When the dessert cart rolls around after dinner, difficult decisions must be made.

“If I eat the tiramisu… then I won’t have room for gelato*… And what is this? A complementary serving of limoncello!?”

In economics parlance we might call this gastrointestinal dilemma the opportunity cost; When we choose one option, we lose any potential gain or enjoyment from alternatives.

A couple recent articles highlighted the financial opportunity cost of not working, either short term for raising children or long term for (early) retirement. These articles inspired me to recalculate the opportunity cost of our own decisions.

The Center for American Progress evaluated taking a few years off to raise children, and concluded that you should work instead, because parenting has zero financial value (and on those extra difficult days, maybe even negative value ;) ) Sounds like progress to me.

The Finance Buff discussed how early retirement is the ultimate luxury purchase.

I’ll buy that ;) When we decided to retire in our 30s, we chose to forego the income we could earn in our 30s, 40s… 80s…

After nearly four years of early retirement, this cost already exceeds $5 million.

More, More, More!

I had a pretty good thing going, financially speaking.

I already had the corner window office, where I could lounge in my giant leopard print bean bag chair and enjoy the small nature preserve outside my window. It even had room to park my bicycle next to the wet bar.

A promotion was likely in the coming months, and perhaps another after that. It was even suggested this could be immediate if I would only reconsider my resignation. A good friend now receives 6-figure bonuses and an even more generous stock package after his latest promotion. Or I could have responded to interest at other companies and earned even more, plus a healthy sign on bonus.

I regularly flew around the globe in Business Class, stayed in 5 star hotels, and ate world class meals on expense accounts, all while meeting with CEOs, CTOs, Vice Presidents, and other experts in their fields. All of those frequent flier miles and hotel points would surely have been worth a hefty sum.

I often leveraged business trips for discount vacations. Once when I had a work trip to Taipei, we also booked Winnie a flight with miles. She went a week earlier to visit friends and family, and afterwards we spent Christmas and New Years Eve on beaches in Koh Samui, Thailand. Our total cost was close to zero.

I walked away from years’ worth of stock options, and the stock has more than doubled since (related, perhaps?) Had I continued to work, I could have exercised these options for at least $400,000.

And of course, our cost of living has increased substantially. Rather than continuing to contribute 70-90% of my salary to new investments each year, we’ve spent nearly $200k. All of our dividends and interest have been spent rather than reinvested, and I even sold a little stock when we were in the baby factory.

All together, with spending, salary, bonus, stock, and airline & hotel points, our net worth is at least a million bucks less than if I had continued working. Of course Winnie would have to go back to work as well.

More, more, more! It never gets old

“More, more, more!,” it never gets old.

Value of a Dollar

People do interesting things for a million bucks: assassination, drug smuggling, marriage, sacrifice of values and soul… so $1 million must be a pretty big deal.

An extra million would allow us to spend $40k more per year (4% rule), about 80% more than we spend now.

Since we are already living our dream life, I’m not even sure where we would begin to spend more.

Others have offered helpful spending suggestions:
– We could buy our dream house (sounds likes a nightmare!)
– We could live in the Bay Area (wow, you must really hate me)
– We could fly 1st class (we sometimes do this now)
– We could get a yacht (this is already in our plan)
– We could buy a few BMWs every year and throw them away (h/t TFB. But I like the idea of burning fat stacks of cash more)
– We could hire staff to fulfill our every need (managing staff sounds like a full time job!)

Why are you just standing there?! Get back to work!

Why are you just standing there?! Get back to work!

Other than the boat, none of these things are remotely interesting. The marginal value of more dollars is basically zero. In practice, we would invest this surplus in the stock market as we do with the rest of our portfolio.

By the time we reached normal retirement age, this extra $1 million would have grown to more than $5 million, assuming a 7% annual return. When we look at the opportunity cost of retirement, it isn’t just today’s dollar that we choose to forego. It is also all of the future income that dollar could earn.

Value of Time

It’s nice to know how much this little holiday has cost so far. I guess.

But bean counting is only one side of the evaluation. How do we determine the value of our time? People like to say that time is money, but they are two completely different currencies.

The choice isn’t just whether to have more money, it is whether or not to sell years of your life to have that money. What are your remaining days worth? How many days do we even have? Unless the value of your time is zero, the opportunity cost evaluation is incomplete.

During these past four years, I’ve had more naps and played more guitar than during the previous 20 years combined. Economic value = zero.

I’ve traveled slowly through numerous countries, completely free of work baggage or schedule limitations. Economic value = 0.

We’ve spent countless hours together as a family. Economic value = 0.

I’ve studied subjects that are most interesting and inspiring (and sometimes financially rewarding), completely independent of profit motive or career needs. Economic value = 0.

Freedom = priceless.

Recently we were parading through the Prague Castle and came across a nice man resting in the relative cool of a stairwell. There were no escalators or AC when this place was built 1,150 years ago, and the heat and exertion had obviously taken a toll. At age 70, this was probably his last International holiday. How many dollars would he trade to have the energy and stamina he took for granted in his 30s?

15 months ago our son was born, and I’ve witness first breath, first steps, and first words. Being constant companions continues to be a great privilege. Certainly not all parents would see this as a positive thing, but how many dollars would many fathers trade for another chance to play ball with their young boy?

(Thank you Harry Chapin, who died much too soon at the age of 38, the same age I retired.)

We can always trade time for more dollars. Maybe one day the reverse will also be true.


Four years ago I asked myself, “Do you want to work another four years for an extra $1 million?”

“$685/day is decent money”, I replied. “But is isn’t super model income. It won’t change your life. Frugal choices early in life enabled compound interest to do its thing, so now you can do yours.”


The concept of enough is critically important.

If you don’t have enough, you have no choice. You work or you don’t eat.

If you can’t (or won’t) grasp the concept of enough, there is no choice. The quest for more rules all. (“He who dies with the most toys wins.”)

But for someone with enough to fund their desired lifestyle, the relationship between time and money is completely transformed. Frugal choices early in life allow you to buy freedom at a discount. (This seems to be particularly annoying to head hunters.)

If I continued to work**, sure, we might have more money. I might also be dead.

Instead, we chose freedom. And there will never be a bill. No payment must be made. No bill collector will come calling.

Our only cost is our fairly modest yet luxurious travel lifestyle of $40k/year or so, which is why opportunity cost is my favorite kind of cost.


4 years ago I walked out of the office for the last time. Had I continued to work instead, we would have at least $1 million more than we do now. Just compounding that to retirement age would exceed $5 million. That is the opportunity cost of not working, a real luxury.

But what is the value of time? Unless it is zero, this math is incomplete.

Once you have enough saved and invested to fund your desired lifestyle, the relationship between time and money is completely transformed. More money changes life very little at that point, while time and freedom change everything. Economic concepts like opportunity cost become little more than philosophical musings, with the same price tag.

There is no need to spend the rest of our lives filled with regret, pining over some old paycheck. Instead, our remaining days are for living in abundance, with the occasional difficult decision about what to have for dessert.

* Admittedly this is a bad example. As everyone knows, there is always room for gelato.

** Dear headhunters. I’m available for a CEO position with a golden parachute clause, a seat on the board of directors with $100k+/hour income and annual meeting in Hawaii, or a position in Congress with a lifetime pension even if I resign after the first day in office.

How much More $ would it take to keep working after FI?


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