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An Extra Dollar a Day For the Rest of Your Life

A simple question popped into my head at the 2022 version of The White Coat Investor Conference. How much more would I need to have saved up and invested to spend an extra dollar a day indefinitely?

What spurred this question? A packet of Planters Spicy Nuts and Cajun Sticks. The meeting had a generous food budget, and in addition to hearty breakfasts and delicious lunches, we also had snack breaks, and this snack mix was some of the best I’d ever had.

That got me thinking. How much bigger would my nest egg have to be to enjoy a little bag of this nut and sesame stick concoction every day guilt-free? Well, at 310 calories, it’s not exactly a guilt-free treat, but you can substitute whatever healthy or unhealthy small indulgence that costs about a dollar a day.

An initial online search told me that a dollar a day should cover it, although I could see via CamelCamelCamel that the 72-pack could sometimes be had for under $40, and I eventually bought them in bulk at just over 50 cents apiece.

 

 

The Less Than $64,000 Question

 

This is a math problem, and it’s a pretty easy one to solve.

We’ll start by using the 4% rule of thumb developed by William Bengen, confirmed by the Trinity Study, and now followed by millions of retirees with sizable nest eggs.

The idea is that you should save 25 (which is 1 divided by 4 percent) times as much as you plan to spend in a year when retired. When invested in a reasonable allocation of diversified stocks and  bonds, the odds of running out of money within 30 years are quite low, and you’re more likely to end up with more money than you started with.

Now, if we want to add the mini-splurge of a dollar-a-day deliciousness that can be found in a little blue Planters pouch, we need to save up enough to afford to spend another $365 a year.

How much is that? Using the 4% rule, it’s $365 x 25 = $9,125. If we want to be more conservative to better ensure we’ll never, ever lose the ability to snack on those spicy little nuggets, we can shift to a 3.33 withdrawal rate and multiply $365 x 30 to get $10,950.

In other words, if you want to spend an extra dollar a day in retirement, you’ll want another $10,000 or so saved and invested. That works out to a 3.65% withdrawal rate, which makes perfect sense given that a normal year has 365 days.

 

Now, saying you need an extra $10,000 to afford the daily taste treat ignores the fact that you’ll probably spend a bit less on other food items, because adding 310 calories of salty snacks a day without making any other adjustments is bound to shorten your life expectancy.

It can be argued that a shorter life expectancy actually increases your likelihood of success with your designated safe withdrawal rate because the money won’t need to last as long, and you would not be wrong, but I can’t recommend taking deliberate steps to decrease longevity as a wise strategy for a “successful” retirement.

Perhaps I should have framed this with how much one needs to save to afford three servings of free-range, organic, grass-fed alfalfa sprouts a day, but if I’m being honest, I don’t snack on that. Also, no such thing exists, and if it did, Whole Foods would sell it for way more than a dollar.

 

$10,000 Equals a Dollar a Day and Why That Matters

 

Now that we’ve established that those planning on a withdrawal rate of 3.33% to 4% of their retirement nest egg need about $10,000  to spend another dollar a day, let’s talk about the implications.

 

It’s Easy Mental Math

I was so pleased to discover this nice, round number.

If it takes $10,000 to spend an extra dollar a day, it’s easy to figure that $100,000 gets you another $10 to spend every day, and $1,000,000 is worth $100 a day when using what’s widely considered to be a safe withdrawal rate.

Several years ago, long before we started flirting with double-digit inflation, I figured our post-retirement life would cost us in the neighborhood of $220 a day. Today, that number is probably in the $250 to $300 a day range.

Using the newly discovered mental math, I know that a nest egg of $2,500,000 to $3,000,000 should be adequate to allow for that kind of spending without violating the aforementioned 4% rule of thumb.

 

It’s Achievable

When you realize that you’ll want at least a few million dollars to retire and a quick check of your pockets and account balances leaves you a few million short, it can be quite daunting to conceptualize getting from here to there.

You have to start somewhere, though, and having a net worth of $10,000 in the black will give you that first dollar a day. Soon, you’ll have $100,000 ($10 a day for retirement) and seeing the ongoing progress might make it easier to continue forging ahead.

 

It Puts Things in Perspective

When you reach your FI number and have a multimillion dollar portfolio invested in stocks, bonds, and perhaps real estate, you’re going to see some volatility, particularly in the stock allocation. If you have $1 Million in stocks that rise or fall 1% in a day (as is extremely common), that’s a $10,000 swing.

