The Dark Side Of Early Retirement
If you look carefully around the web, you’ll read scores of articles about the desire to retire early. Yours truly wishes to finish up no later than 45, as I believe working for 20 or so years is a long enough time. I’ve done the math with various living and return scenarios and it can be done. But the question is whether it’s a good idea? Perhaps not.
Now that the economy is in recovery mode, it’ll be interesting to see how attitudes change towards early retirement. Will those who’ve short circuited their careers feel the pull to return to full time work and maximize their earnings potential again? I believe so. What about all our “lifestyle design” and “digital nomad” friends who had a rough time landing something stable they truly love? Possibly they’ll come back too.
Those who are able to retire early are often cherished. I certainly admire those who are able to cut down their desires to the bare bones and live a very frugal lifestyle. I also admire those who’ve been able to strike it rich very early! That said, perhaps early retirement isn’t a good idea for the large majority of people. Let’s explore several reasons as to why people want to retire early, why they exist, as well as understand why it may not be a good idea. Someone has to argue the other side, so it might as well be me.
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 fulfillment 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 your failure, you decide to give up, and get out of the game. Early retirement is kind of 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. 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 amount of people began writing about a location independent lifestyle, and breaking 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 this downturn, that many people were displaced, and had 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 thing. 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 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 traveling the world, living a leisure lifestyle and experiencing new things. At age 40, you realize 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. Totally logical.
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.
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 realize 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 endeavor 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 realizes 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. Traveling the world and writing about how great your life is a very unproductive endeavor. 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. I’m sure, 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 traveling around the world on a shoe-string budget is so glamorous. Years later, they realize 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
As I strive to fulfill my goal of retiring by 45, I’ve come to the realization there’s an unhealthy focus on self. “What do I need to amass to be comfortable?” should be replaced with “How much do I need to be comfortable while helping others?”
It’s absolutely selfish for me to even consider working less than the number of years I went to school. I think back upon my childhood years and how much effort my parents put into raising me. My mother would spend hours a week sitting down with me after dinner to explain mathematical equations. My father would read all my essays and fix all the punctuations and grammatical mistakes. I would feel like a disgrace not to at least try and do great things.
45 is just an age goal. If I haven’t achieved my potential by then, I don’t plan on retiring even if I have the money to do so. The point of having an earlier-than-normal retirement goal is to help keep someone focused. Like an exam that’s 3 months away, we don’t study until the week before. Hence, better to believe the exam is only a week away so that we are better prepared.
CONCLUSION – 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.
As the economy recovers, perhaps we’ll be able to bring back our lifestyle design friends to their home countries to work again. Our early retiree friends will stop fearing failure as employers open their arms wide open and allow them to succeed. Entrepreneurial ideas flourish once again due to an abundance of capital. The more the wealth gap widens, the more the early retiree crowd will want to get back to work, and realize their full potential.
There comes a point when working isn’t about money anymore since we have enough. If we all reach this point, we’ll no longer be focusing just on ourselves, but on helping others as well. We’ll be doing something we love, that provides a sense of purpose. Here’s hoping we all get there!
Readers, do you agree or disagree that early retirement is a selfish proposition? Are we all just inherently selfish to begin with?
What is your ideal age of retirement and how do you know when is the right time?
Do you think once we’re back to a raging bull market, there will be less people who want to retire early?
Photo: Darth Vader.
Keigu,
Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”
To find out “The Secret To Early Retirement“, click the article.
Don’t forget a middle ground – working less… I just negotiated my own pay cut in exchange for more increase of vacation time from 5 to 7 weeks and ability to work from home or exotic locales. When I deduct the tax, it will only have about 7-8% impact on my take home pay, yet I get to enjoy the life and my job (which I love) even more.
