The appeal of early retirement seems obvious enough. Even if you enjoy the work that you do, it’s only natural to yearn for the day when you no longer need to have a job. We desire that sense of freedom, because we think it will mean that we will no longer have to worry about money and we’ll have the free time on our hands to do the things that we want to do. But is retiring early all it’s cracked up to be?
The Possibility of Freedom 35
A few days ago, there was a story posted on The Province highlighting a young Vancouver couple who are “life hacking” their way to living in the city. They live in the heart of Gastown, go on two international trips a year and plan on retiring sometime in their 30s… with a combined annual income of about $54,000.
This article has generated quite the heated debate online and I’ll leave you to form your own opinion, but the gist of the idea is that they live on a very stringent budget in order to achieve these goals. They don’t eat out, they don’t own cars or use transit, they don’t drink coffee, they don’t have smartphones, and they don’t have TV. In short, they live a very modest, very simple life in their $732/month one bedroom apartment in a housing co-op.
Even if we forget about the incredibly tight budget, we’ve got to wonder if it’s possible to retire in your 30s on such an income and, even if you could, should you?
What If You Run Out of Cash?
Most people plan on retiring around the age of 65 and they probably plan on living for another 15 to 30 years. Given these kinds of numbers, you can roughly calculate how much money you need to retire comfortably. However, if you think that you’re going to retire at the age of 35 and you expect to live into your 80s, it means that you need to have enough savings (or reliable passive income) in place to survive the next half-century of your life. That’s a lot of cash, even if you live modestly.
Not accounting for inflation and other related concerns, even if you think that you can live on about $20,000 a year, that’s still one million dollars for a period of 50 years. Running out of money is a very real possibility, even for people who retire at a more conventional age. For someone who retires at 35 and runs out of money in his or her 50s, it means that this person likely won’t have any relevant work experience for those 15 some odd years, making it even more challenging for them to find a job at that point. It’s a very real concern.
The Fear of Being Unproductive
Let’s make the assumption that most of us have jobs with standard 40-hour work weeks. I know this isn’t always the case — some people work more, others work less — but let’s go with that assumption. That’s a lot of our waking hours spent at our jobs, being productive in some way and earning our wages. It’s a way to occupy the time and being at work means it is less likely that you are out in the world spending money.
When you retire, you suddenly have a lot of time on your hands. This may sound fantastic at first, but boredom can very quickly set in. This is a very common problem among the recently retired and that’s why so many retirees start to suffer from depression. Whereas they once had a distinct sense of purpose and direction, they now have a vacant space in their lives. You need to fill that space. Some people volunteer or find hobbies, and that’s great.
The added risk with this extra time is that you’re suddenly more inclined to spend money during those hours. You’ll go shopping. You’ll buy supplies to satisfy your hobbies. You’ll spend money, instead of save or earn money. If you choose to go back to school for its own sake (which is generally a great idea), that also costs money. And if you retire early, you have a lot more time to spend that money too.
Don’t Put Off Until Later What You Can Do Today
Of course, I’m not saying that early retirement is all bad. That would be naive of me. What I am saying is that early retirement is hardly the perfect solution to anything… and later retirement isn’t necessarily the best way to go about doing things either.
For my part, I intend on working the rest of my life in some capacity. Assuming that I am both physically and mentally capable, I want to do something with my life and that’s why I’ve always said that the goal should be to seek better work and not necessarily less work. When you understand that you’ll be doing some work even in your later years, you gain a new perspective.
You have to ask yourself, why do you want to retire in the first place? Do you want to travel the world and experience new cultures? Do you want the time to pursue one of your favorite hobbies? Whatever the case may be, don’t you think you’d enjoy traveling the world and exploring your hobbies more while you are younger rather than when you are older and (presumably) less physically capable of enjoying these experiences?
It may sound financially challenging (and it is), but the objective should be to enjoy as many “mini retirements” as you can along the way rather than waiting for the final 20 or so years of your life. I don’t want to retire at 35. I want to make the most of my whole life.