Early retirement is almost a religion in some corners of the internet. People like Jacob from Early Retirement Extreme and Mr Money Mustache have grown large followings behind their philosophies of their ideal early retirements.
I truly believe that they have picked the best retirement option for themselves and their families. I don’t think everyone else in America would agree that the lifestyles exhibited by these people are ideal for every single person.
Why Extreme Early Retirement Isn’t For Everyone
Retiring early is no easy task. Due to the early retirement date, you don’t have nearly as much time to let compounding work for you. In order to amass the large amount of assets you would need to retire in your 30s or 40s, you’d have to earn a ton of money and spend a very small percentage of your income. Neither of these conditions are easy to achieve, but they’re both completely possible if you put your mind to it and make smart decisions.
In order to reach early retirement the way many personal finance blogs depict, most people find a high paying job and live off a very small amount of their income. We’re not talking about living on 50% of their income, normally it’s 30% or less. Due to their high incomes, 30% is still a decent chunk of money, but I wouldn’t consider it a middle class lifestyle by any stretch of the imagination.
Early retirees will keep up this lifestyle to save and invest to reach their financial independence point with no breaks. But what exactly is a financial independence point? It is the point where their assets will provide enough income to cover their expenses and never run out.
When you reach financial independence, your expenses will have to remain the same small amount you lived off of each year while building your nest egg. You would already be used to living this lifestyle, but their lifestyle will never increase unless they go back to work to earn more income or invest more money.
Some people are perfectly happy living that lifestyle, but I have to wonder if they ever feel they missed out on opportunities throughout their lives. You wouldn’t likely be able to splurge to go on a vacation of your dreams because you were too focused on reaching retirement early. You might not have a child or more children because they’re too expensive and don’t fit into your financial plan. When you finally get to early retirement, do you live a fulfilled life or are you empty now that you’ve hit financial independence and are just now realizing what you may have missed out on?
The Amazing Side To Early Retirement
Of course, it isn’t all doom in gloom. Once you’re financially independent you can change your mind and find a way to earn income that you’ll truly enjoy. You can use that extra income to support the extra activities you may have missed out on earlier due to financial constraints. Some opportunities will pop up again later in your life, but some may have permanently passed you by. Is it worth it to sacrifice so much to reach financial independence ahead of schedule and retire early?
Many would argue yes. Why? You no longer are constrained by the requirements of your job. You now can do whatever you wish whenever you want! You can walk your kids to the bus stop every morning and pick them up from school every afternoon. You can spend 80 hours a week working on art projects in your garage. You can do whatever your heart desires without a worry about making money, assuming you can stick to your early retirement budget.
Wouldn’t it be awesome to be financially independent and have no money worries for the rest of your life? Or are you worried that you’d miss out on too much of your life? Let me know what your thoughts are on early retirement. Is it worth it or not? Share in the comments below!
Photo by: edenpictures Text added by: Lance Cothern