I will work to my grave and would come to work even if I won lottery (which I do not play), but I would not judge those who do retire early. If it makes them happy, and they are not living off social assistance, they should go for it. And, by the way, most of the mortals can make much bigger impact through unpaid work then their job. Take for example stay-at-home moms (and dads) or those volunteering to feed the hungry and heal the sick. They can make more difference in one year than I can managing my company for 30 years.
My retirement goal is different – I want to save enough so that i do not have to work when I am 50 if I chose not to (for example if I get sick, or can’t find work I like etc).
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I found your list of “dangers” to be a lot of bunk. I retired in 2008 at age 45 and it was the BEST thing to happen to me in my life. I hated the commute, even 2 or 3 days a week, so I had to make that zero days a week. I will never change my mind.
I won’t run out of money. All I have to do is make it to age 60 intact (12 more years now) when I can tap into the first of my “reinforcements” (Social Security, unfettered access to my IRA, company’sfrozen pension). I have health insurance and upped my car insurance limits last year.
I have not lost touch with local friends and family. In fact, being retired has made it easier to get together with them with my added availability.
Starting a family? I am childfree so I never wanted to have kids of my own. Your “What if you change your mind?” is an insult (“bingo”) to us childfree. Wold you ever ask a similar question to someone who wants to start a family? (“What if you change your mind and regret having thrown away your chance of an early retirement?)
I have my volunteer work to keep me busy, activities I began when I was working part-time for 7 years and can now do more of it and do it more easily without that work “nuisance” getting in the way all the time.
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Financial Samurai Reply:
June 27th, 2011 at 2:31 pm
I’m happy to hear there’s no truth to my arguments and therefore greatly looking forward to hanging up my boots at 45!
Thx
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What an amazingly negative article. Full of extreme of the old Protestant ethic” system of shoulds and shouldn’ts. And so wrong on all of the over-generalized points.
I’m in my third year of retirement after 40 years of teaching. Gave it all I had – left because I could and was burned out from “realizing my potential”. Have enough (diversified) savings that i can live off of interest if need be (haven’t started collecting SS yet).
Most friends (of which I still have a rich network) are impressed with how much younger my stress-diminished Me is.
And this family issue? Who is likely (maybe a few rare ones) to retire so early as to make child-bearing an issue? Me? My wife and I are totally savoring the extra time we have with grandchildren.
It sounds like the writer is just a cynical, over-opiniated young’un who is glad to knock something before trying it. What a sad approach to life, whether you are retired or not.
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Financial Samurai Reply:
June 27th, 2011 at 2:29 pm
I think the writer is just pointing out that not everybody can be successful and achieve their full potential, so it’s OK to give up early. I wouldnt worry about it so much.
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My position was eliminated two years ago (must have been a sub-optimal performer). Spent about a week looking over my financial situation and decided that at 55 I didn’t need to work anymore (divorced, no kids). I’ve looked for work, but I haven’t found anything I’m really excited about. The thing I’ve found is that people don’t really care what you do or don’t do for a living. Get over yourself. I’ve had a wonderful time. I eat healthier, get more exercise, more rest, feel much better and more relaxed. I’ve spent real quality time with my family, friends and hobbies. I’ve met a wonderful woman and fallen in love. I wouldn’t go back to my old job (stress, two hour commute) for anything and am thankful that I was given this opportunity. Maybe I’ll go back to some kind of work some day. It would have to be something really interesting though. I just don’t need the money – and that is a very nice feeling.
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Financial Samurai Reply:
June 27th, 2011 at 6:55 pm
Montrose, I’m glad getting eliminated 2 years ago helped you see the light! Congrats on your retirement. If you’ve got the money, you’re 55, and the average life expectancy is 79, then by all means, stop working and doing something else.
Congrats!
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Feeling a bit pessimistic these days? Ready to go back to working a 60 hour week and feeling you need to justify it to yourself?
I am retired and enjoying it. We chose to retire–although not that early 53 and 60. We find ways to continue to add to the world- like taking care of our family while everyone else is too busy working. See- we don’t believe in nursing homes.
