It seems everyone wants to retire early. The standard view of retirement is a warm, sunny, and tropical scenic place with not a care in the world. This conception of retirement is viewed as a reward at the end of life after years of toiling hard, but that can be achieved earlier for some lucky few.
That vision doesn’t seem very appealing to me since I enjoy the challenge of attempting to achieve difficult goals and thinking hard to understand and make progress in ideas, especially philosophical and scientific ideas. Pure relaxation continuously and endlessly while waiting to die is terrifying to me.
Why do people want to retire young or even retire at all?
I believe that the idea of retirement is a symptom of a deeper underlying concern of how working for money may fit into a person’s life with respect to freedom, happiness, and meaning. I will consider here the question of early and normal retirement to articulate my own views as I consider the rest of my own future. Hopefully, it may be useful to others for formulating their own views about work and why they want to retire.
Realistic Issues Concerning Retirement
Unfortunately for most, a secure retirement itself may not even be a choice, forget about “early” retirement. Some reasons may include the following:
- Low Income
The Median US personal income is around $32,000 and this has not increased in real terms for decades. Even an amount far higher than this may not yield enough to save and invest to ensure sufficient assets for a secure retirement if we factor in children and rising costs of living. Those with less than the US Median income may have a more difficult time still.
- Student loan debt
This may not seem like an issue, but the middle class is drowning in student loan debt and it is an increasing crisis that will affect the next generation of retirees more so than previous generations.
- Unemployment and underemployment
This is a more a problem with highly-skilled workers and older workers and may lead to an insufficient nest egg due to the changing nature of the labor market with respect to technology and globalization trends.
- Insufficient funds in retirement accounts
This is due to insufficient contributions and flawed assumptions concerning the exponential increase of retirement assets in diversified mutual funds. This is related to employers’ phasing out of defined-benefit plans in favor of user-directed retirement plans. Social Security is meant to complement, and not replace defined-benefit plans and tax-sheltered retirement accounts.
Those who can end up in a secure retirement are very fortunate indeed, and even more so if it’s voluntary and/or young retirement. Thus, even the consideration of retirement is a great privilege since most may need to work until they are close to death. Early retirement in the prime years is not even a concern for many as they struggle to make ends meet in their day-to-day living.
Need the Money
It seems that aspirations towards retirement for most may fundamentally concern their work in terms of money primarily and the following issues only secondarily: work enjoyment, satisfaction, and meaning. Retirement is seen as finally no longer being financially enslaved while “working for the man,” and having enough money to live life on your own terms instead.
Until then, we’re forced to do unpleasant things while at “work” because we don’t have a choice except to exchange our time and skills for money. Although I don’t necessarily dislike or feel existential depression from my work, that simple exchange of time for money is close to 100% of my concern towards early retirement.
Work and Life
The inflection point of no longer needing money
But let’s consider what happens when we reach the inflection point where the money is no longer a crucial concern for daily living, and we have enough saved up where even the very consideration of retirement is even possible.
Let me stress that this inflection point is very difficult to reach for most people, especially those with student loan debt, mortgages, and costs of providing for children, as well as such things as alimony, child support, or medical costs. Some may never reach this inflection point and go into retirement involuntarily by being laid off and unable to find other work or must work even much past the age of retirement.
The following assumes proximity to this inflection point.
What is your ideal day if you didn’t need to go to work?
This question is perhaps the crucial issue when considering early retirement.
The aspiration is to find something you enjoy doing that provides the right balance of challenge, meaning, and fulfillment that you would do for free anyways if you aren’t forced to do it and if no one is looking. If you can find out what this is, then you really no longer need to work another day of your life and the distinction between work and retirement is an artificial or irrelevant one.
I personally enjoy the act of reading to understand the world better, as well as writing to articulate, explore, and communicate ideas. My interests are wide and span Science, History, Philosophy, Geopolitics, Technology, Investing, and many other fields. These are domains I find intrinsically fascinating, reading and writing about them is intrinsically rewarding. Even if I suddenly had $10 million to my name, I wouldn’t plan to change my habits here and may even allocate more time to them.
If you find something you love or derive meaning, retirement is irrelevant
Warren Buffett 89 years old and worth $80 billion at the time is written in September 2019. He’s still going strong doing what he has been doing for almost his entire life, even though he could’ve technically retired to doing nothing half a century ago when he was already worth $25 million. Of course in Buffett’s case, retirement is irrelevant and work is not tied to money since he finds the activity intrinsically enjoyable.
Assuming you’re in a low-stress job, the desire to change positions to a higher-paying position may actually be inferior to searching for what you find intrinsically fun or meaningful, since the extra money may not be worth it relative to the subjective experience of doing something you enjoy.
Early retirement is really self-employment or part-time employment
Many who claim that they’ve retired also do many things on the side for extra income such as monetized writing, consulting, or part-time low-stress work. The only difference is that the extra part-time income is a complement to money from their portfolios rather than a sole source of income in itself.
What’s important to know is that this self-employment or part-time employment is usually within something that satisfies an intrinsic interest.
Living Small is Equivalent to Having More Money
Implicit in this discussion of retirement, early or otherwise, is how your expenses and the daily cost of living compare to the passive income through a nest egg or active income through active work.
If you don’t require luxury or a lavish lifestyle, it’s incredible how little money you actually need. Most people’s greatest expenses are mortgage payments and car payments, and perhaps such things as luxury vacations. If you simply do not require a massive home or slick car, then there’s not much money required to support it and you can potentially have the financial means to pursue early retirement even earlier.
I’d even go so far to say that I’d need to be paid to care for a large mansion since it would require such mindnumbing effort for upkeep, or an expensive car since I don’t even care for driving fast, or expensive jewelry since it’s so boring as a commodity and just adds annoying random stuff hanging off my body if I were forced to wear them.
Utility of money
If you have interests that don’t cost a lot of money, you actually don’t need that much money at all, so the threshold of retirement is lower.
I feel personally fortunate since my hobbies and interests don’t lie in collecting of massive mansions, high-end sports cars, or jewelry, and instead involve simply reading, writing, and thinking, which are effectively free.
Mindset and Effective Wealth
How you view and value your possessions, activities, and time is another way to contextualize money. If the money is used for expensive purposes, then a large amount of money for those expensive purposes may be effectively less money if you required non-expensive stuff or activities.
This is crucial to understand since it’s not actual and absolute dollar amounts of money that matter, assuming above a low threshold for daily living, but effective and relative dollar amounts.
In other words, live small and each dollar goes further.
To summarize this discussion concerning the question: What is Retirement?
- Secure and young retirement is a great privilege
- Finding something you enjoy or find meaningful intrinsically may mean you never have to work another day in your life since the distinction between work and retirement is irrelevant
- Living small is effectively having more money