"Work-optional" is the phrase I hear most from people who just had a liquidity event. Not "retire" — most of them like working. They want the option. They want to know that if the job changes, or the company changes, or they just want a year on a sailboat, the money question is already answered.
I love this goal. And I've noticed that almost everyone chasing it is guessing at the number instead of calculating it. So let's calculate it.
The math part (it's short)
Work-optional means your portfolio can fund your spending indefinitely without new paychecks. The research on what a portfolio can sustainably pay out goes back to Bill Bengen's 1994 study — the famous "4 percent rule." Withdraw 4 percent of the portfolio in year one, adjust for inflation every year after, and historically a balanced portfolio survived every 30-year period he tested.
The modern refinements land nearby. Morningstar's latest State of Retirement Income work puts the safe starting rate at about 3.9 percent for a 30-year horizon at a 90 percent success rate, up from 3.7 percent the year before — it moves with market valuations and bond yields. And if you're 40 and want the money to last 50 years instead of 30, you should be more conservative still.
Why the liquidity event isn't the finish line
Here's where I watch plans go sideways. Someone's equity is worth $3M on paper and their work-optional number is $4M, so they hold everything and wait for the stock to close the gap. That isn't a plan — it's a bet, and the historical record on single stocks is rough. In J.P. Morgan's long-running study of U.S. stocks since 1980, roughly 40 percent eventually fell 70 percent or more from their peak and never recovered. A work-optional plan built on one ticker is a plan that can un-happen in a quarter.
The paper wealth becomes durable wealth the day it's diversified. Yes, that usually means realizing gains and paying tax. The tax is the toll on the bridge from "maybe rich" to "actually free." I've never met anyone who regretted paying it. I've met several who regretted waiting.
The four things people skip
- An honest spending number. Not what you think you spend — what the last twelve months of statements say you spend. Every work-optional calculation inherits its accuracy from this one input, and most people are off by 20 to 30 percent, always in the same direction.
- Health insurance. Your employer has been quietly paying for a plan that would cost you real money on the open market. This got harder recently: the enhanced ACA subsidies expired at the end of 2025, and KFF's 2026 marketplace data shows average out-of-pocket premiums up 58 percent and deductibles at record highs. Budget for it explicitly — for a couple in their 40s or 50s, it can easily be a car payment or two, every month.
- Sequence risk. The returns in your first few work-optional years matter far more than the average, because early losses plus withdrawals compound against you. This is why the plan needs a cash-and-bonds buffer — a couple of years of spending that lets you leave stocks alone in a bad market — not just a big equity pile.
- A reason to get up. Not my department, technically. But the happiest work-optional people I know optioned into something — a small business, board work, coaching, a build. The ones who only optioned out of something tend to drift back to work within two years anyway. Plan the life, not just the portfolio.
Where to start
Get the spending number. Multiply by 25 and by 30 to bracket the target. Compare it to what your assets would be worth after tax and after diversification — not the paper number. The gap between those two figures, and the schedule for closing it, is your actual work-optional plan.
That after-tax, after-diversification math is most of what I do all day. If you want your version of it on one page, that's what the diagnostic is for. Come say hi.
Sources
- Bengen, "Determining Withdrawal Rates Using Historical Data," Journal of Financial Planning (1994) — the original 4% rule research
- Morningstar — What's a Safe Retirement Withdrawal Rate for 2026? — their current 3.9% starting-rate estimate for a 30-year horizon
- KFF — 2026 ACA Marketplace Enrollment, Premiums, and Deductibles — the expiration of enhanced subsidies and what marketplace coverage costs now
- J.P. Morgan, "The Agony and the Ecstasy" (2024) — why a single stock can't be the pillar of a work-optional plan
This article is for informational and educational purposes only and is not investment, legal, or tax advice. Nothing here is a recommendation for your specific situation — talk to your advisor and your CPA before acting on anything you read. Fathom Wealth is the private wealth practice of Cameron Hunt, conducted through Savvy Advisors, Inc., an SEC-registered investment adviser. Tax figures cited reflect rules in effect for the year noted and can change.