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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Very true SB! I always wondered that! If my hobby becomes my career, would it be as satisfying or would that diminish? Well, I guess I’ll know when I retire!
question is when? when you retire early or when you retire normally?
I expect and will retire to a fulfilling, stimulating and wonderful life. I am 6 years away and working on the the things I expect to do now.
We all aspire that, but seen people going through post retirement trauma. Hope you will do well!
Kylie Ofiu/Aspiring Millionaire says
Interesting post. I have been turning my hobby into my career and love it. I love it more now than I did when it was just a hobby.
I plan on retiring asap, but then I work from home, not in a workplace and I do not feel the need to dominate as you mentioned. I am a leader in other areas and have always been driven by personal success rather than being “able to dominate other people’s thinking”.
I would not want my identity to be so involved in my work that I lose myself in retirement. I know many people who have thoroughly enjoyed retirement, but then they had other hobbies, interests and activities outside of work.
Thanks for getting me thinking.
Sincere point of view I must admit. Many others do feel the same way you mentioned. But, if you ask the leaders, do they want to retire? Ask John Maccaine at that age he was running for president ship. If your source of fulfillment comes within your soul, it’s one thing but if that source is sourced from people you control and the power you have, then it’s another thing.
No one has to change the thought of early retirement after reading my post here, but inspect yourself first what’s your source of happiness and then decide.
Well Heeled Blog says
I think as people’s lifespans grow longer, our concept of retirement will become redefined. I’d like to always keep a foot in the working / money-earning world – whether through consulting/freelance or part-time contract work. That way I can stay engaged and delay cashing out my retirement funds. I would like to have a paid off home and a few income-generating rental properties by the time I am in my 50s, and be in a position where I can choose to ramp down / travel more if so I desire.
How exactly you will cope with the sudden emptiness in your life, no more colleagues no more co workers no more bossing around and no more taking orders. No deadline to chase and no one to work together?
Hunter @ Financially Consumed says
I never want to retire, in the sense that I pursue meaningless goals like golf. I want to be engaged in helping others in some capacity. Life needs to have a meaningful purpose or else it will slip away too quickly…not trying to be too dramatic here.
I like your sentence formation, ‘Life will slip away…’ so very true. As human being we aspire to do something always, how can some one aspire for retirement just to stop doing things? It was not at all dramatic, but reality.
I think it is best to ease into retirement and that is what I have been doing for a very long time. I really didn’t care for my office job that much, so I gradually cut down on my hours. Then I started working for myself. Now that I am self-employed, I can ease into retirement as I please rather than just stop working all at once.
Interesting to know your philosophy. Are you really easing in to retirement? You still are working doesn’t matter for whom, but, you are working. Did you mean lowering work hours is easing in to retirement? I my question would be what are you actually doing during those saved hours? If you are engaged in money earning work during those hours then its not really easing in to retirement.
I can see how you overcame that social emptiness gradually which every retiree face immediately after retirement.
Yes, I am still working and sometimes I even work more hours than I did when working for someone else. But I am in control of my own time. I can choose to work more or less on my own schedule. I will gradually work less instead of cutting work out entirely all at once.
See this is how personal choices come in to play. You want to be in control of your own time, where as, I want to be controlling many others’ time till I can. Yes some one will boss me as well for longer but, it’s all give and take.
Marie at FamilyMoneyValues says
I’m retired – have been for about a year and a half. I used to love my job (as you seem to love yours now), but I can honestly say that I am sooo very much happier now – doing things I want to do rather than things someone else wants me to do.
Life doesn’t slow down as you age, as long as you remain engaged in new and interesting activities!
I am sure this is personal decision. I would rather feel non motivated when I have no team to work with or no one to reward me for a job completion. I do enjoy hobbies, but till they are my hobbies.
Shaun @ Smart Family Finance says
Great post SB, but just a quick correction. You can begin withdrawing from retirement accounts at 59 1/2.
One trend that I find refreshing from retirees is that they are retiring to work at jobs that are kind of like hobby jobs. I know a former CFO who consults for new entrepreneurs. He helps them develop business plans and stays on to help the companies start up. He certainly doesn’t need to work. He’s just enjoying making money, doing what he’s interested in.
I, myself, plan to stop working at some point. There is so much I want to explore, but have such limited time to do. Writing for instance. There’s just not enough writing hours in the day for me and I’d love to have the time to write more.
this will be moving from one job to another, you can’t call it a retirement.
Miss T @ Prairie Eco-Thrifter says
Great post and very thought provoking. I still have quite a fews years until I retire but I do think about it constantly. I often say that even when I retire I will still work but I will be doing things that I want to do. For example I would love to go and volunteer on an endagered species animal reserve and work to help restore the population. I could totally see myself doing this when I retire. I even sometimes wonder if I should do it before hand. You never know what your health will be like later on so you do have to live for the moment to some degree.
Either way I think I will have plenty of things to do when I retire and I think I will really enjoy it.
If you have thought about what exactly you want to do after retirement, then my purpose of writing this is addressed. The main reason I wrote this is many of us just think of retirement, as if getting out of jail. Often people realize working life was better than doing-nothing life after retirement.
I am encouraging others to think about this emotional aspects too when you think about early retirement.
None of this have to go during retirement. For me retirement/financial freedom is I can choose to do the same work for money or not. You can use the same skills to volunteer for free and have an even more active life during retirement. With that said, I agree with your point. Everyone should think about retirement more than just saving for it, in terms of how we are going to spend the money and time…
Yes very accurate evaluation, every one must think about what they would be doing in retirement, and if that would really give happiness for years.
Buck Inspire says
Thought provoking post. I felt the same when I wrote a Yakezie guest post called Don’t Quit Your Day Job. Work and hobbies go hand and hand. Hobbies offset your work stress and work makes your hobby and leisure time that much more enjoyable. When you retire and just have your hobby and leisure time, the dynamic you knew for so long is destroyed. Maybe that’s why many people unretire!
Buck you are with me. I see people deciding on taking retirement and living out of only hobbies and that worries me. My article is for those people. Glad you got the point.
Jesse @ BP says
My view on retirement is that I will not have to work but can if I want to. My hobbies are all marketable skills so I plan to continue and pursue hobbies but let them bring in some retirement cashflow whenever the chance arises.
As long as you have thought about your retirement and specially non financial things, you are on right path friend!
Really good points. I dont ever really plan on “retiring” in the traditional sense. Yeah, I’m maxing out my 401K contributions but I really intend on staying active in the way I contribute to society and my community. My hope is that I never experience the loss of identity that usually happens when a person is no longer tied to a job.
Ralph, good that you thought about your after retirement life. many of us do not think more than the financial aspects of retirement. Even if you have enough money, a sudden emptiness and send you in to depression, we should be all carefully plan non financial aspects as well. hanks for posting your comment.
Financial Samurai says
I have no interest in retiring now, only when I’m tired. That might be in 5 years, or 10 years, but not now!
Neither do I! hanks for stopping by Sam!