|
Getting your Trinity Audio player ready... |
Wondering if and how a master’s degree can accelerate your path to FIRE (Financial Independence, Retire Early)? Whether you’re weighing the pros and cons of further education or you already have a master’s and wonder how to use it to speed up your FIRE journey, we’ll explore how a master’s can be “worth it” for FIRE and beyond.
In this post, we answer the question: When and how can a master’s degree accelerate FIRE, and when does it slow it down? What might be better alternatives? And, we will share our surprising story of how our master’s degree helped us achieve our early retirement goals faster than we thought possible.
And that’s not just because our master’s leads to higher earnings (even though it does). It’s because further education shaped our path to FIRE in ways we hadn’t expected. You see, there’s a lot more to consider when deciding on further education if early retirement is your goal. Let’s explore the hidden details you may have overlooked (just as we did).
The Master’s Degree And Early Retirement
What’s the impact of obtaining a master’s degree on early retirement plans?
For those of you who are new to FIRE (Financial Independence, Retire Early), here’s a quick explanation. You achieve financial independence when you have enough money invested—whether in rental properties, the stock market, or other passive income streams—to cover your living expenses. Some choose to supplement their passive income with a part-time job.
The question is: How does a master’s degree fit into that world?
At first glance, it may seem pointless to invest time, effort, and money into getting a master’s degree and building a career only to retire early from it.
Some people assume that a master’s degree is only worth it for FIRE if it boosts your salary significantly, allowing you to save and invest more. But the impact of obtaining a master’s degree on early retirement goes beyond financial benefits—let’s explore how.
Is A Master’s Worth It For FIRE? How To Calculate It
When is a master’s worth it for FIRE – financially speaking? Let’s do a quick cost breakdown:
- What is the tuition cost?
- How much is the interest on student loans?
- What is your “lost income” while studying?
- How long does it take to recoup your education costs?
The break-even point can be calculated using this formula:
Example:
- Your master’s costs €50.000 (including tuition, debt payoff, and lost income).
- You expect it to increase your salary by €10.000 per year.
- Break-even period: 5 years.
If you plan to retire early within 10 years, the degree is “worth it”.
If your break-even period is 10 years or more, the degree may not be worth it for FIRE.
Opportunity Cost Of A Master’s: Should I Invest The Money Instead?
Opportunity cost refers to what you “lose” in order to buy what you want. Let’s say you want to invest in a master’s degree. But what if you invested that money instead?
Example:
- If you invest €50.000 (the cost of your master’s) at a 10% annual return, in 20 years, it could grow to over €250.000.
- Dividing €250.000 by 20, you get €12.500 per year.
So, your degree must increase your salary by more than €12.500 per year (over 20 years) to be financially “worth it”. If it doesn’t, investing that money instead might be a faster route to FIRE.
If you have access to employer sponsorship and your company pays for your master’s, it can change the equation. Also, if you can get your master’s degree almost for free. That was our case as we live in Europe. Here (in Germany) university is almost for free as it is in many other European countries.
When A Master’s Degree Might Delay FIRE
A master’s degree might slow down your path to early retirement in these situations:
- It adds significant debt, slowing your ability to save and invest
- It offers minimal salary increases, meaning the financial return is not substantial
- You lose valuable years of investing early (missing potential compound interest)
Are There Faster Alternatives To A Master’s Degree For FIRE?
There are fields where a master’s significantly increases earnings – and fields where it doesn’t. If a master’s won’t boost your salary, there are faster alternatives to FIRE:
- Specialized certifications (less expensive, still increase earnings)
- Company-sponsored learning programs (learn skills for free)
- Pivoting to high-income fields (without more education)
- Job-hopping (negotiating raises without more education, we know people who have successfully done it without a masters degree)
- Side hustles or freelancing (building extra income streams)
Here are some online learning platforms / universities to further explore your options.
- LinkedIn Learning
- Skillshare
- Udemy
- Coursera
- Khan Academy
- Google Career Certificates
- The Open University (England)
- Arden University (England)
- The University of the People – UoPeople (USA)
- International Open University (Katar)
If you’re from the US, I recommend reading the blog post Creative Ways to Go to College for FREE from OurRichJourney (an US family of 4 who retired early at age 40) and watch the respective video 8 Ways to go to COLLEGE for FREE (or pay little). Just recently they also shared Leave America for University in the UK: Why Our Daughter is Choosing a UK University Over the US2.
I Have My Master’s – How Do I Use It To Speed Up My FIRE Journey?
If your salary isn’t increasing significantly, you have 3 options:
- Job hunting (find a better-paying job)
- Freelancing or side hustles (monetize your skills)
- Semi-retirement (work part-time while enjoying FIRE)
Let’s explore the third way in more detail. Let’s say you need €50.000 per year to live on in retirement. You want to continue earning at least €10.000 per year in retirement too. So, you only need to build up passive income streams of €40.000 per year.
