Welcome back to my series on the great retirement book The Retire Sooner Method: The 5 Secrets Behind America’s Happiest (and Unhappiest) Retirees.
So far we’ve had the following posts in this series:
If you missed any of those posts, you’re going to want to go back and read them before you read this one, since today’s post is a continuation of the others.
And to make things extra fun, I’ll be giving away a copy of the book at the end of each post in this series, so be sure to stay tuned and read to the end if you want a chance to win a copy.
And there’s more news as well…Wes Moss has agreed to do an interview with me about this book.
We’ll be talking in a few weeks, which gives ESI Money readers a chance to submit questions ahead of time. I’ll review the questions left in the comments on my posts and include some of the best ones in my interview with him.
So if there’s something you’d like to ask Wes about the book, retirement, or any of the ideas he discusses, leave your question in the comments below.
Today we’re going to continue learning about what it takes to get into the Money Green Zone.
Let’s get going…
Green Zone Income
The book now turns to point two in the Green Zone formula, which is income, with this:
The same Red, Yellow, and Green Zone pattern holds true for household income.
Americans earning less than $50,000 annually find themselves in the happiness Red Zone — 21 percent below the baseline. This makes intuitive sense: When you’re stretching every dollar just to cover basic expenses, it’s hard to feel secure about the future. You’re living paycheck to paycheck, retirement or not.
Those earning $50,000-$99,999 land in the Yellow Zone. At 3 percent above baseline happiness, you’ve achieved basic stability, but you’re not exactly living it up. You can cover your needs and maybe a few wants, but you’re still making trade-offs. Do I fix the car or take that weekend trip?
But here’s where things get interesting: Once household income crosses $100,000, happiness levels jump dramatically into the Green Zone. At $100,000-$149,000, we see an 11 percent boost in happiness. Push that income to $150,000-$199,000 and happiness peaks at 18 percent above baseline.
Remember that this research was conducted in 2025, so it has most of the inflation from the past several years baked into it.
And I agree again with these numbers.
We’ve always been over $100k income since I retired and we are certainly happy. And given that we spend $60k a year or so (other than giving and taxes), we could go a lot lower and still be fine.
We have also not started Social Security, so there’s that income source waiting on the horizon.
This is one of the nice things about building multiple streams of income before and during retirement. You create flexibility.
If one source declines, another can help. If markets are down, maybe you can rely more on rental income, business income, pension income, part-time work, or Social Security. If you don’t want to withdraw from your portfolio in a bad market, other income sources can reduce the pressure.
And psychologically, that matters.
I know the book lists “multiple income sources” as one of the core components, and I can see why. Even if the total income is the same, having several sources may feel more secure than relying on only one.
A retiree with $100k from one source might be perfectly fine mathematically. But a retiree with $100k from Social Security, a pension, rental income, dividends, and a small business probably feels more diversified.
That’s not just finance. That can be peace of mind.
Moss continues on this subject:
Just like with assets, there’s a plateau effect. Income above $200,000 actually shows a slight dip to 9 percent above baseline. This isn’t because money makes you miserable — it’s because at some point, you’ve got enough, and other factors (like time, health, and relationships) matter more than additional dollars.
I would have thought the income plateau would have kicked in well before $200k.
I mean, come one — that’s a boatload of money unless you live somewhere really expensive.
In Iowa, where my dad lives, you could buy a good part of the state for that! lol.
But again, this depends on location, taxes, housing, healthcare, lifestyle, and giving. A $200k retirement income in a high-cost area with a mortgage and high taxes is not the same as $200k in a low-cost area with a paid-off house.
Still, I think Wes’s broader point is right. Once income is high enough to support your lifestyle comfortably, other things start to matter more.
Time matters. Health matters. Relationships matter. Sleep matters. Freedom matters.
You can have a very high income and still be unhappy if your health is poor, your relationships are weak, your days lack purpose, or your schedule is not your own.
That’s true before and after retirement.
Moss then makes these final comments in this part:
For retirees, this translates to a practical target zone: Aim for $100,000+ in annual household income during retirement. This isn’t some arbitrary number but the empirical sweet spot where financial stress starts to melt away and happiness takes off. Remember, this is total household income from all sources: Social Security, pensions, investment income, rental income, and more — whatever combination works for you.
