One of the most discussed items in the personal finance arena is Financial Independence. It is a state in which you don’t have to work to earn a living anymore. Your savings will make a living for you. For most Americans, financial independence never comes and they are forced to take retirement. For the rest, it comes only in retirement.
People wrote books and established blogs to discuss the financial benefits and pitfalls of retiring early. I am not going to talk about those in this post; after all, it is your decision whether or not to retire early. But I will strongly advocate considering a few things before putting in your paperwork and waving your hands in ecstasy.
Yesterday I talked about the things you should be doing when you are young and just have joined the work force. Now, after doing all those nice things diligently, you should be in a situation where you are now contemplating an early retirement after having saved enough money.
You aspire to retire as you probably have enough savings to cover
- Your life expenses (and your partner’s) til you die. An interesting formula of 4% withdrawal from your retirement savings per year will make your savings a never ending coffer of money, as you will earn interest on the rest of the amount. The interest would cover this 4% loss of value and inflation-related loss as well.
- Your children are established in life and don’t require your monetary support for living or studying.
- You have no debt or liabilities to pay off. You have enough cash to cover emergencies over and above the 4% withdrawal every year.
- You don’t depend on a 401(k) or other retirement savings as they will start coming in late, after you turn 65, unless you pay a penalty (you’ll earn way less if you start withdrawing early).
- You are well covered on your insurance (remember it’s not employer-provided with a subsidized premium) and can pay your copays for medical conditions of any kind at any time you are alive.
- Your death after a prolonged illness will not cause any additional family debt for your surviving partner or children or grandchildren. Basically you can pay for your own expenses, come what may.
If you are unsure about achieving everything from the list above, seriously rethink that beloved ‘happy early retirement’ scheme of yours.
Experts of all kind have predicted and calculated what your target savings amount should be. This is one interesting calculator I found on Money Zine. You will find 100′s of other calculators on the net and in books. They all have one flaw: they do not consider the exceptions (as i mentioned, one of them is death after a prolonged and costly illness) and emotional factors of early retirement.
Often the greatest and biggest impacts of retirement is felt mentally and emotionally. Your sense of identity, usefulness, and power is tied up with your job for years.
For me, I like to boss around – I am a leader. I have a team who follow my orders day in and day out. My team members always stand for each other. We share our happiness, we help each other out, we share our lunch bags… Often we sing to each other on our birthdays. Rain or shine, we work together for a purpose..of making things better, some way or another.
Can money buy these priceless feelings after retirement?
Basically, after your retirement you have no one to work for, work with, or work for you. You are stuck with your hobbies! Your greatest argument behind retiring early is to pursue your hobbies, right?
For all practical purposes, do you know how hobby is defined? When I checked wikipedia I found this:
A hobby is a regular activity or interest that is undertaken for pleasure, typically done during one’s leisuretime.
I always fear that, if a hobby is the only thing I’ve got to pursue, will it be equally satisfying as I find it today? Can I just read books on a beach for days? I am a social being and I need people around me to work together.
Like all, my memory also takes me into past glorious moments all the time, and I find many of them around four walls of an office space. Often they are simple celebrations of cracking a solution for a difficult software bug. Many times, they are the memories of parties after major project launches.
I can retire when I grow old and become physically incapable – well, almost. I can retire if my health requires me to take retirement, but I love my work life! I love to be among the people, I like to wield my sword of power and make things work for me. I like to lead teams!
Leadership is a passion that people only can pursue while they work. All great leaders are passionate about one thing in life and that is a will to be able to dominate other people’s thinking. Retirement will take that power away from you and me. Sure, you can start doing voluntary work but will that be challenging enough to keep on fueling your adrenalin?
Readers, do not retire to a lesser life. Think about the reasons you want to retire. Is it your boss? The company? Is it the area of your work, or is it your loss of interest in working for someone else?
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