Taboo #1 – Retiring Young – Covid-19 Edition.
Possibly too late for the target audience and certainly too late for me but something to think about for the kids or maybe the next life! This throws up a number of issues well beyond the ‘wouldn’t it be nice to be rich enough so we don’t have to work!’ – foremost being that it’s only achievable with a combination of hard work – lots of it and austerity. Jam tomorrow not today – TOIL now for TOYL later! See FIRE – Financial Independence Retire Early.
I suspect that for most, even those youngsters who may have thought this possible, the coronavirus pandemic will have made this impossible due to the future economic uncertainty. Indeed those working now are the very people that will be paying higher taxes to support those already retired at the same time that the services they had come to expect are cut.
However for this ‘Covid-19 Edition’ we MAY be able to translate this possibility to mean ‘Retiring Earlier’ if after all considerations financial, family, community, social etc. one were to consider that in the circumstances retirement is the best, or more likely the least worst option that helps support ourselves as well as the youth etc. who will in all probability be the hardest hit educationally, financially and job wise.
Of course there will be some for whom the Coronavirus Pandemic has been a financial boom. Online sales have rocketed and profits have been massive and not just for Jeff. Others will have turned a failing business around by making it all the more acceptable to be on line. Whereas transatlantic flights for a short sales/business were previously commonplace the pandemic first made this an avoidable health risk then opened up the idea that maybe we could do meetings on Skype or Zoom afterall!
The ‘work ethic’ we’ve been accustomed to and which will be required to make this work doesn’t traditionally have an early end point. The traditional model has been to work at least into our senior years, take the gold watch and pension and then die soon after. That we are living longer on average than our forebears has many consequences for this model let alone retiring even earlier having presumably not built up a large pension pot to dip into to provide a tidy income for all those extra years. Living longer suggests we may well be troubled by illness and infirmity for longer and this isn’t going to be cheap.
You can live longer if you retire early, research shows—here’s why – this is an insightful article by Yoni Blumberg where he reports that retiring early can actually lengthen your life. A study by economists from the University of Amsterdam affirmed in a 2017 study published in the journal of Health and Economics which showed that male Dutch civil servants over the age of 54 who retired early were 42 percent less likely to die over the subsequent five years compared to their colleagues who continued working. The researchers explain the potentially life-extending effects of retiring in two ways.
Firstly retiring frees you up to allow you more time to invest in your health. That benefits you whether you’re sleeping more, exercising or simply having time to address health issues that might otherwise get ignored.
Secondly work can be stressful and retirement can alleviate some of that. Stress albeit difficult to measure and very much in the eye of the beholder is a risk factor for cardiovascular disease and retirees in this study were significantly less likely to die from stroke or heart disease. These results are reflected in studies across the world. An analysis in the United States found about seven years of retirement can be as good for health as reducing the chance of getting a serious disease (like diabetes or heart conditions) by 20 percent. Investigation into behavioural data, such as smoking and exercise, suggests that retirement may affect health as having additional leisure time, many retirees practice healthier habits. Positive health effects of retirement have also been found by studies using data from around the world.
However much as we might hate working it does have it’s compensations and some but not all of these can be compensated for in retirement – the Time Of Your Life – when we swap TOIL for TOYL!
Work can keep your mind and body active, give a sense of belonging. Having a sense of purpose whether at work or otherwise has been shown to reduce the risk of heart disease and dementia which can also be more common in those who are socially isolated. Even that dull job and hateful boss could be keeping you from the grave! These needs can be fulfilled outside of the office, as long as you remain active and social.
I’ve written my FIRE (Financial Independence Retire Early) blog that you may like to read – This excellent article in the New York Times also has tapped into FIRE and the suggestion that your children might well, if so inclined retire before you do – How does that make you feel? I’ve also written about some of the problems that retirement can bring such as ‘Boredom – Taboo #2’ so it’s clear that living happily ever after isn’t a given and will need a great deal of pre-planning and preparation. That without unlimited financial resources you may well have to live a rather more austere lifestyle for many decades is also a consideration and somewhat opposite to the dream of ‘when I retire I’ll have a big pension and be able to travel the world and xyz!’ In today’s society there is still ageism at work and if we get this FIRE wrong we may well find getting back into the workplace difficult let alone having a HUGE hole in the CV! – Better prepare for those interview questions around your recent experience and what have you learned that will be an asset to the company in those years away from the workplace! Some have come across jealousy and criticism for their choices – This too may be a hindrance to the return to the workplace. Maybe keeping a finger in the pie isn’t a bad idea – keeping a skill up to date or having a small business that can be expanded if needs be? I’ve also included a couple of insightful articles looking at the psychological aspects as well as reflections from those who have done FIRE and are now TOYLing away and are far happier than when TOILing away in their old life.