The beauty of understanding this income threshold is that it makes retirement planning more concrete. If you’re not exactly sure how much you will need once you stop working, you could focus on this more concrete level and ask, “How do I generate $100,000 in annual income?” Both questions are leading you down the right path, but finding this Green Zone gives you an actionable income level to target — one that puts you on the path to the financial freedom we’re all searching for.
Well, let’s look at it this way:
- If you have a two-worker household, you could earn $40k a year in Social Security.
- Then $1 million at 4% is another $40k.
So now you need to come up with another $20k.
That could come from a part-time job, rental income, dividends, a pension, consulting, a small business, or some other source.
For many people, that’s a much less intimidating target than trying to generate the full $100k from investments alone.
This is also why I like the multiple streams of income concept. It gives you more ways to solve the retirement income puzzle.
If you need some ideas, here are some of my streams of income from a few years ago.
Now, do I think everyone needs $100k to be happy in retirement? No.
Some need less. Some need more.
But I do think $100k is a useful planning benchmark, especially for married couples who want a comfortable retirement, some travel, some margin, and the ability to handle surprises without panicking.
The danger is treating it as a universal requirement. It’s not. The better way to use it is as a starting point.
Can you generate $100k? If yes, great. If not, can you still cover your planned expenses comfortably? If yes, also great.
The goal is not to hit a magical number. The goal is to build enough income to support the retirement you actually want.
Mortgage Payoff
The book now covers the third part of a Green Zone plan with this:
The third goal is to get within striking distance of paying off your mortgage — or knocking the whole thing out completely.
Our research showed that happy retirees either have their homes completely paid off or are within nine years of making that triumphant final payment. The relationship is clear: As “time to pay off mortgage” goes down, happiness levels tend to rise. Americans with 30+ years remaining to mortgage payoff are 19 percent less happy than the baseline, whereas those with 29 to 10 years left are in a neutral happiness zone. But once people reach 9 years or less, we enter another financial Green Zone and happiness levels rise dramatically.
Why does this matter so much? Easy: Housing is typically your largest monthly expense, often eating up 20-40 percent of your budget.
Eliminate that payment, and suddenly your nondiscretionary spending might drop by $25,000 or more per year. It’s like realizing you no longer have to carry the heaviest suitcase through the airport: Everything else instantly feels lighter, easier, and far less stressful.
This isn’t an issue for us as we haven’t had a mortgage since the 90’s, but if we had, I don’t think I would have felt great about retiring with a mortgage.
Retiring without one? That’s a HUGE benefit as (they say above) it cuts down an enormous expense.
If you retire with $100k income and no mortgage, you are LIVING LARGE (unless you live in NYC, San Francisco, and the like).
This is one of those issues where the math and the emotion both matter.
Mathematically, eliminating a mortgage reduces your required income. That means your portfolio doesn’t need to support as much spending. It may lower your withdrawal rate, reduce your sequence-of-returns risk, and give you more flexibility.
Emotionally, it just feels good. There’s something different about knowing your house is yours.
Yes, you still have property taxes, insurance, maintenance, utilities, and all the other joys of home ownership. But the mortgage payment is gone. That changes the monthly cash flow picture dramatically.
And in retirement, lower fixed expenses are golden. The fewer mandatory payments you have, the easier it is to adjust when markets fall, inflation rises, or life throws you a curveball.
That said, I can see keeping a mortgage if you meet certain criteria…which they mention now:
I’m not necessarily telling you to throw every spare dollar at your mortgage starting tomorrow. The math isn’t always that simple, especially in today’s mortgage rate environment. If you locked in a 3 percent mortgage rate during the pandemic’s golden days of cheap money, congratulations you basically borrowed money for free after accounting for inflation. In that case, you might be better off investing that extra cash in your nest egg instead of paying down a practically free loan.
However, if you’re carrying a mortgage at 6 percent, 7 percent, or higher, that’s a different story. Paying off a 7 percent mortgage is essentially giving yourself a guaranteed 7 percent return on your money, tax free.
