Exaggerate the example, and it makes more sense.

Say you go on a game show (like a “whole wants to be a millionaire” type show) and the grand prize is $10M. You’re up $5M and you can do one more question to win the $10M if you’re right or, if you’re wrong, all you get is $25k (and all of your costs to be on the show, including travel, lodging, food, clothes, study materials, time spent, opportunity costs, inflation, and all taxes, including taxes on the $25k was just under $25k).

So by qualifying to get $25k no matter what, you’ve essentially “cashed out your initial investment.” So that $4.995M at risk to go for the grand prize is just house money. So why isn’t going for the $10M grand prize risk free?

Well, even though you leave no worse off financially than when you started, you were up by a life changing amount of money and could have cashed out then. That $5M wasn’t house money anymore. You had every right to keep it all (less taxes of course), and they can’t do anything to stop you. That money was just as good as yours at that point. And you chose to risk that money, that chance at retiring early or whatever, in order to make even more.

I’m not saying that’s necessarily the wrong decision, but it’s not a risk free decision.