If you wish to obtain monetary independence, each funding we make serves one objective: to purchase again our time. Time is infinitely extra beneficial than any object, expertise, or luxurious. Given how quick our lives are, we should always use our cash not simply to build up extra, however to purchase freedom. Upon getting freedom, you possibly can extra simply craft the life that you really want.
And when instances are good, as they’re now, with roaring inventory market returns and danger property surging, it’s value pausing to ask: How a lot time have my investments truly purchased up to now yr?
If you can begin desirous about your monetary good points when it comes to time saved from doing issues you do not need to do, not simply {dollars} earned, you’ll start to see your monetary independence journey in a way more tangible and motivating manner.
Let’s undergo a sensible train to calculate how a lot time your funding returns have purchased you, whether or not you’re already retired or nonetheless grinding towards monetary freedom.
The Philosophy: Changing Returns Into Time
Earlier than diving into numbers, it helps to reframe what your investments characterize. Each contribution to your portfolio is a deposit into your future time financial institution. Each greenback earned in returns is a slice of freedom – time you not have to spend working for another person.
However many people by no means translate this connection. We have a look at share returns, internet value trackers, or steadiness will increase with out ever contemplating the human facet – the hours, months, or years of labor these returns may save.
Right here’s the framework:
- Select your ultimate secure withdrawal charge (SWR) in retirement: 3 – 5% is advisable.
- Examine your annual funding returns to that SWR.
- Convert the distinction into years (or fractions of a yr) of time purchased or misplaced.
We’ll strategy this from two views:
- The Retiree, who’s already residing off investments and different revenue like Social Safety.
- The Employee, who’s nonetheless on the trail to monetary independence.
For The Retiree: How A lot Extra Can You Spend?
We all know from many years of analysis (e.g., the Trinity Examine, Invoice Bengen, and so forth) {that a} 4% withdrawal charge has traditionally allowed retirees to maintain their portfolios for 30+ years with out working out of cash. If you happen to earn any supplemental revenue (Social Safety, pension, part-time work), your secure withdrawal charge (SWR) can rise to five% and even larger.
However let’s simplify. Suppose you’ve retired and also you’re residing completely off your investments. You’ve budgeted to withdraw 4% per yr. What occurs when markets surge?
Let’s run some numbers.
| Annual Portfolio Return | Protected Withdrawal Charge | “Additional Years” of Retirement Gained |
|---|---|---|
| 8% | 4% | 1 yr |
| 12% | 4% | 2 years |
| 16% | 4% | 3 years |
| 20% | 4% | 4 years |
In case your portfolio returns 8% and also you’re solely withdrawing 4%, your investments successfully grew by one yr’s value of spending. A 12% return offers you two additional years of retirement funding, and so forth.
Extra optimistically, you may say that an 8%, 12%, 16%, or 20% portfolio return successfully buys you two, three, 4, or 5 years of annual residing bills, respectively.
In case you are an lively investor making an attempt to outperform the S&P 500, as I’m, you can too calculate how a lot further time you have got gained by outperformance. For instance, I famous in my 2025 evaluate that by outperforming the S&P 500 by roughly 5%. The outperformance share isn’t large, however the time saved is. I successfully purchased somewhat multiple yr of normal residing bills for my household of 4.
It is a highly effective psychological mannequin as a result of it turns summary returns into one thing deeply tangible: time.
What To Do With The “Time Surplus” (Funding Outperformance)
Now that you simply’ve “purchased” further years of retirement, you have got a couple of choices:
1) Spend extra within the coming yr.
Improve your withdrawal charge barely – say, from 4% to five% – and benefit from the fruits of your self-discipline. Perhaps you lastly transform that kitchen or take a household journey to Cambodia and Vietnam.
For these of you on the FIRE path, being intentional about budgeting for enjoyable and occasional splurges is essential. In case you are at all times disciplined about saving and investing for the long run, it’s possible you’ll by no means depart sufficient area for enjoyment within the current. Finally, you’ll doubtless die with a surplus of capital, thereby losing a lot of the time and stress you spent accumulating that capital while you had been youthful.