When you have a larger portfolio and you see 3% to 5% daily swings, which haven’t been all that uncommon, particularly since early 2020, that can be a mid-five-figure to six-figure change in the balance of your holdings.

Whether or not you decide to spend an extra dollar, ten dollars, or hundred dollars on any particular day, the whims of Mr. Market are going to be more impactful. And it’s not like you’re going to repeat that indulgence every day for the rest of your life, either.

 

The Power of One More Year

I’ve written before about what working one more year (or a series of them) can mean for your future. Having this $10,000 equaling a dollar a day helps you quickly understand what financial good that extra year or years can do.

If you can save and invest $10,000 a month, every month you continue working increases your future budget by a dollar a day. It also decreases the length of your retirement by a month, all else being equal.

I ended up working four to five more years in anesthesia after discovering that I had reached financial independence, and by the time I left medicine, I had developed this side gig of a blog that has continued to provide income. The combination of these two extra efforts have given me dozens of additional dollars to spend each day, and I have no regrets.

 

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Working Backward

 

Understanding that $10,000 is worth a dollar a day allows you to invert the math and equate your accumulated nest egg with a daily spend.

It’s difficult for many supersavers who spent decades accumulating wealth to switch gears and be comfortable spending more than they once did to enjoy that wealth. Ask me how I know.

If a retiree has, let’s say, $5 Million dollars, conceptually, they may understand that equates to the ability to spend $150,000 to $200,000 a year, but these are all big numbers, and they don’t help much with day-to-day decision making.

If you use the metric you learned today and realize that your $5 Million lets you spend $500 a day, you realize that it’s exceptionally rare that you do so, and you can probably afford to be more generous with yourself and others.

I should note that your spending should include all costs of living, whether borne that day or not, like monthly utility bills, taxes, food, shelter, healthcare, etc… but if your core costs add up to $100 or $200 a day, in this example, there’s another $300 to $400 to play with each and every day. That’s a lot of fun money one can use while still abiding by the 4% rule!

 

There you have it. Every $10,000 you have now can give you a dollar a day to spend for the rest of your life.

 



 

What small or large indulgences are you saving up for?

 

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8 thoughts on “An Extra Dollar a Day For the Rest of Your Life”

  1. I think what struck me most about this framing has nothing to do with my own situation, but rather contemplating what that means for people much lower on the income/wealth scale with say $50,000 in savings. That’s $5 a day, and not to be flippant about it but saying it out loud reminds me of those commercials where for just $5 a day you can care for an underprivileged child. Granted there is social security and working at Walmart and such, but it really drives home the meager existence available to those who haven’t been able to save well.

    Reply
    • Excellent framing, Jeremy. There is a large subset of the population that doesn’t have much savings to live on, so it’s what they earn by working or collect from Social Security and other government programs that covers their expenses.

      Best,
      -PoF

      Reply
  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  3. Just added a simple excel line to the monstrosity workbook.
    To spend X, you need N
    and
    You have N, you can spend X

    I like simplicity.

    Reply
  4. Just added a simple excel line to the monstrosity workbook.
    To spend X, you need N
    and
    You have N, you can spend X

    I like simplicity.

    Reply
  5. Leif,
    You sneak the taxes piece in there at the last paragraph, but it is important to point out that you are talking about having an extra $1 a day to SPEND – not at all the same as withdrawing a $1 from Traditional retirement plan for from savings that have capital gains. Your math in the first part would only apply to Roth accounts.
    ‘Cuz Taxes.
    Luckily you can find the treats for less than a dollar – so you will be okay!!!
    🙂

    Reply
    • Excellent point. The good news is that taxes can be quite low in retirement — it’s not uncommon for an early retiree to pay nothing at all in federal income taxes.

      That said, taxes need to be included as part of your annual expenditures when doing any safe withdrawal rate math, which is what this is.

      Cheers!
      -PoF

      Reply
  6. Leif,
    You sneak the taxes piece in there at the last paragraph, but it is important to point out that you are talking about having an extra $1 a day to SPEND – not at all the same as withdrawing a $1 from Traditional retirement plan for from savings that have capital gains. Your math in the first part would only apply to Roth accounts.
    ‘Cuz Taxes.
    Luckily you can find the treats for less than a dollar – so you will be okay!!!
    🙂

    Reply
    • Excellent point. The good news is that taxes can be quite low in retirement — it’s not uncommon for an early retiree to pay nothing at all in federal income taxes.

      That said, taxes need to be included as part of your annual expenditures when doing any safe withdrawal rate math, which is what this is.

      Cheers!
      -PoF

      Reply

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