Our mortgage rate was around 9% when we paid ours off and I looked at it the same way — as a guaranteed return. Why not take that? It was good money!
But if you borrowed at 3% I can see how you might want to keep the mortgage. According to Google, that’s about 20% of the people out there these days. So the majority of folks should look at paying off their mortgage in retirement IMO.
The math is pretty straightforward. If your mortgage rate is high, paying it off can be an excellent “investment.” A guaranteed 6%, 7%, 8%, or 9% return is hard to beat, especially when it also reduces risk and improves cash flow.
If your mortgage is at 3%, the math can favor investing instead, especially if you have plenty of assets, a stable income plan, and the mortgage payment does not bother you.
But math is not the only issue.
Some people are fine carrying a mortgage forever. It doesn’t bother them. They like arbitraging the low rate. They sleep well at night.
Others hate debt. They want the payment gone. They want the house paid off. They don’t want to send money to a bank every month in retirement.
Neither group is necessarily wrong.
This is where personal finance is personal again.
But I do think people should be very careful about retiring with a large mortgage unless they have the income and assets to support it easily.
NINE YEARS is a long time, and to think that’s where happiness starts to improve is interesting. I would have thought it was under five years if I had guessed.
Maybe nine years is the point where people can finally see the finish line. The balance has come down. The payoff date is real. The remaining mortgage no longer feels like a lifetime burden. Or maybe that’s just what the data showed.
Either way, the direction is clear: the closer people are to mortgage freedom, the happier they tend to be.
But even if you have a very low interest rate, there’s another reason why paying off your mortgage might be a good deal:
The psychological benefits are just as important as the mathematical ones. There’s something deeply satisfying about owning your home outright. You sleep better at night knowing that even if everything else goes sideways, you have a roof over your head that nobody can take away. That peace of mind! Priceless.
This is often underestimated but there is something pretty awesome about owning your home outright.
It’s a peace of mind that’s hard to explain to someone who doesn’t have it, but for those who do, it is almost priceless.
I know I’m glad we never had to even think about a mortgage payment for the majority of our marriage.
Plus, can you imagine how less wealthy we’d be if we’d paid 9% interest for 30 years? Yikes!
Paying off our mortgage early was one of the best financial decisions we made. I know the spreadsheet crowd will sometimes argue against early mortgage payoff, and in some situations they may be right.
But I have never regretted it. Not once.
Debt freedom changes how you see the world. It lowers your required income, reduces your risk, and gives you options.
And options are a big part of financial independence.
The 4% Rule
And finally we get to point #4 in the Green Zone list, starting with this interesting perspective:
In 1994, back when a “tweet” was just a bird sound and people thought Blockbuster video stores would be around forever, financial advisor William Bengen revolutionized retirement planning. He published research that answered the question that was keeping pre-retirees (and retirees) up at night: How much can I safely withdraw from my savings without running out of money? I think of this as, What’s the max amount I can take out, without running out?
Lucky for us, Bengen was an aeronautical engineer-turned-financial planner — a totally lovable nerd. After analyzing monthly historical market data going back to the Great Depression, he discovered something remarkable: Retirees who withdrew 4 percent of their initial portfolio in the first year of retirement and then adjusted that amount annually for inflation almost never ran out of money over a thirty-year retirement, as long as they maintained a certain stock-bond asset mix-even during the worst market conditions This became known as the “4% rule,” and three decades of additional research and real-world application have only reinforced its validity. It’s elegant in its simplicity, yet powerful in its application.
Now, after working with hundreds of retirees over the years, both Bengen and I, independently, adjusted the original withdrawal rate guidelines. While 4 percent works as a baseline, real-world experience shows that retirees can often sately withdraw 4.25 percent or 4.5 percent over time. In fact, Bengen recently upped his safe max withdrawal percentage to 4.7 percent. It may not sound like much, but even moving from 4 to 4.5 percent is a 12.5 percent boost to retirement withdrawals. That’s why I call it the 4-plus percent rule of thumb. It’s a range, a dynamic or even elastic withdrawal target zone rather than an amount that’s etched in stone.