Essentially the FIRE (Financial Independence, Retire Early) is a lifestyle movement whose goal is to do as it says on the tin –
Those seeking to attain FIRE intentionally maximise their savings rate by increasing income and/or decreasing expenses but usually both and brutally at that! The goal is to accumulate financial assets until the resulting passive income provides enough money for living in perpetuity.
Proponents of the FIRE movement suggest the 4% rule as a guide, thus setting a goal of at least 25 times estimated annual living expenses. Once FIRE is achieved extra income from TOIL is optional TOYL can start decades earlier than the standard retirement age. Well that’s the theory! – Let’s see how that has worked out for some.
Me? Well I have well and truly missed the boat so will leave you in the hands of those who haven’t – Read on!
How to Retire in Your 30s With $1 Million in the Bank – New York Times
Fed up with their high-pressure jobs, some millennials are quitting and embracing the FIRE movement. (It stands for financial independence, retire early).
Carl Jensen experienced what he calls “the awakening” sometime around 2012.
He was a software engineer in a suburb of Denver, writing code for a medical device. The job was high-pressure: He had to document every step for the Food and Drug Administration, and a coding error could lead to harm or death for patients.
Mr. Jensen was making about $110,000 a year and had benefits, but the stress hardly seemed worth it. He couldn’t unwind with his family after work; he spent days huddled over the toilet. He lost 10 pounds.
After one especially brutal workday, Mr. Jensen Googled “How do I retire early?” and his eyes were opened. He talked to his wife and came up with a plan: They saved a sizable portion of their income over the next five years and drastically reduced expenses, until their net worth was around $1.2 million.
On Tuesday, March 10, 2017, Mr. Jensen called his boss and gave notice after 15 years at the company. He wasn’t quitting, exactly. He had retired. He was 43.
Hacking Your Way to Retirement
Although Mr. Jensen’s story may seem exceptional, a more modest version of the stockbroker who makes a killing on Wall Street and sails off to the Caribbean, he is part of a growing movement of young professionals who are intently focused on quitting their jobs forever.
Millennials especially have embraced this so-called FIRE movement— the acronym stands for financial independence, retire early — seeing it as a way out of soul-sucking, time-stealing work and an economy fueled by consumerism.
Followers of FIRE tend to be male and work in the tech industry, left-brained engineer-types who geek out on calculating compound interest over 40 years, or the return on investment (R.O.I.) on low-fee index funds versus real estate rentals.
Indeed, much of the conversation around FIRE, on Reddit message boards or blogs like Mr. Money Mustache, revolves around hacking one’s finances: strategies for increasing your savings rate to the hallowed 70 percent, tips for cheap travel through airline rewards cards, ways to save nickels and dimes at the grocery store.
Some practice “lean FIRE” (extreme frugality), others “fat FIRE” (maintaining a more typical standard of living while saving and investing), and still others “barista FIRE” (working part-time at Starbucks after retiring, for the company’s health insurance). To be “firing” is to slash one’s expenses to maximise saving while amassing income-generating investments sufficient to support oneself. To have “fired” is to have achieved that goal.
“A lot of people think you’re a new-age hippy,” said Mr. Jensen, who sold his four-bedroom, four-bathroom house, downsized to a more modest home and maxed-out retirement accounts while firing. “They can’t even wrap their minds around it.”
In retirement, Mr. Jensen and his wife and two daughters plan to live on roughly $40,000 a year generated from investments. Because his wife currently works, they have yet to draw on those accounts. But already, it’s a life rich on time but short on luxuries: Groceries are bought at Costco, car and home repairs are done by him.
“People always assume there’s an external circumstance: ‘Oh, you must have received an inheritance,’” Mr. Jensen said. “We’ve just chosen to live far below our means. That itself is a radical idea.”
Equally radical is opting out of the work force in your 30s or early 40s, a time of life when men and women are normally leaning into their careers, or, less happily, enduring the daily grind to pay the bills until Social Security kicks in.
How does all of this really work?
