If you wish to obtain monetary independence, each funding we make serves one goal: to purchase again our time. Time is infinitely extra useful than any object, expertise, or luxurious. Given how brief our lives are, we must always use our cash not simply to build up extra, however to purchase freedom. Upon getting freedom, you’ll be able to 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 belongings surging, it’s value pausing to ask: How a lot time have my investments truly purchased previously 12 months?
If you can begin eager about your monetary positive aspects 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 means.
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 signify. Each contribution to your portfolio is 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 take a look at proportion returns, internet value trackers, or stability will increase with out ever contemplating the human facet – the hours, months, or years of labor these returns might save.
Right here’s the framework:
- Select your ideal safe withdrawal rate (SWR) in retirement: 3 – 5% is really useful.
- Evaluate your annual funding returns to that SWR.
- Convert the distinction into years (or fractions of a 12 months) of time purchased or misplaced.
We’ll strategy this from two views:
- The Retiree, who’s already dwelling 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 rate has traditionally allowed retirees to maintain their portfolios for 30+ years with out working out of cash. In case you earn any supplemental revenue (Social Safety, pension, part-time work), your secure withdrawal price (SWR) can rise to 5% or even higher.
However let’s simplify. Suppose you’ve retired and also you’re dwelling solely off your investments. You’ve budgeted to withdraw 4% per 12 months. What occurs when markets surge?
Let’s run some numbers.
| Annual Portfolio Return | Protected Withdrawal Fee | “Additional Years” of Retirement Gained |
|---|---|---|
| 8% | 4% | 1 12 months |
| 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 12 months’s value of spending. A 12% return provides you two further years of retirement funding, and so forth.
Extra optimistically, you would say that an 8%, 12%, 16%, or 20% portfolio return successfully buys you two, three, 4, or 5 years of annual dwelling bills, respectively.
In case you are an active investor attempting to outperform the S&P 500, as I’m, you can too calculate how a lot extra time you may have gained via outperformance. For instance, I famous in my 2025 review that by outperforming the S&P 500 by roughly 5%, I successfully purchased a bit of a couple of 12 months of standard dwelling 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” extra years of retirement, you may have a number of choices:
1) Spend extra within the coming 12 months.
Enhance your withdrawal price barely – say, from 4% to five% – and benefit from the fruits of your self-discipline. Possibly you lastly rework 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 vital. In case you are at all times disciplined about saving and investing for the longer term, chances are you’ll by no means go away sufficient house for enjoyment within the current. Finally, you’ll probably die with a surplus of capital, thereby losing a lot of the time and stress you spent accumulating that capital once 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 kind of early retirees who instituted a 0% withdrawal price since 2012 due to scars from the global financial crisis 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 price the identical and roll that surplus right into a buffer for future bear markets. You’ll thank your self when a down 12 months comes alongside and you’ll proceed spending confidently with out promoting belongings at a loss.
Nonetheless, all for the sake of total financial security, you may get hooked on constructing buffers on your monetary buffers. In case you by no means cease constructing buffers, then you’ll have failed at consumption smoothing.
One signal of intelligence is having the ability to craft your preferrred 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 one more year syndrome that by no means ends.
3) Reinvest for legacy objectives.
In case you already really feel content material, take into account reinvesting any surplus on your kids or your favourite causes. You might construct a custodial funding account, match your children’s Roth IRAs, or arrange a donor advised fund for charitable giving. Compounding time for future generations is without doubt one of the most beneficiant presents you’ll be able to go away.
To hedge in opposition to an unsure future, I invested $198,000 of my residence sale proceeds into Fundrise Venture to achieve publicity to the AI increase for my kids. If AI performs nicely over the subsequent decade, my personal AI investments will probably do nicely too, and assist my children launch. And if AI seems to be overhyped, at the very least my kids should profit from higher job alternatives in a world formed by AI.
Adjusting for Market Cycles
When returns decline or flip destructive, the framework works in reverse.