Most retirees err on the facet of being too conservative. Regardless of the “4% rule,” many retirees solely withdraw 2–3% as a result of they’re afraid of working out. I’m a type of early retirees who instituted a 0% withdrawal charge since 2012 due to scars from the international monetary disaster and a need to develop my household. However by actively quantifying your surplus years, you achieve the emotional permission to really spend and luxuriate in life.
2) Construct a bigger monetary buffer.
Preserve your withdrawal charge the identical and roll that surplus right into a buffer for future bear markets. You’ll thank your self when a down yr comes alongside and you’ll proceed spending confidently with out promoting property at a loss.
Nevertheless, all for the sake of whole monetary safety, you would possibly get hooked on constructing buffers on your monetary buffers. If you happen to by no means cease constructing buffers, then you’ll have failed at consumption smoothing.
One signal of intelligence is with the ability to craft your ultimate life. There are many folks on the market who’ve sufficient, however who nonetheless cannot break away from a suboptimal job or life as a result of yet one more yr syndrome that by no means ends.
3) Reinvest for legacy objectives.
If you happen to already really feel content material, contemplate reinvesting any surplus on your youngsters or your favourite causes. You can construct a custodial funding account, match your youngsters’s Roth IRAs, or arrange a donor suggested fund for charitable giving. Compounding time for future generations is likely one of the most beneficiant presents you possibly can depart.
To hedge towards an unsure future, I invested $198,000 of my dwelling sale proceeds into Fundrise Enterprise to realize publicity to the AI increase for my youngsters. If AI performs nicely over the subsequent decade, my personal AI investments will doubtless do nicely too, and assist my youngsters launch. And if AI seems to be overhyped, at the least my youngsters should still profit from higher job alternatives in a world formed by AI.
Adjusting for Market Cycles
When returns decline or flip detrimental, the framework works in reverse.
Suppose your portfolio grows solely 4% in a given yr. If you happen to withdraw 4%, you’re basically flat. In case your portfolio declines 4%, you have got successfully misplaced a yr of time. However it’s truly worse than that, since you nonetheless have to fund the present yr’s bills, that means you have got successfully misplaced two years. In different phrases, you have got borrowed time out of your future.
Though this sounds discouraging, it’s also regular. Down years are baked into long run market averages. Each the 4% Rule and the extra versatile 5% Rule already account for corrections and bear markets. What issues most is monitoring your cumulative surplus or deficit over time.
A easy spreadsheet will help you visualize how a lot time cushion you have got constructed over time and whether or not you’re forward or delayed. Alternatively, you need to use a number of glorious retirement planning instruments, equivalent to Boldin and ProjectionLab.
For The Employee: Measuring How A lot Time You’ve Saved
Now let’s flip to the accumulation section, for these of you continue to working towards monetary independence.
Roughly 70% of staff report being disengaged from their jobs, that means most would retire sooner if given the selection. If that’s you, then your main mission is to transform as a lot of your revenue and funding good points into saved time from working as potential.
Let’s use the traditional 60/40 portfolio because the inventory / bond asset allocation retirement portfolio benchmark. That is the asset allocation Invoice Bengen used for retirees to give you the 4% Rule within the first place. The extra you possibly can beat the typical historic return of 8% for a balanced 60/40 portfolio, the quicker you possibly can exit the rat race.
Right here’s the best way to measure your progress.
Step 1: Examine Your Returns to the 8% Benchmark
Begin by evaluating your portfolio’s annual return to an 8% long-term benchmark.
In case your investments earn 12% in a yr, subtract the 8% benchmark and also you’re left with a 4% surplus. Assuming a 4% withdrawal charge, that surplus represents one full yr of residing bills. In different phrases, you’ve successfully purchased your self one additional yr of freedom or one yr much less you have to work.
In case your portfolio returns 16%, that’s an 8% surplus, which interprets into two years of residing bills saved. You didn’t simply develop wealth, you meaningfully compressed your working timeline by 24 months.
On the flip facet, in case your portfolio solely returns 4%, you’re working a 4% deficit relative to expectations. That shortfall represents one yr of misplaced time, as your portfolio did not develop sufficient to assist each future spending and progress towards monetary independence.
Step 2: Translate Surplus (or Deficit) Into Time
Right here’s the straightforward rule of thumb: Each 4 share factors of surplus equals one yr of residing bills saved.
