The answer may surprise you
A thought came to me a few weeks ago. I was daydreaming and I started thinking about what my salary was worth to me.
I've been an English teacher for seventeen years now, eight of them full-time at my current university job. I've worked hard, changed jobs when opportunities came along, pushed myself (becoming the English education advisor for Miyagi after 3.5 years of ALT experience was a real stretch), and been very lucky.
My current take home pay is just under 5 million yen (after tax and social security deductions).
But what is that worth to me?
One way to look at it is to consider what you would need to replace it.
It is easy to calculate how much you need to make 5 million yen a year from investments. Choose a safe withdrawal rate (4% is widely used, I prefer 3% for an additional safety margin), then the calculation is easy.
To get 4% you need 25 times your target annual income.
To get 3% you need 33 times your target annual income.
So to replace my current salary I would need about 165 million yen.
Luckily though, I don't need to replace my entire salary because I don't need all of it to have a comfortable life. I save at least 1.5 million yen a year now (see my annual plan for details), so I only need to replace 3.5 million yen to have the same lifestyle I enjoy now.
At a 3% withdrawal rate I would need about 116 million yen.
That's still a bit steep.
Let's assume that I could keep working part-time: teaching privately, writing, or running this blog (hah!*). Even working in a convenience store or cafe could be an option. If I could bring in 100,000 yen a month doing this, I'd only need 2.3 million yen, which would require investments totalling 76 million yen. My wife could also work (let's say for 50,000 yen a month), so we'd need about 56 million yen in investments.
Still huge, but much more doable than 165 million ;)
We're also eligible to receive a pension. I'm going to assume that we will get a pension, but it will be half the size of the current one (if we retired now on our full pension allowance we'd get about 240,000 yen a month, so call it 120,000 yen a month). This means we only need 260,000 yen a year, so about 9 million yen in investments.
So the future looks manageable. I was a bit surprised to see these numbers. The most surprising one is that my job is worth 165 million yen to me. Should probably stop grumbling about it ;)
How about you? Have you run your numbers? Feeling more confident now?