Original Article published 27 Jun 2025 in Financial Review – written by Lucy Dean

Building the wealth to retire early is one (huge) thing. But figuring out how you’re going to spend your time once you get there is a whole other matter.

After 31 years of senior banking roles in Australia, the US and the UK, Kathleen McDowell entered a state of “extreme fatigue” in 2020.

She wanted to do something new, and landed on real estate, but a year into her new career, she checked her financial position to see if she could afford to take a pay cut to continue with her new vocation.

To her surprise, McDowell had enough to retire there and then.

Today she estimates her net worth – including her primary place of residence on Queensland’s Sunshine Coast – at $4 million.

This realisation opened up a new world for McDowell. It meant she could wind up work, and she and her Australian partner moved from Arizona in the US to Queensland about a year ago.

“I thought, ‘How many more years in corporate would I have slaved away, doing something that I’d lost the joy of doing, simply because I didn’t know what my number was?’

“I was a budgeter, I knew exactly how much we spent each year, but I still never sat down and figured out, ‘How much longer do I have to do this?’”

Financial adviser Nicholas Block of ID Advice estimates that about 50 per cent of his clients have a goal of retiring early, or reaching a point where work is optional financially.

Proponents of the FIRE movement – or financial independence, retire early – aim to save as much as they can and invest the difference, with a goal of building up a large enough pool of funds to retire early, or make working optional.

Most people with these goals tend to be self-starters and strategic, says Block.

“It’s not necessarily about the income. It’s about the ratio between how much you earn and how much you spend,” he says.

FIRE numbers vary significantly between people, Block says.

“For one person, that could be $800,000 and for another it could be $4 million. It depends on how you’re willing to live.”

Naturally, a larger income makes it easier to achieve financial independence.

But regardless of the starting point, Block says nearly all people on the journey to financial independence will face these three questions:

1. How much do I need to retire?
2. What will I do when I leave work?
3. What’s my plan if my circumstances change?

Those who have achieved it can offer some advice on how to answer the securly questions.

How to find your FIRE number

Now happily retired, when asked about the biggest lessons she’s learnt, McDowell’s answer is this: know your numbers.

One of the most popular ways of calculating your FIRE number is to figure out how much your annual or ideal lifestyle costs are or will be, and from there, how big your investment portfolio needs to be to deliver that income.

For example, if you need $200,000 in income a year, then you may need about $5 million invested. That way, if you’re invested in a 60/40 portfolio which was earning at least 5 per cent a year, you’d be able to draw down 4 per cent annually ($200,000) without eating into the capital.

The big caveat with this model is that it’s too simplistic for young people, who face a wider range of variables in their future, says Block.

“Anyone can put together a spreadsheet that says, ‘If I have this much money, and I apply a nominal earnings rate of X, I should be able to retire at this age.’ But life isn’t that simple.

“The biggest hurdles to achieving FIRE are changing life circumstances. That’s the number one thing that can derail a plan. For example, having a kid, having something change in their personal life, or having their house flood or burn down – they’re the hurdles,” he says.

The solution to this has two parts. The first is simple but brutal: Do you need to retire at 35 or even 40? Or should you get a job that is less soul-sucking, or even brings purpose and meaning to your life?

“This isn’t just because of the marriage and kids question, but if you are able to achieve FIRE at 35, you’ve probably had a good income. But in 10 years, if you don’t want to be fully retired any more, then that’s 10 years you’ve spent outside of your industry, so you’re not going back to the same income as before [if you return to work],” Block says.

Consider whether you can make your job more flexible, or switch goals.

“There’s nothing wrong with trying to get to that goal of 35, but with a fiveyear sabbatical in mind.”

The other option is to drastically increase your FIRE number.

“The FIRE number is such a big part of the community. It’s something you can write down on your vision board and aspire to it. But there are risks in coming up with a static number – it requires you to work out compounding return figures, and I come across a lot of people using quite optimistic numbers,” he says.

“It’s not just the number, but also the idea that you’ll get 8 per cent a year, linearly. We know that doesn’t happen – there’ll be a negative 20 per cent year, and then a positive 20 per cent year – so things like sequencing risk comes into it, which can affect how you shift your portfolio in the years up to retirement.”

That’s not to say that having a FIRE number isn’t a worthy – or indeed necessary – part of hitting your goal, but rather that you need to be prepared to revise it, build in buffers and try to keep the door open to returning to work, particularly if you’re on the younger side.

Have a plan for how you’ll spend your time in retirement

Because McDowell’s family has split the last few decades between the US and Australia, their portfolio is largely invested in US ETFs.

She’s not invested in bonds, and is instead “all in” on stocks and property.

She and her partner own three investment properties in America. The properties, and their home in Australia, are mortgage free.