Jason Long, a pharmacist in rural Tennessee who retired last year at the ripe old age of 38, said his father had a hard time understanding why Mr. Long couldn’t continue to work and collect his $150,000 salary.
But Mr. Long said he was deeply unhappy in his job, where over his career he witnessed drug costs skyrocketing, sick people battling with health insurers and the over-prescription of opioids and the resulting addiction crisis. His customers, angry, confused, financially stretched, often lashed out at the person behind the counter.
“There were days when I had 12- or 14-hour shifts where I didn’t use the restroom, where I didn’t eat, because so much work was piled up on me,” Mr. Long said.
Like Mr. Jensen, he had been saving a sizable portion of his income over the past decade, and he and his wife had a paid-for house and an investment portfolio worth a little more than $1 million. Why stick around?
“The reality is the numbers are there for me,” Mr. Long said. “To go to a job that’s making you miserable every day, it doesn’t make sense to pad the bank account at that point.”
Why These Millennials Hate Work
Quitting the rat race isn’t a new concept. From the Shakers of the 1700s to the back-to-the-land hippies of the 1960s and ’70s, a strain of Americans has always embraced simple living. One of the bibles of the FIRE movement, “Your Money or Your Life,” which teaches readers to reduce their spending and value time (or “life energy”) over material gain, was published in 1992.
But Vicki Robin, who wrote that financial guide with Joe Dominguez, said the FIRE crowd is a different breed of dropout than those in the ’90s. “Our aim was not just to have a whole bunch of people quit their jobs,” Ms. Robin said. “Our aim was to lower consumption to save the planet. We attracted longtime simple-living people, religious people, environmentalists.”
The FIRE adherents are, by contrast, “very numbers oriented, fascinated by the minutiae of taxes and accounting,” Ms. Robin said.
They are also benefiting from a lengthy bull run in the stock market and, in some cases, the privilege of class, race, gender and background. It’s difficult to retire at 40 if you work a minimum-wage job, say, or have crushing student-loan debt, or did not have the same opportunities as others because you grew up poor in a crime-ridden neighbourhood.
But if, as Ms. Robin said, FIRE adherents “don’t have the aspirational part” of earlier generations, why are they so determined to quit the work force? Many millennials haven’t been working longer than a decade, if that.
It’s about having agency, Ms. Robin said: “The worker in this economy has very little sense of control over their existence. People are expendable. You’re a young person and you look ahead and you say, ‘What’s there for me?’”
That accurately describes how Kristy Shen and Bryce Leung felt. The married couple from Toronto became minor celebrities (and the target of online haters) when they retired from their tech jobs in 2015 to travel the world full time. They were in their early 30s at the time.
Ms. Shen’s wake-up moment came when she watched a fellow I.T. colleague collapse at his desk after clocking 14-hour days and get hauled away in an ambulance. For several years before that, she and Mr. Leung, following the path laid out by their parents, had tried to buy a house in Toronto’s ever-escalating real estate market.
But, Ms. Shen said, “It didn’t matter how much you saved, it was a goal post that kept moving. And I was seeing people stressed out paying their mortgages.”
Though they had good educations and well-paying jobs in the booming tech sector, Ms. Shen and Mr. Leung faced the looming threats of outsourcing and artificial intelligence, and had no hope of a retirement pension, or even that their employers would exist in five years.
At the same time, their jobs were all-consuming, their work hours basically 24-7. Rather than chain themselves to a costly mortgage, and therefore to high-pressure jobs, the couple decided to pour their money into an investment portfolio and peace out.
“The rule books our parents have given us is advice that’s perfect for 1970,” Ms. Shen said. “We have to throw out that rule book and write a new one.”
Mr. Leung spoke of the challenges his generation faces more bluntly. “We don’t have jobs that will take care of us,” he said. “We have to take care of ourselves.”
Go Where It’s Cheap
By ditching a big city, Ms. Shen and Mr. Leung exemplify another underlying reason for the popularity of FIRE: the high price of urban life, especially in places like New York and Southern California. There’s the insane housing prices, the high cost of child care, the temptations of so-called lifestyle creep.
“We were spending nearly $3,000 a month on rent, and that was considered a good deal,” said Scott Rieckens, 35, who, along with his wife, Taylor, 33, and their infant daughter until recently lived in Coronado, Calif., a pricey beach town across the bay from San Diego. “We made something like $160,000 between the two of us, but we didn’t have a whole lot left over.”