Since my mother never worked outside the house and is still kicking at 81 and his father and grandfather both retired at 60 and 58 and lived well into their 90′s….I think it will be ok. You can check on us around 2030. We will still, probably, be eating homegrown tomatoes and fishing on the lake!
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Nope, sorry. You seem to be defining early retirement as lounging in a hammock. Early retirement for me and my spouse meant financial independence and financial freedom. Free to do whatever we wanted without worrying about money. Our desire for freedom and options didn’t make your list. Time is precious though, so I’d cosign #5.
Regarding the dangers of early retirement, re: “oops, you change your mind”, we were self-employed so that doesn’t affect us. If we change our mind, we can simply rehire ourselves and go back into business. The great thing about being self-employed, besides being the easiest way to amass wealth: Your boss loves you.
“Lose touch with friends and family”? Seriously? Because they’re busy living their own lives no matter what *you* are up to. And if you’re retired, you have the time to make plans, cook meals, make a home where friends and family love to gather. It enhances your social life, no doubt about it. There is *more* time to be with the ones you love.
Raising children too expensive as early retirees? Nope. We have two children and we retired in our 40s.
“You’ll lose your self-respect and the respect of others”? Ha ha. Nope. Here’s a nugget of wisdom for you: Doing so well with your finances that you can retire early is actually a boost to your self-esteem. Being able to then turn your mind toward tackling the things that really, truly matter to you? Boost. Having time to learn? Boost. Having time to contribute to society? Boost. As far as the respect of others, again I think you must be imagining a guy in a hammock with a scruff of beard who just swills beer all day, but as far as *myself*, I lead a life that is respected by my children and my loved ones, and those are the only opinions that matter to me. As far as the guy who thinks I should be sweating it in a 9-to-5 job instead of following my dreams, I don’t respect him, so the feeling is mutual.
As far as early retirement being selfish, that’s ridiculous. If you work because you want to work, are you selfish? Are the only unselfish people the ones who are forced onto a path that they don’t want to be on? I retired early because I succeeded — at my business and at managing my personal finances. I now invest my time in my family, in learning, in doing, in creating, and in contributing to society. Is that selfish?
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Early retirement or financial independence means more choices! Not being tied to a paycheck is a nice feeling. If you are running away from a crummy career or job, it will always be a bad decision. If your focus is truly on yourself, it is selfish. Goals should be formed in everyone involved because it affects everyone.
The ideal age for retirement is around forty because you are young enough to still enjoy that freedom. Who wants to wait until a more standard retirement age when you are in your late sixties.
The bull market may make more people financially independent because it raises wealth and encourages IPOs.
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I tried to cut through the early retirement mystery last week.It’s about thinking through the non-financial aspect of retirement, selfish or not..
http://onecentatatime.com/non-financial-things-to-consider-before-retiring-early/
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Sounds like you’re jealous. I retired at 34 and am 39 now. I do not live on a shoestring budget. In fact I bought my dream car, a Lamborghini LP560, this year. It was my present for driving crap cars most of my life. I don’t “justify” to others why early retirement is great — I don’t need to. I don’t tell everyone how great my life is, either, because I don’t try to make people feel bad. I find it’s the other way around: people who have a 9-5 job they don’t like are the ones who tell me how they don’t want to retire because they’d be bored, and how they prefer their life over mine. Give me a break. Their jealousy is too obvious.
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These days with so many people not getting enough hours or advancement, I wonder whether not retiring early when you can afford to may be the more selfish option? So while I believe most people do look out for number one, I don’t believe that early retirement is intrinsically selfish. Folks who keep themselves out of the applicant pool in order to give others a chance to earn a decent living may be the heroes.
