or Malaysia), or Latin America (Mexico or Costa Rica)? Reducing your retirement expenses by 30-50% in some of these locations can have a dramatic impact on your retirement timeline.
Our Financial Independence Calculator also provides you with what your retirement timeline would look like if you considered a different retirement destination (see screenshot of interactive map below).
Figure 4: Screenshot of our free, subscription-based Financial Independence Calculator. The tool uses cost of living data and returns how the retirement timeline changes (in years) depending on where you wish to retire.
In the example above, implementing a 35% savings rate meant a 21.4 year timeline to retirement in the US. But, if the retirement destination were Portugal, Mexico, or Thailand that same timeline would be reduced to 16.1, 13.7, 13.2 years, respectively. Remember that these timelines consider a starting net worth of $0 net worth—some readers may be substantially ahead already.
Geographic arbitrage isn’t a one-size-fits-all. For some, it might mean moving to a lower cost-of-living area in your country. For others, it might mean moving halfway across the globe. What matters is that it’s intentional and align with how you want to design your life.
If you’re considering retiring abroad, check out our Retirement Relocation Tool. It’s a data-driven dashboard that ranks over dozens of countries using real-world indicators like cost of living, healthcare quality, safety, political stability, pollution, climate, English proficiency, and more (see Figure 5).
The tool lets you adjust your preferences—for example, prioritizing healthcare or avoiding regions with high natural disaster risk—and instantly filters countries that match your ideal retirement criteria. Whether you’re dreaming of beaches in Portugal, mountains in Mexico, or a peaceful village in Thailand, this tool helps you shortlist the best-fit destinations so you can retire not just early—but well.
Figure 5: Screenshot of the Retirement Relocation Tool (at the moment available for PC only).
Choose Your FI Path: LeanFIRE, FatFIRE, Coast & Barista
There’s no one-size-fits-all journey to Financial Independence. Some choose LeanFIRE—a more extreme version of FIRE. This FIRE flavor focuses on minimalism, simplicity, and low-cost living. It’s for those who value freedom over luxury—and are willing to embrace a more frugal lifestyle in exchange for an earlier exit from work.
At the other end of the spectrum we have FatFIRE—the pursuit of FI with a higher spending target. Think upper class lifestyle—extensive travel, fine dining, etc. Of course, this path requires a larger portfolio, but for some, working those extra years are worth it.
In between, we have more flexible pathways—CoastFIRE and BaristaFIRE. With CoastFIRE, you front load your savings and investing early on and then stop investing altogether once you’ve reached a certain point. After this, the portfolio will continue compounding in the background until retirement.
BaristaFIRE adds the idea of working part-time in low-stress jobs while your portfolio continues to grow. It’s semi-retirement, not a full escape—and for many, it’s the sweet spot. I recommend you to check out our dedicated articles where we dive deeper into some of these alternatives paths to Financial Independence.
These flexible paths show that Financial Independence isn’t just about numbers—it’s about optionality. When life or markets shift, having the freedom to adjust spending, location, or part-time work can make your plan far more resilient. That adaptability and resilient mindset can protect your early retirement years without delaying them—something we explore in depth in our article on flexibility as a shield against market risk.
FI Is About Purpose: Live with Meaning Beyond Income
For many pursuing FI, housing decisions can be just as influential as savings rates—especially in countries where home prices have skyrocketed—outpacing wage growth. In many countries, renting can often accelerate Financial Independence by keeping capital flexible, while others may choose to gain property exposure indirectly through REITs (Real Estate Investment Trusts) rather than traditional homeownership.
Money isn’t the end goal—it’s the means to a more fulfilling life. The true value of pursuing FI is that it gives you back your most precious resource: time. You can decide to spend it with your loved ones, focus on your health, pursue creative endeavors, give back to your community, or explore meaningful ways to spend your time in early retirement.
One of the key misconceptions of FI is that it means never working again. Instead it’s about not being forced to. For some, that realization also shifts the goal—from sprinting to the finish line toward redesigning work and life today, a slower and more sustainable approach I explore in “the middle path to FI”.