After hearing a podcast interview with Mr. Money Mustache, a.k.a., Pete Adeney, who The New Yorker called “the Frugal Guru” (he retired at 30), Mr. Rieckens became fired up. He told his wife they should ditch their leased BMW and quit eating out several nights a week.
But even with those lifestyle cuts, the couple couldn’t increase their savings rate substantially unless they relocated to a cheaper community, a deleveraging tactic the FIRE crowd calls “arbitrage.”
The idea, Mr. Adeney said, is “to reap the high salary” of a place like Silicon Valley, “then take that nest egg out to any of the thousands of nice, affordable cities and towns we have in this country and begin a second stage of life on your own terms.”
Ms. Rieckens, who works in recruiting, was initially reluctant to give up her BMW and beachy life and the prestige that went with it, until she saw a retirement calculator that showed they could retire in 10 years if they adopted FIRE and moved, or when they are 90 if they continued their upscale lifestyle in Coronado.
“I never paid attention to the finances, I thought it will all work out,” Ms. Rieckens said. “After I had a baby, I had stress around how I could spend more time with her. I was almost a slave to my job because of the way we were living.”
Last year, the couple left Southern California in search of a community that would give them more financial freedom, a journey Mr. Rieckens, formerly a creative director for a creative agency, is chronicling in a documentary, “Playing With FIRE.”
They ended up in Bend, Ore., where there’s no state sales tax and they could afford to buy a house. Gas for their used Honda CRV with 186,000 miles (they got rid of the BMW and downsized to one vehicle) is a dollar-per-gallon cheaper than in San Diego, although Mr. Rieckens often rides his bike around town.
“The whole retire early thing is unimportant to me. It’s more about gaining control of your time,” Mr. Rieckens said. “If you dive into the definition of retirement, what you’re retiring from is mandatory labour. It’s not necessarily about piña coladas on the beach.”
When You Retire Before Your Parents
A retirement that starts well before you go grey and lasts 40, 50 even 60 years is an anomaly in modern life. How do you fill all those days, months, decades?
On a recent weekday afternoon, Mr. Jensen was taking his two daughters, ages 8 and 11, to the Boulder County Fair. “I told them, ‘O.K., we’re going to wait until Thursday for half-price day,’” he said. “And by the way, we’re walking there. It’s two miles from our house.”
Fearing boredom, Mr. Jensen at first took on way too much, and he found it strange to be at the local rec center exercising alongside senior citizens, or shopping at empty big-box stores on a Tuesday. He also beat his own mother to retirement, which made for awkward family get-togethers.
But one year in, he has settled into his life of leisure, enjoying time spent raising his daughters, making sure they never see him vegging in front of the TV. Mr. Jensen also practices an activity that for many FIRE achievers seems to be the new golf: writing a financial advice blog.
Other FIRE retirees turned bloggers include Early Retirement Dude; the husband and wife behind Our Next Life; the Frugalwoods, a young married couple with children, who wrote a book about their transformation from suburban Boston high earners to retired Vermont homesteaders; and Ms. Shen and Mr. Leung, who when not travelling the world are calling for a Millennial Revolution (“Stop working, start living”).
It’s hardly surprising that a tech-savvy generation would proselytise on the internet. Also, blogging can provide the holy grail of early retirement, an additional income stream.
Perhaps Mr. Long, the pharmacist in rural Tennessee, has given the most detailed, thoughtful account of someone who has fired. In a series of posts to Reddit’s financial independence message board, Mr. Long chronicled with dry wit and self-effacement his first year in retirement.
One month into FIRE, he wrote of the guilt he felt spending money (on video games), and his concern that he would be over his household budget. He spent his days with family, at the gym, doing housework, exercising. He had no regrets so far: “I made the right decision. This is life.”
In the second month, Mr. Long reported a 2.8 percent increase to his portfolio over the first two months, even after living expenses, and listed his accomplishments as more reading, more cooking, volunteering and “faster Rubik’s cube solves.” Stress levels were way down, he wrote: “A friend of mine said the sense of dread from my face was gone.”
In the months that followed, he re-watched the mini-series “Roots,” lost all interest in talk of FIRE now that he had achieved it, feared a looming stock market crash, had nightmares that “I’m back at work and arguing with morons,” finished a marathon in a personal best sub-three hours, felt moments of social isolation, took a two-week road trip across the heartland, and went twice to the beach in Florida with his wife and watched their net reach its highest point, despite not working, which he attributed to “the passage of the tax cut for wealthy job creators like myself.”