I don’t think there’s an ideal age for retirement from a particular job, but I do believe there is a right time for it to happen, and that’s when one loses interest in doing it well. Simply marking time I think is a mistake for both you and for your employer. I would agree that when the job market heats back up that early retirement will become less appealing– mainly because more job openings means a greater likelihood of finding that perfect fit in work/life balance. Many of today’s early retirees don’t want to settle for a poor fit, and when the market recovers they won’t have to.
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I think this is an excellent article with many well made points. I appreciate that you were willing to take an opposing view and provide a different perspective. Satisfaction and identity is often derived from doing productive, fulfilling work, and I concur that early retirement is oftentimes not the right solution towards achieving personal fulfillment. Having given up a career to raise children, I often crave and desire defining myself outside of the home. Being able to do intellectually stimulating work and meaningfully contribute to society is now what I want. A sense of self respect and identity I believe comes from doing work that benefits others beyond oneself. Many people who don’t have this do suffer from a lack of purpose or hopelessness. I also think one of the contributing problems is that many are stuck in dead-end jobs. However, those who quit early may never find their potential or fulfill their true calling in life. Thank you for a well written article and presenting many excellent points.
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I believe that all the previous comments have been harsh to the writer as I understand his objective in writing this article. Of course the people that are retired and live a great life are going to get insulted but what you haven’t realized is that this article is not intended for you or to insult you. This article is for people like myself, I am 19 years old and analyzing my financial options to endure a great lifestyle. As I was thinking, yes you can retire early if you definitely hate working or you just feel that you have given it all you have and are tired of it and have no need to continue working because you have made enough money in the years you have worked. Now, for those like myself that are starting out, all you read about in other websites is how amazing it is to retire early and live an extremely frugal life. Honestly who wants to live so frugal? What’s the point of retiring early if you can not enjoy a luxurious vacation if you wanted to or buy yourself a condo by the beach, or even if you can…. You have nothing coming in, the consumerism guilt is in the back of your mind, the subtraction to your savings for retirement. Not the.. “Its ok, I can purchase it because there’s still money flowing in.” Every one likes nice things, and like the writer said, what if you have a sudden inconvenience that you never expected. As in my short years I have realized, as I am a very honest individual. No one likes the truth, they like to be told that every thing will be ok, that every thing will go as planned and if it does not there will be a way. That is true there is always a way but I am a realist there is a big difference between being realistic and being a pessimist. I think as adults we all know that, like an old friend taught me ” You need to be able to have a professional conversation with out showing emotion even when the topic is about emotions.” If it is going fabulous for you, amazing…. But no need to insult the writer who is a realistic individual trying to warn those young ones of a promised land. As a dollar today does not equal the same as a dollar in the 1800′s don’t we all agree? Who knows how inflation may be 15 years from now……. Good luck, love, and respect to the now retired readers. :)
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Two points that I want to highlight. I agree with you about the fact that an early retirement plan is a great way to keep you focused. Secondly, most of the time, early retirement is selfish, but it doesn’t have to be. I don’t just want to sit around my entire life. Instead I want to use my time to make a difference. My early retirement plan isn’t the traditional plan as well, since i will still be working 3 days per week; but I’ll be working for myself too.
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The question of selfishness is dependent on your reason for retiring. There are many good reasons and many selfish reasons to retire.
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I have been thinking about retireing for a couple years now. My husband who is 9 years my senior retired four years ago. I have worked with the federal government for 32 years (2% pension for each year worked 64%) and would have a 15% penalty in my pension (5% for each year age is less than 55) should I retire now at age 52. The age for retirement with no penalty for me would be 55. I have been struggling with whether or not it is worth the 15% loss.
My 17 year old daughter recently gave birth to our adorable granddaughter who are both financially dependant on us. My 91 year old soon to be 92 year old father-in-law has come to live with us. He is financially independant.
I do not have any interest in my job any more and find it physically sickening everyday I have to be there. It is a time of cutbacks and reductions for the current government and the stress for all employees is noticeable in the office. Our mandate is no longer the same and everyone is feeling the stress of the unknown.
I do have alot that would keep me busy if I did retire even if they are not the things I would like to choose to do. I would like to care for children who cannot care for themselves and I would like to be able to help make a day brighter for someone even if that only means reading the daily paper to someone who can no longer do that.
I have to say that life is very short, It goes by very fast, you may not have your health physically or emotionally if you wait. All of these things keep me thinking everyday. Yet, I have not retired. Hopefully for me, it will happpen soon!
Thanks for listening, I feel better having vented.
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Financial Samurai Reply:
April 11th, 2012 at 11:11 am
Hi Shelley, first off I think it is VERY admirable that you’ve stuck with your job for 32 years! I know I could not do that.
Secondly, you’ve got a pension, that is better than most people. The average life expectancy is around 80 for women. What will you do for the rest of your life?
I’d take the leap of faith.
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Really great analysis – I don’t think you left anything out. The part about haven’t yet found the dream job is dead on. I suspect that is one of the main reasons I’m so enthralled by the idea.
I think the main reason I want out is because I just feel like I’m being used as part of a large, social experiment. A lot of the realities we’ve created in the last 20-40 years are going to be strongly tested soon (fiat currency, deregulation/re-regulation, social security, health care.)
I also have a strong contrarian/anti-authoritarian streak, which makes me loathe to work for an idiot boss. Some of us are better off on our own away from the good workers and line-toers.
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Financial Samurai Reply:
April 12th, 2012 at 12:49 pm
Glad you enjoyed the post John. Never heard of “feel like I’m being used as a large social experiment” before as a reason to get out!
So long as I like my colleagues and bosses, I’m happy to work. Once you start working due to the work, and not for the money, it is very liberating.
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Interesting post…
Is the purpose of education solely to support a work effort/career? Maybe I’m the oddball, but I enjoyed learning a great deal, and a majority of my education applies to life in general more than my work.
As for “full potential”, we all have potential in different areas, work being only one. Less time at the office might allow me to achieve my full potential as a citizen, giving back or providing value for my community/world.
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Financial Samurai Reply:
April 13th, 2012 at 7:42 am
Why not do both, provide value to your community and to your work? What’s the point of spending all that time and money to go to college to only stop working shortly thereafter? If that’s the case, best to just work from 18, or go to cheaper alternatives that provide just as good opportunities no?
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There’s really no such thing as retirement. You stop working, but you will always be relying on income streams (passive or otherwise). When you “retire” from your job, all you are doing is cutting off one income stream, and relying more heavily on others. The more you have, the more selective you can be. That’s how I view things. At some point, I hope to have enough streams that I can cut one off and rely on others, allowing me to adjust how I spend my time without affecting my material/personal well being. I would never say that I’m “retired”. That just sounds like being bed-ridden in a nursing home.
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When we have multiple income streams, we are allowed the freedom to spend our time as we see fit (to the extents that our streams allow us). I make the decision to stop working at my regular day job, because it truly does interfere with something I really want to do. Would I feel regret about doing this later on? Of course. Just as you may or may not feel regret about many other things in life (kids, marriage, not doing study abroad etc.). But it is not something to fear. The whole point is that multiple income streams allow you the chance to try this without any serious ramifications (other than regret). Just pick up hobby, or start volunteering. There are plenty of avenues to find fulfillment. Most people will never have the luxury to explore this, so be grateful.
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Financial Samurai Reply:
April 24th, 2012 at 6:24 pm
I think you’ll enjoy this latest Post: http://www.financialsamurai.com/2012/04/16/achieve-financial-freedom-slice/
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Very interesting post.
I started a little blog in downshifting and the like some weeks ago.
and I share the view here, that early retirement is maybe not the silver bullet. I think working can be interesting and even some fun, *if* you don’t have to work too much.
So I think a kind of middle-way is the best you can do: Reduce your working time here and now, reduce stress and maximize free time, but don’t aim to retire at 40.
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