Let’s bring this to life using our $1 million benchmark, the number that gets you out of the Red and Yellow Zones and into the Green. The 4+ percent rule of thumb means you can safely withdraw $40,000 in your first year of retirement ($1 million x 0.04 = $40,000). Add that to Social Security, pension income, or other sources, and you can see how you are well on your way to that $100,000 annual income target. The next year, you adjust your withdrawal amount for inflation, and this pattern continues throughout retirement, ensuring your income keeps pace with rising costs.
We have all probably heard of the 4% Rule prior to its inclusion in this book.
I know we talk about it often in the MMM forums, as it applies to so many retirement topics.
I still use 4% as a guideline, though I might want to start using 4.5% or even 5%, knowing that retirement spending also tends to drop as retirees get older.
The 4% rule is useful because it gives people a simple starting point. If you have $1 million, 4% says you can withdraw about $40k in the first year. If you have $2 million, that’s about $80k. If you have $3 million, that’s about $120k.
Simple.
But like most rules of thumb, it’s not perfect.
It depends on your asset allocation, retirement length, flexibility, inflation, market returns, taxes, spending patterns, other income sources, and whether you adjust spending when needed.
A retiree who can reduce spending during bad markets is in a very different position from a retiree who must withdraw the same amount no matter what.
A retiree with Social Security, a pension, and rental income is in a very different position from a retiree relying entirely on portfolio withdrawals.
A retiree spending heavily on travel in the first decade and much less later is in a different position from one whose expenses are steady forever.
So I like the idea of a “4-plus percent rule of thumb” as a range rather than a fixed law. That seems more realistic.
In real life, retirees are not robots. They don’t all withdraw exactly 4%, increase by inflation every year, and never adjust. They adapt. They spend more in some years, less in others. They respond to markets, health, family needs, and changing interests.
That’s why I think the 4% rule is best used as a planning guide, not a commandment.
What do you use as your safe withdrawal rate?
Summing It All Up
As we near the end of this chapter, they wrap up with this:
And there you have it. A $1+ million nest egg, $100,000+ in annual income, mortgage freedom within nine years, and the 4+ percent withdrawal strategy.
These four strategies work together to help build a solid financial foundation that can get you into the Green Zone-and keep you there. With this base in place, you’re ready to focus on what truly matters: living a happy, purpose-filled retirement.
Yeah, if you have all four of these, you’re in decent shape.
Actually, you’re probably in very good shape.
You have a meaningful nest egg, strong retirement income, a paid-off or nearly paid-off home, and a reasonable withdrawal strategy. That’s a lot better than where most Americans are.
My numbers when I retired (which was 10 years ago, so the goals were probably lower):
- $3.3 million in net worth (about $2.8 investable)
- $200k income (still had my rental units, real estate loans, and websites)
- No mortgage
- 0.0% withdrawal rate — hahahahaha
So that explains part of why we were so happy. 😉
But more broadly, I think this chapter gets the financial side of happy retirement mostly right. Money is not the whole game, but it is the foundation.
If the foundation is shaky, everything else is harder.
It’s harder to enjoy core pursuits when you’re worried about paying bills. It’s harder to sleep well when you fear running out of money. It’s harder to be generous when you feel financially squeezed. It’s harder to build a happy retirement when every decision is filtered through anxiety.
So yes, money matters.
But it matters because of what it enables: freedom, security, confidence, options, generosity, and time.
Once those are covered, the next question becomes, “Now what?”
And that’s where the rest of the book comes in.
Next time we’ll get into core pursuits.
For now, here’s a book giveaway!
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As I said above, I’m giving away a copy of The Retire Sooner Method on every post I do about the book. Here’s how to enter:
- Leave a comment below telling me what you liked best about this post, what you think you can use, or something you learned from it. Basically just share anything meaningful related to the content above (note: “please enter me to win” and similar comments will not be considered out of pure weakness! At least put a bit of effort into it!) This should be fun!
- Be sure to leave your email address when you leave the comment so I will know how to reach you if you win (the email address will not be visible to anyone other than me).
- The winners will be selected by me at random a few days after this post goes live. I’ll announce who wins in my own comment.
- I’ll email the winner, get their address, and send them a book from Amazon.
As with most giveaways, there are rules. Here they are.
Good luck!!!!
