An Argument Against Early Retirement
June 30, 2014
It sometimes seems as if everyone wants to retire early, or maybe it just seems that way on financial blogs. Most people seem to agree that it’s a good thing to do, but we’re going to be contrary today and consider reasons why you might not. In fact, there are arguments against early retirement, solid ones at that.
1. Early retirement preparation will impair your early years.
Relatively few people retire early in life. The simple explanation for that: Early retirement requires far more sacrifice early in life than most people are willing to make.
Truth be told, in order to retire early, you won’t be able to make it happen by saving 10% of your income, or even 20%. You’ll almost certainly have to save something more like 40%, 50%, or even more. And that’s not just for two years or three or even five – you’ll have to do that for at least 20 years, probably more like 25 or 30.
Not everyone has that kind of discipline. What’s more, most people aren’t willing to trade off their youth for a better life in middle age. To illustrate the point, if you want to retire at age 50, you’ll probably need to become a committed saver no later than age 25. Most people haven’t figure out exactly what they want to do with her lives, or even how they want to live their lives at that age. Making that kind of commitment – which involves giving up a quarter of a century of your life, and most of your youth – is more than most people can stand.
2. Your best efforts may not be enough to get you there.
Let’s take that last point a step further. Let’s say that you spend 25 years preparing to retire at age 50. You do everything that you need to do – you live beneath your means, you live one step above a homeless person, you save more than 50% of your income, and you invest it faithfully. What happens if there’s a stock market crash when you turn 45?
Your grand retirement at age 50 may get pushed back to 55, or even 60. At that point early retirement is starting to look like normal retirement. That may not be a bad thing, but if you gave up the best years of your life to make it happen, you’ll have paid a high price for something that’s fairly normal.
There other factors that can derail the best laid early retirement plans. For example, it’s one thing to plan early retirement if you are either single, or married and childless. But if a child or two come in to the picture, the plan may go right out the window.
Even apart from children, you could get snagged by a career crisis that drains of some of your resources. You can also have a major medical event – either for yourself, your spouse, or a close loved one – that will soak up big chunk of your savings.
The point is, no plan – no matter how well carried out – is guaranteed to work. If you’re working diligently to provide yourself an early retirement, you’ll be giving up more than money to make it happen – you be giving up a big chunk of your life.
3. Early retirement increases the chance of outliving your money – dramatically.
The thought of out-living their money is a serious consideration for all who would retire. But if your plan is early retirement, that issue becomes even more complicated.
If you retire at age 65, you’ll probably have to provide for yourself for something like 20 years. But if you retire early at 50, you’re looking at covering 35 years. Unless you are a financial wizard, it may not be possible to provide for that many years on the strength of investment income alone. Markets rise and fall, and sometimes you’re distracted by other events that interfere with your investment success.
Many people who retire early in life find that their exit from the world of work is only temporary. Five, or 10, or 15 years after early retirement, they find themselves back in the workforce.
4. The need for a purpose in life.
Some people talk about early retirement as though they hate their work and want a way out. Early retirement becomes the default path to freedom.
But what if you don’t hate your work? In fact, what if you actually like your work?
That’s a complication in the early retirement scheme. We don’t just work to pay the bills – our work often fills other roles in our lives, emotional ones that we don’t fully understand. For example, work is a form of contribution to the human race – it’s our contribution. It’s also our connection to the world around us. Oh sure, there other ways to connect with the world, but work has a way of making a connection more intimate than other methods. It’s a form of interdependence between us and the world around us.
There are even some among us who feel that we have something to contribute to the world, something maybe extraordinary. Our work is our way to bring it about. Early retirement would short-circuit that desire.
Early retirement could remove those silent advantages that work provides.
5. Balance is always the key in life.
We all have opinions, and mine is no more valid than anyone else’s. But I tend to think that the recent emphasis on early retirement is way overblown. At its deepest level, it’s trading youth for a large enough pile of money to not have to work for the second half of your life. You can engage in something like that, but you have to carefully consider the cost of doing so.
I think that balance should be the real key in life. That means you live your life – and youth – as well as you reasonably can, while making a provision for the future. That’s similar to what people normally do by saving money in emergency funds, and for retirement – but at a more reasonable rate (the more typical 10% or 20% pay).
By doing that, you are enjoying the benefits of today, while making preparations for tomorrow. You’re trying to live a good life now, rather than delaying everything into your later years. In a way, early retirement is a form of back-loading your life, and that isn’t necessarily a good thing.
Given that we never know how long we’ll live – or what the quality of that time will be – it doesn’t seem that building your finances around early retirement is entirely worth the trade-off.
But that’s just me. What’s your thought on early retirement? Is it worth what you’re giving up to get, or do you agree it’s best to find some kind of balance over the course of your life? Leave a comment!
All posts by Kevin Mercadante