Oh, and he started a blog.
“My life is so much better than it was before,” Mr. Long wrote seven months in. “I hope everyone here finds this peace.”
Speaking by phone, Mr. Long acknowledged it was possible that he’d simply burned out, that all of this FIRE stuff was just a needed break until he found a more satisfying career. When he was recently offered a job back in the pharmaceutical field, it induced a mild panic attack.
That morning, he’d woken up on his own, “not when an alarm clock told me that I had a responsibility.” He’d read the news online for 30 minutes, went on a seven-mile run, took a nap and “watched the ceiling fan spin around for a little bit.”
He had been watching the movies from They Shoot Pictures, Don’t They? a website that ranks what it calls the 1,000 greatest films. He’d watched 600 or so. He had work to do.
The Unspoken Problem with Early Retirement
Authored by Vanessa Lumby September 21, 2017
Ah…the American dream.
You know the promise. Work hard, and anything you want can be yours. White picket fences, brand new cars, fine foods, and …. corporate slavery? What a dream.
Surely by now you’ve probably realised that the original American dream is complete crock.
While the American dream does promise success, the dirty bugger didn’t mention the 60 hour work week, the excruciating climb up the corporate ladder, and the sacrifice of all things that make a person happy.
And so a new American dream has been born out of disgust for the work-til-65-to-pay-for-crap-you-don’t-need original.
That dream? Early retirement.
Early retirement promises relief from the original American dream. It promises an extended sabbatical from the tireless job you’ve dedicated your life to. It’s an escape from the rat race, and a first class ticket on the plane to the rest of your beautiful life.
If you’re new to the concept, it looks just like it sounds. It means “retiring” before the traditional age of 65. It’s made possible through frugality, a decent paying job, and the ability to invest in appreciating assets. Some have been able to save between $500,000 and $1,000,000 in their thirties and call it quits in the corporate world. They hope that this nest egg will last 40-60 years, until death.
Upon retirement, early retirees are supposed to live the dream; work, stress, and obligation free. The equivalent of a permanent weekend on vacation.
But underneath those promises of relaxation and freedom lies the dark underbelly of early retirement that is full of dangers like depression, loss of purpose, and maybe even a midlife crisis.
The American Psychological Association wrote a fantastic article published in January of 2014 called, “Retiring minds want to know. What’s the key to a smooth retirement?” (1)
In the article, the APA states that, ” retirees experience a ‘sugar rush’ of well-being and life satisfaction directly after retirement, followed by a sharp decline in happiness a few years later… most retirees experienced the rush-crash pattern regardless of the age they retired.”
Regardless of age, retirement is great for a while. There is nowhere to be, no deadlines, no stress, and no pressure to perform.
But after retirees settle into the new normal, what at first seemed like freedom, reveals itself as a new type of prison.
According to the Psychologist Jacquelyn B. James, PhD, of the Sloan Center on Aging and Work at Boston College, “people need to invest as much if not more time in their social or psychological portfolio planning before retirement, to figure out what makes them happy.”
It’s simply not enough to focus on building financial assets. Many of those people who retire just don’t know what to do with their time, and the whole experience is one giant ugly surprise.
After all, there is only so much reading, watching TV, shopping, traveling, and visiting friends that one person can handle. Once those activities are exhausted, what comes next is usually restlessness, closely followed by guilt for being unsatisfied in your retirement.
According to Robert Delamontagne, PhD, author of The Retiring Mind: How to Make the Psychological Transition to Retirement, “People can go through hell when they retire and they will never say a word about it, often because they are embarrassed…The cultural norm for retirement is that you are living the good life.”
Society says you should be living it up. You should be supremely happy in this period of life!
But this is often not the case.
Without some form of work to challenge and inspire you, life can become boring. And while work is often viewed as a means to an end, where the more you work the more glamorous your retirement, that’s not the whole story.
Work has deeper implications than a monthly paycheck and a 401k plan. Even though work is sometimes hard, exhausting, stressful, and frustrating, it can be an important part of a fulfilling life.
There are numerous ways suggested by experts to counteract the feeling of useless in retirement, such as making new friends, volunteering, or spending a lot of time on a new hobby such as gardening or model airplane building.
But I don’t think this is sound advice for the type of individuals that achieve early retirement.