When you suppose in time as an alternative of percentages, the maths turns into intuitive:
- 4% surplus = 1 yr saved
- 2% surplus = 6 months saved
- 1% surplus = 3 months saved
- 8% surplus = 2 years saved
Likewise, deficits work the identical manner in reverse.
This framework helps you admire the worth of even modest outperformance. A couple of additional share factors in a very good yr don’t simply pad returns, they will translate into complete years of reclaimed life, particularly when compounded over time.
Simply remember the first rule of economic independence: do not lose tons of cash. If you happen to quit your good points and lose a lot of cash, you’ll finally sacrifice large time to get again to even.
Step 3: Alter Danger and Technique Based mostly on Your Want to Work
Your portfolio shouldn’t exist in isolation. It ought to replicate your power stage, danger tolerance, and how for much longer you truly need to work.
If you happen to’re burned out and near your monetary independence quantity, contemplate dialing down danger. Locking in freedom issues greater than squeezing out additional returns. Upon getting sufficient, the aim shifts from maximizing wealth to preserving time.
If you happen to’re nonetheless energized and luxuriate in what you do, sustaining, or selectively growing, danger for a couple of extra years can develop your security margin and purchase much more optionality.
If you happen to’re behind, essentially the most dependable lever isn’t taking extra funding danger, it’s growing revenue. Job-hopping, negotiating raises, or constructing facet revenue will virtually at all times transfer the needle quicker than making an attempt to constantly beat the market.
Keep away from the gambler’s mindset of “doubling right down to catch up.” That strategy usually destroys capital and prices much more time. You’ll be able to’t reclaim freedom by taking reckless dangers by margin buying and selling and so forth. In the long term, self-discipline, not desperation, is what buys your life again.
Constructing A Private “Time Ledger”
To make this extra concrete, construct a Time Ledger spreadsheet that tracks:
- Beginning portfolio worth
- Annual return (%)
- Surplus or deficit vs. 8% benchmark
- Equal years (or months) of time saved or spent
- Cumulative time steadiness
For instance:
| 12 months | Return | Surplus vs. 8% | Time Gained/Misplaced | Cumulative Time Saved |
|---|---|---|---|---|
| 2025 | 12% | +4% | +0.5 years | +0.5 years |
| 2026 | 16% | +8% | +1 yr | +1.5 years |
| 2027 | 5% | -3% | -0.375 years | +1.125 years |
Seeing your “time account” compound over time supplies large motivation. It transforms investing from an summary numbers sport into one thing deeply human: gaining management over your life.
Saving Time Is The Final Goal
Everybody’s FI journey is totally different. Life throws fixed curveballs – well being points, household additions, job loss, pandemics, market crashes. It’s inconceivable to foretell all of them. However constantly working the numbers and pondering in time offers you readability and management amid uncertainty.
Most individuals don’t measure progress in time. They don’t have a plan for when to dial again danger or the best way to translate returns into way of life enhancements. They simply preserve accumulating, usually with out realizing they’ve already “gained the sport” or finally will at a a lot quicker tempo than anticipated.
However in the event you’re studying this, you’re not common. You’re deliberate about your funds, inquisitive about optimization, and keen to suppose otherwise. Understanding your true danger tolerance can also be about estimating how a lot time you are keen to lose to grind again your losses.
I’ve been jotting down my ideas on Monetary Samurai since 2009, however I began desirous about escaping company America a decade earlier in 1999. The 5:30 a.m. – 7 p.m. work hours had been brutal, and I knew I could not survive for 20+ years. The one largest difference-maker was shifting from a cash mindset to a time mindset. As soon as I started seeing investments as time purchased, not cash earned, my braveness to reclaim my life by leaving work grew.
Don’t simply preserve accumulating for accumulation’s sake. Use your monetary good points to purchase again extra time with household, extra time for creativity, and extra time to reside life in your phrases.
In the future, the bull market will finish. It at all times does. When that occurs, you’ll be glad you transformed at the least a few of your paper good points into actual freedom. Time you possibly can by no means lose is the very best asset of all of them.
Reader Questions
- How a lot time have your latest funding returns purchased you?
- Are you spending sufficient of your “time surplus” or hoarding it out of concern?
- What steps may you are taking in the present day to speed up your journey towards time freedom?
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