From that and their share portfolio, they derive an annual after-tax income of $145,000, which is enough to support the family. Her husband wants to work for the next five years until their 13-year-old daughter graduates from high school.

McDowell spends her time working on her family history project, and volunteering at an Australian wildlife hospital.

She also works on her blog, Live Richly, where she outlines the lessons of retiring early, and has returned to work about four hours a week. This is the second lesson she offers.

After she sold her real estate business, she and her partner went travelling before moving to Australia in late 2024. Once they stopped travelling, she felt the absence of work immediately.

“You just have a little bit of an identity crisis, partly because whenever you move to a new place, you meet people who’ll all say, ‘I’m so-and-so, and this is what I do.’ And I didn’t know what I did. It was all new to me, not being able to say, ‘I’m a real estate agent’ or ‘I’m a banker’.

“That’s when it hit me, ‘What are you doing? Oh my god, I don’t know’.”

Now she does a few hours a week for the new owner of her business, mainly working on pricing strategies.

Block believes this is a sensible strategy.

“The thing that reduces the risk [of running out] and also reduces the amount you need is the ability to work part-time. If you can be sure that you can cover your absolute baseline expenses through work, and anything that you earn through your investments cover your discretionary and holiday expenses, then your number is going to be so much lower.”

Don’t be a stock-picking hero, start small and keep it simple

Ashton Pereira, 32, achieved financial independence in 2024, with his wife Hannah and three-year-old son, Fred.

They live in Sydney, own their own home, and have around $2 million (outside of their home) invested in a portfolio mostly composed of ETFs, such as Vanguard’s global shares ETF and iShares’ S&P500 ETF. For diversification, they also have a smaller allocation to Vanguard’s emerging markets ETF.

From that, they can extract 4 per cent a year or $80,000. This covers their living expenses.

However, while the couple could technically stop working, they have chosen not to. “We still continue to work and earn income via our business because we enjoy it, and anticipate increased cost of living in the future – more kids for example,” says Pereira.

Pereira says they were able to achieve their FIRE goal quite early because he’d been investing a portion of his pay from the moment he got his first job as a finance graduate at a telco.

“We were always trying different side hustles to earn more, and when one finally had success and turned into a proper business for us to run, we invested all our time into it.”

Among the ventures Pereira tried were drop-shipping products and selling household goods imported from overseas on eBay, and running a small publishing business selling ebooks and audiobooks on Amazon.

Meanwhile, Hannah was making face masks and bath bombs, which they were able to turn into a successful business.

While minimising expenses and launching a business were key factors in their FIRE success, Pereira says one of his biggest lessons was to keep his investment strategy simple.

“We used to invest in individual stocks – mining, buy now, pay later and retail stocks – and tried to pick winners, which didn’t work out well for us.

Then, once we discovered ETFs, we saw more success and things became easy,” he says.

Travelling gets old pretty quickly (and don’t be afraid to rent)

Tim Guest, who lives in Western Australia, spent the first two years after he retired early travelling the world and “being a bit of a ratbag”.

He was 27 when his property portfolio (which now includes nine homes) allowed him to no longer have to work for an income.

But not long after that, he says he ended up “in a bit of a hole”.

“I was like, ‘Who am I? What’s my life about?’.”

He decided he wanted to teach other people how he achieved an early retirement and started an education business, Infinite Wealth.

“ I believe that what people are taught about money is fundamentally wrong. We’re conditioned into being consumers … and people rate how they’re doing financially based on how much money they make, but 50 per cent of people spend everything they earn.

“It’s about what you keep and how you put that to work. My strategy is more about, ‘How do we get you to a position where you’ve got a couple of million dollars behind you over the next 15 years, and then you’ve got about $100,000 in passive income, so you could retire if you wanted to’.”

He believes property is the best way to achieve this, but is also a firm believer in diversification.

“We typically recommend property first … because it gives you the ability to leverage money. If you want to buy $500,000 worth of shares, you typically need $500,000, but if you want to buy a property worth $500,000, you only need $80,000 or $100,000. So you can leverage your money into a larger asset base.”

Guest says that after 12 or 24 months of owning an investment property, the rent will likely go up. While most people would then use that to pay off that mortgage faster, he thinks they’re often better off putting that cash into super or index funds.

He also doesn’t think living in the home you own is a must.

“I’ve never lived in a house that I’ve owned. Primarily, the reason for that is the tax deductibility of the debt. Once you take into consideration the tax advantages, from a cashflow point of view, you’re much better off renting the same house that you would own.”

But it all comes back to purpose, he says.

“What people need to be happy and satisfied in life is a purpose, and if you don’t have a purpose life can get a bit hard.”