No, early retirees are motivated and driven. They obviously have goals and are dedicated to achieving them. I don’t think that scrapbooking and knitting are reasonable follow up acts to early retirement.
So what’s the answer?
Find meaningful work.
This can include a project, career, or hobby that you can’t wait to get started on every day. The only requirement is to find something that makes you jump out of bed every morning.
Take it from Steve Jobs,
“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it.”
If at first you try something you think you’ll love, and it turns out that you don’t like it at all, that’s fine. The beauty of early retirement is that you’re free from having to work a job you hate just for the money, benefits, or retirement account.
Once you retire early, you will not only have the freedom to travel and see your friends and family more often, but you will also have the freedom to submerge yourself in work you find meaningful and fulfilling. You will finally have the freedom to follow your passion.
Once you find that passion, you’ll never have to worry about boredom, depression, or a midlife crisis during your retirement years, because you’ll never really retire. Instead, you’ll earn money doing something you enjoy. This leads to higher levels of happiness, which was the whole reason for retirement in the first place.
The Dark Side Of Early Retirement
Posted by Financial Samurai
If you look carefully around the web, you’ll read scores of articles about the desire to retire early. You’ll notice some early retirees incessantly bragging about their fabulous lifestyles on their blogs or over social media.
The reality is, there is a lot of downside to retiring early nobody talks about. Take it from me, someone who left their corporate job for good in 2012 at the age of 34. I agonized with the decision before I left, and experienced some downside surprised after I negotiated my severance.
Let’s explore several reasons why people want to retire early, why they exist, as well as understand why we should all think twice about pulling the ripcord too early.
Why People Want To Retire Early (It Isn’t That Obvious)
1) Haven’t found the right job. The number one reason why people want to retire early is because people haven’t found a job that gives them enough fulfilment to do for the rest of their lives. Nobody quits a job they like. If there was a job paying $80,000 a year to hike in the mornings and get massages in the afternoon, I’d do that forever!
2) Easier way out. If you are a sub-optimal performer, you tend to experience a sub-optimal lifestyle. It’s easier to just give up as a result. Let’s say you are a research scientist who after 10 years never produces any relevant research and finds no cures. Instead of going on with failure, you decide to give up and get out of the game. Early retirement is like the cowards way of not having to be the best any more. Some even liken it to suicide.
3) People are lazy and want things now. Society has shifted our ideals from hard work and thinking long term to instant gratification. Nobody has the patience to work for decades before being eligible for a pension. Look at our pathetic <5% savings rate. We all think we know more than we do and deserve to be the rich boss now. When we don’t get our way, we quit, rather than letting people know we couldn’t reach our potential.
4) A feeling of hopelessness. During the downturn a tremendous number of people began writing about location independent lifestyles that allow one to break free from the 9-5 and “really doing what you want.” In actuality, we all know that what they really wanted was to have a good job and be accepted by society. It’s because of the downturn of 2008-2009 that so many were displaced with nowhere to go. If they did, perhaps they’d think differently. In an economy where everybody is losing money left and right, what’s the point of working some think. Well, the economy has roared back with a vengeance and if you aren’t working, you are falling farther and farther behind.
5) Realization that time is precious. With the median lifespan hovering around 80 years old, you only have 15 years of retirement to enjoy your life if you retire at 65. People in this camp have a heightened awareness of time and therefore do everything possible to make sure they are financially stable sooner, rather than later. I’m a strong believer in this thought process, but at the same time, I don’t want to cut short my potential. The worst is running out of money and being too old to do anything about it.
The Dangers Of Early Retirement
1) Oops, you change your mind. Imagine retiring at 37 after 15 years of work after undergrad. You spend the next 3 years travelling the world, living a leisure lifestyle and experiencing new things. At age 40, you realise the reason why travel and play is so fun is because of work! You have the urge to get back into the game, but who’s going to risk hiring a 40 year old with a 3 year employment gap? The employer will suspect you are rusty, and that you may just bolt after a year. As a result, the employer simply chooses to hire someone with no gap in their employment, or someone else from another firm.
2) You run out of money. No matter how conservative we are in our retirement money needs, something unforeseen may happen. Maybe you have a medical disaster, or your house blows down. Maybe your investments tank due to a massive economic downturn. Who knows what the future holds. But if you partake in “normal” early retirement, without the mega-millions windfall, you may find yourself needing more one day. Again, a large employment gap is perceived as riskier by the employer and you may be un-hireable. Here’s a savings guideline by age you should consider.