Suppose your portfolio grows solely 4% in a given 12 months. In case you withdraw 4%, you’re basically flat. In case your portfolio declines 4%, you may have successfully misplaced a 12 months of time. However it’s truly worse than that, since you nonetheless have to fund the present 12 months’s bills, that means you may have successfully misplaced two years. In different phrases, you may have 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 may have constructed through the years and whether or not you’re forward or not on time. Alternatively, you should utilize a number of wonderful retirement planning instruments, reminiscent of 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 employees 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 positive aspects into saved time from working as attainable.
Let’s use the basic 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’ll be able to beat the typical historic return of 8% for a balanced 60/40 portfolio, the sooner you’ll be able to exit the rat race.
Right here’s the best way to measure your progress.
Step 1: Evaluate 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 12 months, subtract the 8% benchmark and also you’re left with a 4% surplus. Assuming a 4% withdrawal price, that surplus represents one full 12 months of dwelling bills. In different phrases, you’ve successfully purchased your self one further 12 months of freedom or one 12 months much less you must work.
In case your portfolio returns 16%, that’s an 8% surplus, which interprets into two years of dwelling 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 12 months of misplaced time, as your portfolio didn’t develop sufficient to help each future spending and progress towards monetary independence.
Step 2: Translate Surplus (or Deficit) Into Time
Right here’s the easy rule of thumb: Each 4 proportion factors of surplus equals one 12 months of dwelling bills saved.
When you suppose in time as a substitute of percentages, the mathematics turns into intuitive:
- 4% surplus = 1 12 months saved
- 2% surplus = 6 months saved
- 1% surplus = 3 months saved
- 8% surplus = 2 years saved
Likewise, deficits work the identical means in reverse.
This framework helps you recognize the worth of even modest outperformance. A couple of further proportion factors in a very good 12 months don’t simply pad returns, they will translate into total years of reclaimed life, particularly when compounded over time.
Simply remember the first rule of financial independence: do not lose tons of cash. In case you hand over your positive aspects and lose plenty of cash, you’ll in the end sacrifice great time to get again to even.
Step 3: Alter Danger and Technique Primarily based on Your Need to Work
Your portfolio shouldn’t exist in isolation. It ought to replicate your vitality degree, danger tolerance, and how for much longer you truly need to work.
In case you’re burned out and near your monetary independence quantity, consider dialing down risk. Locking in freedom issues greater than squeezing out further returns. Upon getting sufficient, the purpose shifts from maximizing wealth to preserving time.
In case you’re nonetheless energized and luxuriate in what you do, sustaining, or selectively growing, danger for a number of extra years can increase your security margin and purchase much more optionality.
In case you’re behind, probably the most dependable lever isn’t taking extra funding danger, it’s growing revenue. Job-hopping, negotiating raises, or building side income will nearly at all times transfer the needle sooner than attempting to persistently beat the market.
Keep away from the gambler’s mindset of “doubling all the way down to catch up.” That strategy typically destroys capital and prices much more time. You may’t reclaim freedom by taking reckless dangers via margin trading 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 stability
For instance:
| Yr | Return | Surplus vs. 8% | Time Gained/Misplaced | Cumulative Time Saved |
|---|---|---|---|---|
| 2025 | 12% | +4% | +0.5 years | +0.5 years |
| 2026 | 16% | +8% | +1 12 months | +1.5 years |
| 2027 | 5% | -3% | -0.375 years | +1.125 years |
Seeing your “time account” compound over time gives great 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 completely different. Life throws fixed curveballs – well being points, household additions, job loss, pandemics, market crashes. It’s unattainable to foretell all of them. However persistently working the numbers and considering in time provides 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 only maintain accumulating, typically with out realizing they’ve already “received the sport” or in the end will at a a lot sooner tempo than anticipated.
However should you’re studying this, you’re not common. You’re deliberate about your funds, interested by optimization, and keen to suppose otherwise. Understanding your true risk 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 eager 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 only greatest 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 maintain accumulating for accumulation’s sake. Use your monetary positive aspects to purchase again extra time with household, extra time for creativity, and extra time to reside life in your phrases.
At some point, the bull market will finish. It at all times does. When that occurs, you’ll be glad you transformed at the very least a few of your paper positive aspects into actual freedom. Time you’ll be able to by no means lose is one of the 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 might you’re taking at the moment to speed up your journey towards time freedom?
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