How much money to quit your job: the three-tier runway math

Carlos and Maya, before the math

Carlos opens the bank tab on a slow afternoon. He has been at the firm for eleven years. His wife Maya works part-time. Two kids. One mortgage. One income at $235K. The savings number on the screen is $90,000.

He had been telling himself the number was $400K. He had never actually counted. Somewhere along the way he absorbed "three years of expenses" as the magic figure, and three years at his $11,500 monthly burn would be $414K. The gap between what he thought he needed and what he had was the reason he had been miserable about Sunday nights for two years.

Two surprises landed once Carlos worked through the actual numbers. The gross quit-money target was smaller than he feared. Eighteen months at $11,500 is $207K. The all-in cost was bigger than the spreadsheet showed, because the spreadsheet was missing COBRA, a Q1 estimated-tax bill that was already booked, and a category of cost Maya had been carrying for six months without saying.

Most household budgets size the savings number for the leaving day and stop. The eighteen months that follow have their own costs that never made it onto the spreadsheet.

Three tiers of quit money: Bridge, Pivot, Sabbatical

The defensible number depends on what you are walking into. Three tiers cover the realistic cases.

Bridge (3-6 months of burn). You have a signed offer in hand. The start date is four to eight weeks out. Your old equity has clawback risk if you leave inside a window, or the new comp ramps in over a quarter. You need cash for the gap and a margin for a sudden offer rescission. At a $6,000 monthly burn the band is $18K to $36K. At $12,000, the band is $36K to $72K. Most readers actually need this one.

Pivot (6-12 months). You are retraining, interviewing into adjacent work, or shopping a portfolio. There is no offer in hand yet. Expect four to nine months of search at lower probability per application than someone with a current title. At $6,000 burn, Pivot is $36K to $72K. At $12,000, it is $72K to $144K.

Sabbatical (12-18 months). You are quitting with no immediate destination. You want time to read, recover, think. Honest about cost: this is the tier that derails on month nine when the search starts late and the market is soft. At $6,000 burn, the band is $72K to $108K. At $12,000, the band is $144K to $216K.

If you have not yet sorted which tier fits, our main piece on career change at 40 walks through the three diagnoses and the 90-day stay-test.

What actually counts as runway (and what doesn't)

The standard is simple. Liquid. In your name. Accessible inside thirty days without a tax penalty. That is it.

Counts:

• Checking
• High-yield savings
• Taxable brokerage with 30-day liquidity (factor capital-gains tax on long positions)
• Vested RSUs already sold and parked in cash
• I-bonds past the 12-month minimum hold

Does not count, no matter how the spreadsheet looks:

• 401(k) and traditional IRA. Early withdrawal triggers a 10% federal penalty plus ordinary income tax in your top bracket. A $90K gross withdrawal can net around $58K once federal hits clear.
• Home equity. Illiquid in the timeframe that matters. A HELOC is a credit line. Credit lines are debt, and debt accelerates the burn.
• Unvested RSUs or options. They are the company's promises. They evaporate on your last day.
• A parental loan that has been verbally offered. Until wired, plan around zero.
• Expected severance. Until paid and cleared, it is a hope. Companies miss payroll. Companies time payments around quarter close. Companies sometimes condition severance on signing a release that includes a non-compete you would refuse.

In month seven of unemployment, the mortgage gets paid from whatever is liquid in Carlos and Maya's name that morning. Nothing else counts.

Carlos and Maya, walked through

Back to the kitchen. Monthly burn $11,500. Pivot tier ($69K to $138K). Liquid $90K. They sit inside the band, on the floor of it.

Months 1-2. Severance pays out over two months at half base. Combined with savings, that arrives net around $36,000. He files for unemployment. The Texas state cap is a few hundred a week pre-tax and shrinks fast against an $11,500 burn. They start COBRA continuation at $2,100 a month for the family. The KFF 2024 Employer Health Benefits Survey reported the average annual family premium for employer-sponsored coverage at $25,572. COBRA prices in at the full premium plus a 2% administrative fee.

Month 3. The Q1 estimated-tax pre-payment lands on April 15 (see IRS estimated tax guidance). His W-2 income for January through early February was real, and the February bonus carried no withholding cushion against the bracket it pushed him into. The bill is $14,800. They had budgeted zero for it.

Months 4-6. Search begins in earnest. Two final-round losses. He starts coaching a former direct report off the books for $4,000 a month. Cash burn drops to $8,200.

Month 7. He lands. Base of $185K, down from $235K, with a sign-on that covers about half the lost equity. Start date is six weeks out, which puts Bridge math back in play.

Month 9. Cash floor at $11,400. Mortgage paid. Kids enrolled. They made it.

Pivot at $90K worked. It worked because the search compressed in month four and a side-stream emerged at the same time. Neither was on the original October plan; the runway covered both.

The number most people get wrong

The cost most spreadsheets miss is the salary you walked away from. False. The salary is the easy number. The hard numbers are three, and only one of them is a dollar figure people forecast.

Health coverage. COBRA for a family runs $1,800 to $2,200 a month in 2025-2026, anchored on KFF's reported average annual family premium of $25,572. Marketplace plans through the ACA can be cheaper if your projected income drops below subsidy thresholds, though the calculation depends on your state and your bracket. Budget two grand a month. Revise downward only if you actually qualify after you run the numbers.

Estimated taxes. If you had W-2 income in Q1 or Q2 before you quit, you may owe a quarterly estimate that lands after you have stopped earning. The bill arrives on April 15, June 15, September 15, or January 15. People miss the April 15 hit because they were still on payroll in March. The payment still has to clear when April arrives.

The spousal-stress tax. This line shows up on no spreadsheet, and it ends more exits than every dollar figure combined. The household that planned the quit together survives the quit. The household where one partner ran the math alone and presented the result as a finished decision usually does not. Six weeks of resentment compounds faster than any 401(k) ever did. By month four, the conversation at the kitchen counter is about the marriage, and the spreadsheet has stopped mattering.

So run the spreadsheet with the spouse, not for them. The savings number changes when both people own it.

— Maren