Indeed, many in the FIRE community choose to continue working, but on their terms: they launch their passion projected, teach, mentor, or build things they care about without the pressure of needing the paycheck.
Whether you choose or not to continue working, FI is a launchpad, not a finish line. It allows you to ask yourself deeper questions, like “What do I truly value?”, “What kind of life do I want to lead?”, “What is my philosophy of life?” The answer to these questions often reveals that meaning and connection are much more than consumption or playing the rat race.
What does your Financial Independence pathways look like? Photo by NEOM on Unsplash.
What To Do Now: Tools, Planning & Resources
Now that you understand the principles behind Financial Independence, it’s time to take the first step. Start out by calculating your own FI number using our FI Calculator Tool—you’ll get a clearer picture of your path, even if you’re just getting started.
Next, try plugging in different current and monthly spendings in retirement to model how your retirement timeline could be shortened. You’ll likely discover opportunities to speed it up with just a few small adjustments. Remember: this is your journey—customize it to suit your lifestyle and goals.
If you’re feeling overwhelmed or skeptical, that’s normal. There are lots of myths about FI floating around—some of which may be holding you back.
If you’re looking for more in-depth material to further optimize your timeline, visit our Start Here page to identify what areas you still need to uncover on your Financial Independence journey.
We’d love to hear from you. Are you just starting your journey to Financial Independence, already on the path, or somewhere in between? Share your story in the comments—what motivates you, what challenges you’ve faced, or what freedom means to you.
Enjoyed this post? Check out our article on the importance of low cost, internationally diversified index fund investing or the updated 4.7% rule of thumb as a Safe Withdrawal Rate in retirement.
🌿 Thanks for reading The Good Life Journey. I share weekly insights on money, purpose, and health, to help you build a life that compounds meaning over time. If this resonates, join readers from over 100 countries and subscribe to access our free FI tools and newsletter.
Check out other recent articles
Frequently Asked Questions (FAQs)
-
Early retirement is possible even on an average income if you're intentional. By tracking your spending, saving a higher percentage of your net pay, and investing in low-cost index funds, you can steadily build wealth. Many people reach Financial Independence in their 40s or 50s without earning six figures.
-
A common rule of thumb is to multiply your annual expenses by 25. If you spend $40,000 a year, you’ll need about $1 million saved to retire safely using the 4% rule. Your personal FI number depends on lifestyle, location, and retirement goals.
-
The fastest path to early retirement is increasing your savings rate and reducing lifestyle inflation. Combine this with consistent investing and consider geographic arbitrage—moving somewhere with lower costs—to supercharge your progress.
-
Yes, retiring at 55—or even in your 40s—is realistic if you save and invest intentionally over time. Many in the FIRE movement reach their goals through frugal living, smart financial choices, and avoiding lifestyle creep.
-
There’s no universal “best” age, but many who follow the FI path aim to retire between 40 and 55. Your ideal retirement age depends on your savings rate, annual expenses, and how much you value time over work or consumption.
-
Your FI number is your annual expenses divided by your chosen safe withdrawal rate (e.g., 4%). A calculator can project your timeline to FI based on income, savings rate, investment returns, and spending, helping you plan effectively.
-
Yes, retiring early on a $90K salary is achievable with strong savings habits. If you consistently save 25–50% of your income and invest wisely, you could retire in 15–25 years depending on your expenses and lifestyle choices.
-
Retiring in a lower-cost country can significantly reduce your FI number and shorten your timeline. Many people cut expenses by 30–50% by relocating to places like Portugal, Thailand, or Mexico—without sacrificing quality of life.
-
The 4% rule suggests you can safely withdraw 4% of your retirement portfolio annually without running out of money. It’s a widely used benchmark to estimate how much you need to retire, but should be adapted to your risk tolerance.
-
Start by recording all your spending each month—either with apps or a simple spreadsheet. This builds awareness, helps identify waste, and makes it easier to boost your savings rate. Clarity is the first step to financial control.
Join readers from more than 100 countries, subscribe below!
Didn't Find What You Were After? Try Searching Here For Other Topics Or Articles:
