There is a dark side of early retirement I want to tell you about. I originally wrote this post in 2011 when I was strongly considering retiring early from banking after 12 years.
I ultimately did retire a year later in 2012 and have been retired ever since. I’ve updated this post for 2020+ after having gained a lot more perspective.
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 or how fabulous the early retirement lifestyle is. The FIRE movement (Financial Independence Retire Early) has grown rapidly since I first began writing about retiring early in 2009.
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 surprises that I did not anticipate until after I had already left Corporate America.
Leaving a stable job, especially during a global pandemic and massive unemployment is a scary thing to do. The economic environment is extremely uncertain. If you decide to retire early and realize six months later you want to come back to work, there may not be a job to come back to!
Let me be clear. I love early retirement. However, I’m going to play devil’s advocate because retiring early is not something to be taken lightly.
Let us 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
You would think the reason why people want to retire early would be obvious: the desire for freedom. However, life is much more complicated than wanting to do what you want, whenever you want.
The below reasons why people want to retire early might sting, but thy are the truth. It is the dark side to early retirement.
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 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) Some people want shortcuts in life.
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 <6% savings rate before the pandemic began in 2020. 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. I suspect the same thing may happen in 2020 as well.
5) Realization that time is precious.
With the median lifespan hovering around 80 years old, you only have 20 years of retirement to enjoy your life if you retire after 60, when most people do. 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 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.
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 unhireable if you need to return.
If you want to retire early, the most you should be out of the workforce is three years, but preferably two years. After two years, you should have enough taste of the early retirement lifestyle to figure out if never working a normal day job is right for you.
Here’s a savings guideline by age you should consider before retiring early.
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 retire with a tremendous amount of money, having a child and raising a child may be too expensive an endeavor to undertake as early retirees. In big cities like New York City and San Francisco, you might have to spend around $1 million to raise your child from birth through college.
Even if your household has a $5 million net worth, it’s not easy to sustain an early retirement lifestyle with two kids in a big city like Los Angeles. Interest rates are close to all-time lows, which means the relative income generated by your retirement investments are also likely at all-time lows.
Finally, your focus on saving and investing enough money to retire early might make it more difficult for you to have kids if you wait too long. I know so many couples who were so focused on keeping expenses down in order to retire early, that by the time they started trying after 35, it was too late. They had to go through IUI, IVF, and all sorts of expensive and arduous procedures, many to no luck.
5) You may lose your own self-respect, and the respect of others.
Unless you’re out there helping the poor, fighting racism, or trying to make a positive difference in people’s lives, you might start getting depressed you are contributing very little to society. You need purpose in retirement, otherwise, it’s hard to stay retired.
Others may stop respecting you because you aren’t doing anything productive either. Traveling the world and writing about how great your life is, is a very unproductive endeavor.
A great many rich early retiree friends from the first dotcom bubble in 2000 have mentioned they wish they didn’t get rich so quickly. Instead, they wish they worked a little harder for their money.
During the first year of early retirement, I was bored out of my mind. I would wake up automatically at 6 am every morning and just twiddle my thumbs until my wife woke up at 8 am or later. It was when I committed to writing on Financial Samurai every day where I found my purpose in early retirement.
Careful Who You Listen To About Early Retirement
The dark side of early retirement is real.
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.
The louder you have to brag about how great your early retirement lifestyle is, the less great it probably is. Just like how confident people don’t brag about their achievements, people who are busy living great lives aren’t telling the world about how great their lives really are.
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?
Perhaps 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 reached their full potential. Perhaps this is the real dark side of early retirement.
Early Retirement Can Be 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 punctuations and grammatical mistakes.
As a parent now, I appreciate how much time and effort it takes to raise children. To work less years than you went to school doesn’t feel right. It feels like I wasted some of my studies and my parent’s efforts.
To not want to be a productive member of society when I know I can is selfish and lazy. Again, this is one of the main reasons why I’ve committed to writing 3X a week on Financial Samurai for the past 10 years. If I’m not going to be a laborer, then I want to at least help more people reach financial independence sooner.
By stopping work early, you are also depriving the government and society of your valuable tax dollars. Taxes are used to help fund schools, roads, libraries, Social Security, Medicare, defense, and more. I was paying over $100,000 a year in taxes for 10 years before I retired in 2012. Then I stopped paying as much for the first several years to help 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.
But what are early retirees really running away from? What is the dark side of early retirement they can’t face? Once you recognize the truth, your career path and your life will be much clearer.
The best thing you can do is work at a job you’d do for free. Sometimes, it takes doing your own thing to truly find what makes you happy.
So long as you have purpose, whether you are working or in early retirement, everything will turn out OK. It often just takes finding what that purpose really is in life.
Early Retirement Recommendation
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 optimize 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 have an 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. There is no rewind button in life. Avoid the dark side of early retirement by staying on top of your finances.
Updated for 2020 and beyond.