3) You lose touch with friends and family. It’s nice to have all the time in the world to do whatever you want. But, if your friends and loved ones are busy working all day, they can’t join you on your midday hike or adventure to Bora Bora. They may also have a family to tend to during the evenings and on weekends. If you’ve ever taken a staycation by yourself, you’ll soon realise how lonely it is when others are busy leading their own lives.
4) You may find it difficult to start your own family. Unless you have a tremendous amount of money, raising a child may be too expensive an endeavour to undertake as early retirees. If you never wanted to start a family, chances are you haven’t been saving for a family. Let’s say you’re a woman who turns 35 and suddenly realises the safety window for having a baby is closing rapidly. It may be tough to even get pregnant, let alone support a new born without the right support network.
5) You lose your own self-respect, and the respect of others. Unless you’re out there saving the world, you might start getting depressed you are contributing very little to society. Others will stop respecting you because you aren’t doing anything productive either. Travelling the world and writing about how great your life is a very unproductive endeavour. You better be learning a new language and volunteering in the local community, or else you’re just a travel bum. A great many rich early retiree friends from the Dotcom bubble have mentioned they wish they didn’t get rich so quickly. Instead, they wish they worked a little harder for their money.
Careful Who You Listen To
Early retirees will croon about how great their lifestyles are. In some ways they are spot on. But notice how they seldom write about the hardships they face. They can’t, because it’s important they continue highlighting how awesome everything is, to justify their decision to no longer work. Can you imagine spending 16 years going to school (grade school + four years of college) only to work for 10 years? Some would surely say that’s a waste, would they not?
The worst that could happen is some aspiring scientist, musician, lawyer, or teacher decides to give up their careers because they believe travelling around the world on a shoe-string budget is so glamorous. Years later, they realise their fingers don’t remember the notes anymore and the chemical formulas are one big haze. Maybe they would have made it as a concert pianist, or helped discover the cure for seasonal allergies, ACHOO!
What a shame they never reach their full potential.
Early Retirement Is Selfish
I think back upon my childhood years and remember how much effort my parents put into raising me. My mother would spend hours explaining mathematical equations after dinner every day. My father would read all my essays and fix all the punctuation and grammatical mistakes. By working for less years than I went to school, it feels like I’m just throwing everything away.
To not want to be a productive member of society when I know I can is selfish and lazy.
Further, what about the millions of Americans who don’t pay taxes, who depend on us to continue working to pay taxes in order to help them live? Social Security and Medicare need to be funded. Roads and utility poles need to be maintained. I’ve paid over $100,000 a year in taxes since 1999. By removing myself out of the system, I’m no longer contributing as much to the well being of society.
Look Beyond The Smoke And Mirrors
Early retirees sometimes like to pity those who have to work. Yet perhaps we should empathize with those who are lost and haven’t found something they truly love to do (point #1). It’s impossible to all be great humanitarians working tirelessly until the age of 65. It’s easier just to give up and tell the world how fabulous your life is, and how you’ve retired on your “own” terms.
What are you really running away from? Once you recognise the truth, your career path and your life will be much clearer.
Wealth Building Recommendation
Manage Your Finances In One Place: One of the best way to become financially independent is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimise your money. Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances on an Excel spreadsheet. Now, I can just log into Personal Capital to see how all my accounts are doing, including my net worth. I can also see how much I’m spending and saving every month through their cash flow tool.
A great feature is their Portfolio Fee Analyzer, which runs your investment portfolio(s) through its software in a click of a button to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was hemorrhaging! There is no better financial tool online that has helped me more to achieve financial freedom. It only takes a minute to sign up.
Finally, they recently launched their amazing Retirement Planning Calculator that pulls in your real data and runs a Monte Carlo simulation to give you deep insights into your financial future. Personal Capital is free, and less than one minute to sign up. Ever since I started using the tools in 2012, I’ve been able to maximise my own net worth and see it grow tremendously.
Q1. So if you had your time again would you consider FIRE?
Q2. Is work really so bad that you would like to walk away for good?
Q3. Have you thought through what you would do with those extra decades of ‘freedom’?
I’d love to hear from anyone out there that has experienced FIRE and succeeded as well as anyone for who it didn’t work out – We can all learn from each other.
Have a look at FIRE! (£$! Retire Early)