The Many Paths That Lead to FI – A Case Study – Part 2

This is part 2 of the case study with Michael from Ireland, who is exploring alternative pathways to get to FI. If you have not read part 1, I recommend you do so before you read part 2.

Michael’s FI Lifestyle Goals

Before we get into the numbers, I’ll share some more background from my conversations with Michael.

Michael has set an €800,000 FI number for his family. He feels this would be enough to support his family of five following the 4% rule. However, this wouldn’t be a Fat FI lifestyle with a lot of extras.

A lot of families (the Money Flamingo family included) are in a similar situation – if you want to fully FIRE with kids, your FI number will be a lot higher than if you FIREd once the kids are out of the house. Accumulating a “Family FI” nest egg means that you’ll likely end up with excess funds in the long run when the kids have left home.

An elegant solution to this is to simply set a FI goal that is just enough to support a family but a decent amount for a couple without dependent children. Instead of fully retiring while you have kids to support, you just live a semi-retired life, supplementing the income from your portfolio by working part-time.

This is exactly what Michael is planning to do: “[…] I guess my full version of “retired” is really semi-retired.  I enjoy many aspects of work, but would just like to work less and with more meaning. […] Thus, my approach to handling early retirement with family is really to simply semi-retire – working 10 hours a week causally, spending time with my family and playing lots of golf.”

Michael is currently working full-time and manages to save €10,000 per month. He is due to finish a project soon and plans to cut back and slowly transition into a semi-retired lifestyle. He is very much looking forward to this lifestyle change. However, even after cutting back, he believes he will manage to save around €5,000 per month for the foreseeable future. He might reduce this amount if he feels it is too difficult to achieve and requires too many sacrifices.

Exploring Pathways to Financial Independence

Below we’ll explore different paths Michael could take from where he currently stands towards his FI goal:

  • “Full-throttle” FI – pushing on at his current speed until he hits his full FI number
  • Coast FI – what would happen if Michael just stopped saving and investing now?
  • The part-time path – moving to part-time work as planned and reducing his monthly savings amount (we’ll look at three different options for this path)

The numbers and assumptions

Current monthly savings: €10,000
Planned monthly savings from June 2023: €5,000
Current FI net worth: €359,408.00
Assumed annual investment return (inflation-adjusted): 5%

Option 1: “Full-Throttle” FI

Michael is currently 38 (almost 39) years old. Theoretically, he could simply push on, working full-time and saving €10,000 per month to reach FI in just under three years by age 41 (and around six months, to be exact).

In a recent podcast, Michael mentioned that he feels burnt out and that the financial progress his family has made over the last couple of years has come at a significant personal cost. So I don’t think this is a viable option for Michael at this stage of life. However, I have to say that the numbers and what is theoretically possible are pretty astounding with such a high monthly savings rate.

Option 2: Coast FI

What if Michael decided to do the complete opposite of the full-throttle option above and stopped saving and investing altogether?

Based on his annual return assumptions of 5%, he would reach full FI by age 55 through compound interest alone. Not bad, considering he wouldn’t have to save another cent to get there.

Michael loves working, so it is highly unlikely he would choose this option, but I think it is nice to see that age 55 is his baseline. Unless markets underperform for a really long time, he can look forward to reaching Full FI by his mid-50s. That’s pretty good when you think about how many people struggle to accumulate enough to retire even in their 60s and 70s.

Options 3-5: The Part-Time Path

Now that we’ve explored the two “extreme options” (full-throttle FI and not saving another cent and coasting) let’s look at some more realistic options.

The first one is his current plan – complete the project he is working on and then downshift in June 2023. This will see him cut his monthly savings by half – from €10,000 to €5,000 (€60,000 per year).

How soon will he reach FI with this plan? Let’s have a look. Note: I’ve used the “Die With Zero” spreadsheet for the calculations below.

Based on his return assumptions, he would reach full FI at age 43 (and again around six months, to be exact) – only two years later than with the “full-throttle” FI option above!

I find this incredible – he can literally halve his monthly savings amount, and it only costs him two years. If that’s not a good deal, I don’t know what is!

Note: The table shows €80,000 in contributions in the first year because Michael will be adding €10,000 per month for the first four months (using his January numbers as a baseline).

Michael mentioned that if a monthly savings amount of €5,000 becomes too difficult, he might reduce this amount further. Let’s assume he wants to cut his hours again one year into his new plan and only manages to save €2,500 per month (€30,000 per year) after that.

Let’s have a look at what this scenario would look like from an accumulation perspective:

Based on his assumptions, Michael would reach full FI at age 45 – four years later than with the “full-throttle” option. That’s still a fantastic result, in my opinion.

Now let’s look at one last option. What if, after the first year, Michael decided only to make small regular contributions of €1,000 per month (€12,000 per year)?

I think the result will surprise you:

In this scenario, Michael would get to full FI by age 47. Six years later than with the “full-throttle” option but eight years earlier than with the Coast FI option (Option 2 above)! This really shows the power of small contributions over time.

The Many Paths That Lead to FI

As you can see, there is more than one way to get to the finish line. We explored five possible scenarios, but in reality, the options are endless. I often write about the fact that Financial Independence is a spectrum. I think this case study illustrated this point quite well.

Also, all the options we explored assume Michael actually wants to reach full FI. I didn’t even get around to exploring what a “Die With Zero” scenario would look like for Michael. As you can see, there are so many options, and the whole FI concept is definitely not as binary as we tend to think.

Here is what the five options from above look like on a line graph:

We have one extreme – the “full-throttle” path – on the left (in red) and the other extreme (coasting without saving another cent) on the right (in dark blue). In reality, Michael will probably end up somewhere in between these two (like most of us).

