Calculating my own "enough"

The idea that stuck hardest out of everything in my book notes wasn't from a book about investing at all — it was the bucket image from Enough?: aim for the return you actually need, not the maximum your risk tolerance permits, because those are different numbers and most people spend years optimising the wrong one. I'd nodded along at the argument without ever actually doing the arithmetic on my own numbers. So here it is, done properly, with illustrative figures rather than my real ones.

The first number: what "enough" actually costs per year

Say the honest answer, for a life that looks like the one I described answering Kinder's first question — the same job, four days instead of five, room for a sabbatical — comes out at £25,000 a year. Not a real figure, but a realistic stand-in, and the exercise only works if you're honest with your own version of it rather than borrowing mine.

The second number: what pot that actually requires

Apply a safe withdrawal rate to that annual figure and you get a target. At 4%, standard in most of the American FI writing: £625,000. At 3.5%, the more conservative figure RESET suggests for UK readers specifically: just over £714,000. The gap between those two numbers is entirely due to how much margin you want against a bad sequence of returns early in retirement — not a small consideration, and worth its own post, but not the point of this one.

The number that actually mattered

Here's the part of the exercise that's easy to skip past: that target is very obviously not the most money the maths would let me extract if I optimised for maximum risk tolerance instead of minimum requirement. A higher equity allocation, a higher withdrawal rate, a few more years of compounding — the "as much as possible" number is always bigger, and always available if I want to keep pushing for it.

Enough?'s actual argument is that most people never stop to ask which of those two numbers they're aiming at, and default into chasing the bigger one by not choosing at all. Once you've written down the smaller number honestly, the bigger one stops being obviously better — it's just more, purchased with years you don't get to spend twice.

Why the small number is the right one, for me specifically

This is where it loops back to the Kinder questions. My answer to the first one wasn't "escape" — it was room for a four-day week and a sabbatical, not the end of working entirely. The "enough" number for that life is meaningfully smaller than the number for never working again, and chasing the bigger figure anyway, out of habit or in case the smaller one turns out to be wrong, is exactly the trade Enough? is warning against.

The arithmetic above took about ten minutes. Being honest about the first line — what I actually want, rather than what sounds appropriately ambitious to want — took considerably longer, and is the only part of this exercise that was actually difficult.

Not financial advice — I'm not qualified to give any, and none of the figures above are my real numbers; they're illustrative, chosen to make the exercise concrete rather than to describe my own finances. Safe withdrawal rates are a modelling choice, not a guarantee, and the right one for you depends on assumptions this post hasn't tried to defend.