That is the power of using your degree to still earn a decent income. It will reduce the passive income you need in FIRE. So, you won’t need to save up as much for your early retirement plans. Yes, that might not be an early retirement in the traditional way. But, you can enjoy that early retirement lifestyle while doing meaningful work. That concept actually exists and it is called semi-retirement. If you want to further explore that topic, we have written a couple of blog posts such as:
- Semi Retirement: How To Semi Retire In 5-10 Years
- How Early Retirement Works vs Semi Retirement: Your Options
- Pros & Cons Of The 13 Types Of Financial Independence
To us, semi-retirement is a no-brainer. A win-win situation. And that’s why we are pursuing this path. But, instead of searching for a new regular job for our “early retirement” plans, we rather prefer to build up our own small business. We want to help as many families as possible to figure out how a path to financial independence and early retirement or semi-retirement can look like for them and then get there as fast as possible. Want to learn more? Start here.
What If You Ever Leave Early Retirement To Re-Enter The Workforce?
What happens if you ever decide to leave early retirement and re-enter the “normal” workforce? If you hold a master’s degree with significant job experience, it will open up more job opportunities once you decide to return to work for any reason. You never know what the future holds, and further education -especially a master’s degree – can help you quickly find a job again.
This can speed up your FIRE journey as well because it serves as a safety net in uncertain times. You may even choose to skip saving for a large emergency fund, feeling that one year of living expenses is sufficient for your situation. Without a degree, however, your financial safety net might need to be larger.
How Our Master’s Degree Has Accelerated Our Path To FIRE
There are high-paying careers where a master’s degree is required, such as in the fields of medicine or law. In my professional field (information technology), it is not required. However, a master’s degree can significantly boost career opportunities, especially when aiming for management positions. Even though that’s not my path at the moment, my master’s degree has given me greater peace of mind.
Simply by holding that degree, I enjoy increased job security and, more importantly, job flexibility. Most of my work can be done remotely, which is now my daily routine. Additionally, my salary increased after earning my master’s degree, which quickly offset the costs involved. However, it was not the master’s degree itself that led to that raise – rather, it was my work commitment at that time.
However, the two most beneficial aspects of pursuing my master’s while working a corporate job were the following, and I did not expect them to accelerate our path to FIRE as much as they did.
First, I switched to part-time work at my corporate job so I could earn my master’s degree part-time (even though I completed it faster than expected). I would never have considered working part-time otherwise. Once I had my master’s, I thought: What am I going to do with all this free time now? Since I was already in part-time mode, I decided to give our dream a chance – building up a side hustle that could provide for our family in the long term. This significantly reduces the passive income we need to enter early retirement or semi-retirement and allows us to semi-retire much earlier than we originally thought possible.
Second, I acquired skills that enabled me to build up passive income streams, such as our own stock market portfolio. You see, earning a master’s trains your brain to be more strategic and analytical in problem-solving and long-term thinking. Right now, I earn less because I am not working full-time (at least not yet). However, I can use my free time to build wealth for the future, learning how to build a budget for success and invest our money wisely.
The ONE Question We Got Asked All The Time
Have you done your Masters’ degree to retire early now? That is by far the most popular question we get when talking about our early retirement goals. Why have we put so much time, money and effort into our degrees and build up a career to then retire early from all of that?
Well, first of all it has made a huge difference in our earnings, especially for my wife. She earns twice as much as whe would be able to earn without her degree (she has a Diploma in sociology and journalism). Of course, those earnings also come from a certain dedication and work commitment and risk taking too.
Our high household income allows us to save and invest a lot more for FIRE than if we would only earn half so to say. We have the choice what to do with our money. If we want to consume it or save it. We decided to save and invest it. But saving 50 % of our income and more was a whole different world we had to work our way up to. We share more about us and our journey here.
You see, we made the choice to become wealthy. To build up a stock market portfolio worth almost half a million Euro. To become debt-free in our 40s, owning a house nearby the most expensive city in Germany and one of the most expensive cities in Europe. That is a lot of wealth and passive income for a young family. We don’t want to create all of that wealth to just sit on it so to say. We want that wealth to empower us living an early retirement lifestyle.
So, YES: we have done our master’s degrees and build up our corporate careers to retire early from all of that at some point in life. We truly enjoy our work. But we don’t want our work to be our life forever.
Now, I’d love to hear from you: Are you considering a Master’s degree on your FIRE journey? Or have you already earned a Master’s and how did it turn out for you financially speaking? Let us know in the comments!
If you haven’t already, subscribe to our newsletter in the green footer below to stay updated on the latest personal finance tips and boost your journey to financial independence and early retirement!
Title image source: Vasily Koloda on Unsplash
Register for our Newsletter
Connect