The key here is that he has built a decent-sized portfolio already and will get to his end goal over time, regardless of what option he chooses. That’s the nature and power of compound interest.

As mentioned above, Michael’s FI baseline is age 55 – that’s when he should get to FI (based on his ROI assumptions) even if he doesn’t save another cent. Any additional contributions before then will bring his FI date closer, but at the end of the day, that is entirely optional. He will be fine either way. Michael could semi-retire tomorrow and simply decide to cover his expenses (which would probably mean only 1-2 days of work per week in his case).

One thing – the most important thing – that cannot be easily illustrated using a chart is the quality of life Michael enjoys along the path. We can only assume that any of the part-time options would mean a much higher quality of life and time freedom for him and his family.

Michael is very aware of the fact that working as hard as he does is not sustainable and that he is making huge sacrifices. This, combined with the acknowledgement that his real medium-term goal is semi-retirement rather than full early retirement, is very powerful. It allows him to choose from the full spectrum of options rather than feeling stuck on the “full-throttle” path like most people in the FI community.

I really look forward to following Michael’s journey and hearing about the decisions he makes along the way. If you want to follow along, too, I highly recommend you subscribe to his fantastic podcast.

Which path would you choose if you were in Michael’s situation?

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18 thoughts on “The Many Paths That Lead to FI – A Case Study – Part 2”

  1. I love the different possible strategies that Michael could take. I take issue with the assumptions around his potential investment growth. You usually build in growth of 5% over inflation. My Superfunds has various objectives for its differing fund options. The highest objective is their High Growth option, where the objective is 4% above CPI and it suggests only investing this aggressively over a 7 year time frame. If Michael is only a few years out from retirement, he might need to consider ‘safer’ investment choices, with less risk, to avoid retiring when there is a market slump. If he’s only semi-retired and 43 or so he has more options to keep working than the usual person retiring at 65, but I’d still be worried by overestimating the potential growth.

    • But they are Michael’s assumptions, not Tina’s?! Also remember he is in Ireland, I doubt he would care about the Aussie super system. TBH a lot of bloggers use 7% or more which seems to be the share market returns over the long term. Super has heaps of fees too, don’t forget that. I find 5% pretty conservative TBH.

      • Most of my portfolio is actually in property and our rental yields alone are well over 5%, so we are likely to beat that overtime if there is any increase in the value of the properties – which I suspect there will be, as there is a huge housing shortage here and the problem isn’t going away anytime soon.

        As it is, while I am aware of Super (I lived in Australia for a couple of years back in 07-08), I do have some funds in a pension here, which would have similar fees. So yes, I could be more conservative there – but I suspect my property returns should more than account for that overall.

        • Michael, you say ‘Rental returns are well over 5%’, but is that 5% over inflation? Inflation in Australia is running at 6-7%, what is it in Ireland? Property returns are of course subject to different considerations to the share market and there would be capital growth over time. Sounds like you are in a very good spot financially, and are poised to reap the lifestyle rewards.

        • Hi Michael, for your current FI net worth figure, what exactly is this made up of? i.e. equity in BTL, funds in SIPPs and ISA etc?

          BTW i’m up the road from you in Belfast, Northern Ireland. Love your podcast!



          • …for the benefit of the potentially uninitiated, SIPPs are what we call private pensions in the UK. ISAs are tax free savings. Embarrassingly, I don’t know the equivalent in the Republic of Ireland!

    • Hi Suzanne, I purposely didn’t include any details regarding Michael’s investments in order to avoid starting a ROI discussion. I guess that didn’t work. 🙂 Remember, the 5% is Michael’s assumption based on his specific investment and risk profile. If you feel safer doing your calculations with 4%, that’s totally up to you. The point of the case study was more to illustrate how the math works so people can apply the principles to their own situations.

  2. Love the chart at the bottom and the baseline idea. Would love to read more case studies like this, very inspiring. I am not on an enviable income like Michael but the strategies discussed seem universal. Thanks for sharing your fresh take on all things FIRE!

  3. Part of me thinks Michael should just make hay while the sun is shining. But 3 years is 3 years if you get hit by a bus at the end. Sorry to be morbid, I just read Die With Zero and your biggest risk article.

    • I think that’s why a semi-retirement option is best, time available to spend with the kids while they are young, but not away from the workplace, so able to continue earning at a good rate, in case investment earnings are less than expected, especially with high inflation. Michael hasn’t considered either how much extra outgoings might be as the children get older.

      • I think you are right Suzanne. Semi-retirement allows me to scale my income as needed, depending on our families needs. It does make sense while our kids are still financially dependent on us.

        Just as an aside, I did take out a massive life insurance product against myself, so even in the event of getting hit my a bus, I know my family will be financially OK. It was a bit of a hedge, just incase! Cost me about 28 euro a month for the policy – seemed like a fair trade off.

  4. From reading the first part of the article – I think Michael suffers from the two common FI Syndromes “How Much is Enough Syndrome” & “One More Year Syndrome”. I wonder if he will ever have the confidence to trust the numbers and just DO IT – in whatever form of FI IT is?

    • Hey Mark. My semi-retirement path is already in the early stages. Notice given on my one project already, so I will be scaling back this year. How far back I scale back, time will tell, but I definitely do want to start living a semi-retired lifestyle ASAP. I guess only time will tell.

    • I have to say I actually got the opposite impression. Michael is only just approaching Flamingo FI (400k) now, so I think that’s a reasonable milestone to wait for before semi-retiring with a young family. I’m certainly looking forward to following his journey and seeing what he ends up doing.

      • Hi Tina – this is a great point and it has been a number I have been watching for a while now. I am also hopeful to hit the 400k mark the same month that I start reducing my workload, so the timing is inline with hitting Flamingo FIRE!


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