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The dark side of early retirement

Sam Dogen, Financial Samurai
Sam Dogen, Financial Samurai

This article originally appeared on Financial Samurai.

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 why people want to retire early, why they exist, as well as understand why we should all think twice about pulling the rip chord too early. 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 failure, you decide to give up and get out of the game. Early retirement is like the coward’s way of not having to be the best any more.

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 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 2008-2010 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 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 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 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 newborn 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.

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.

Forty-five 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.

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 continues to boom, 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.

Read the rest of this post at Financial Samurai.

See: Early Retirement Five Years Later: Reflections on Life After Work

Sam Dogen is the founder of FinancialSamurai.com, a leading personal finance site established in 2009 that teaches people how to achieve financial freedom sooner, rather than later.