25x Rule: The simple math for deciding whether or not you can quit working for good.

quit working 25x rule
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If you’re sick of your day job and dream of an early retirement, then what I outline below will be helpful for you to figure out if it’s feasibly possible yet. What might surprise you is that you could be closer to telling your boss to shove it than you think, depending on what you’re expectations are.

25x rule for retirement

The Road to Financial Independence (or, “FI” as the money nerds like to say)

The traditional route to FI (yes, I’m a nerd) based on the pioneers of the movement is to keep your expenses so low that not only can you save for retirement faster, you also commit to keeping expenses low for the rest of your life, so you can live on a smaller nest egg.

Here’s some easy math (the only math I’m capable of) to figure that out for yourself:

Financial indépendance (FI) is defined as having enough money saved so that your investments can cover your daily expenses to the point where you no longer have to work for an income.  The equation to calculate what that magic number is for you, is to multiply 25 times your annual expenses. So, if you’re someone who only spends 25K per year, then once you’ve reached $625,000 (25 x $25K) in investments, you can live off the proceeds of that figure and thereby kiss your cubicle life goodbye and sleep in till noon every day for the rest of your life.

Sounds good, right?

Well, that depends whether you’re cool living on 25K per year (adjusted for inflation) for the rest of your days which is a pretty meager income, even in the cheapest areas of the US. It would be impossible to live here in the SF Bay Area on that income, but even in Birmingham, Alabama or Youngstown, Ohio where you can still buy a single family home for $40,000, it would still be a stretch.

No vacations, no dining out, no shopping trips to the outlet malls and not a lot of wiggle room for the things that generally come up in life, like medical expenses or car repairs.

Basically, at this level, you’re committing to being poor, but well rested for the rest of your days.

The Good News

This equation doesn’t factor in any other possible income streams you may have, like pensions, social security or inheritances. It also doesn’t account for income you might make from any random jobs you could pick up in your post-retirement life. It’s just a standard baseline of what you could count on to cover your expenses, based on your current savings.

The Bad News

If you’re in your 40’s and your current nest egg wouldn’t afford you a roomy cardboard box at the rate of 25x, then you’ve got some work to do, but all is not lost. You can start right now by reducing your expenses and increasing your income to build that retirement account up. You can also think about a post-cube career that will afford you the ability to feel a little “retired-ish” without losing your income entirely.

The Important Takeaway

Clearly, the best time to start saving for retirement is when you’re still in the womb. The next best time is today, so don’t be discouraged if you’re not even close yet. With a little creativity, focus and determination, you’d be surprised how fast you can accumulate wealth.


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  1. The 25x Rule is a great rule of thumb for knowing when you want to quit for good, but as you mentioned that equation doesn’t factor in any other income streams. With a little bit of side income you could decrease how much you actually need to save and potentially reach financial freedom sooner. Great post 🙂