The High Cost of Early Retirement

[CaliforniaMan]

Quote:

Originally Posted by 2B For many of us, our "luck" was to be born in the USA. In general, educational opportunities are available for those willing to take advantage of them. Obviously, "lucky" people have parents that help guided them as children. And if all else fails, where else can you be considered "poor" with a smart phone, hi def TV, a roof over your head and a statistical likelihood of being obese. Most of what people call "luck" in being able to RE is planning, commitment and the comprehension necessary to take advantage of opportunities. I was really "lucky" when I spent hours banging my head through calculus and various engineering courses instead of smoking dope all day.

Agree 100%! We cannot choose the place or the time in history in which we are born, we cannot choose our parents. This is where pure luck comes into play. But we do choose almost everything else. I am so thankful for being born here and with opportunities presented by having parents that instilled in me the value of morality, good education and hard work. This was my luck. I made a lot of mistakes along the way, but as you I am so thankful that I appreciated and took advantage of some of the many opportunities that were presented by the fortune of my birth.

One time when I worked as a programmer at the University of California we had a program that hired disadvantaged kids for summer jobs. It was no cost for us, so we hired a few. For any kid that had the desire, it was a tremendous opportunity to learn new things, make contacts, and participate in some very interesting and amazing projects. It was the beginning of the microprocessor era, and we had them working there, not junk work, but potentially really interesting stuff. I recall how surprised I was that to a person, they had absolutely NO interest in anything except getting paid, and spending all their money on the latest records, clothes, expensive frivolities for their car, etc.

I contrasted this with some kids of the professors. When they came it, we could not get them off the computers, they were interested in everything. Both of these kids had access to some amazing possibilities, but only one group could see it.

I always wondered what happened to those kids we hired so long ago, they probably did get what they wanted to get. Buying the latest fad music, and shiny things for their cars. I wonder if they ever got anything more.

It was so sad for me to see at the time. I guess I had optimistic images of the big effect we would have on these kids future. Was the beginning of my conversion to cynicism. These kids just didn't have a chance, they were born in the US, had access to education, but unfortunately were not born to parents who would encourage their curiosity and industriousness.

Being born to the right parents is the luckiest part of life. I don't mean parents with money, mine didn't have much, but parents who were optimistic about their child's future. and valued hard work, education and morality.

[Bestwifeever]

Here is a recent story about the governor of Massachusetts and his first cousin, where luck came into play: From Wabash and 54th, two roads diverged - Chicago Tribune

Quote:

Patrick left Chicago at age 14 for an East Coast boarding school, went on to Harvard and eventually the state Capitol in Massachusetts — a journey he describes as improbable and filled with moments of grace. Wintersmith, at age 11, lost his mother to a drug overdose and was sent to Rockford to live with relatives who were running a drug house. Within five years he joined the illicit trade, a decision that ended in a stunning mandatory life sentence for a first-time, teenage offender.

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[TimSF]

Hmm. The article contends that "Social Security deducts approximately 7 percent from your monthly check for every year you retire early." If this is true, then I (retired at 50), will lose about 84% of my SS check. !! This does not seem right to me. Does anyone know where the author came up with this 7% figure?

[daylatedollarshort]

Some research shows the U.S. actually has low levels of economic mobility compared to other countries:

The Myth of the American Dream

America's economic mobility myth - Dec. 9, 2013

[MasterBlaster]

Quote:

Originally Posted by TimSF Hmm. The article contends that "Social Security deducts approximately 7 percent from your monthly check for every year you retire early." If this is true, then I (retired at 50), will lose about 84% of my SS check. !! This does not seem right to me. Does anyone know where the author came up with this 7% figure?

The author refers to the SS reduction in benefits when taken early. Per the author if your SS full retirement age is 67 but you start benefits at 62 then you'll se an (approximate) 35% (ie, 7% x 5 years = 35% reduction) reduction in your monthly SS check.

However if you wait until FRA at 67 to start benefits (and you have at least 35 SS yearly service credits) then the reduction will be none at all.

Go to the SS website (SSA.gov) they have a calculator there where you can see how retiring at 50 affects you. If you started working full time relatively young then some people ballpark the ER SS penalty at less than 1 % reduction per year retired early. However the calculation involves adding up all your work years along with each years earnings (adjusted for inflation) to make a determination. The SS calculator can more accurately help you there.

[nash031]

Along with being just simplistic in thinking, that was actually not all that well written. Is that all I have to do to get published on Yahoo! Finance?

[Forrest]

I've read a few Yahoo Finance articles and most offer very general advice that seems to be rehashed over and over. I think many of these Yahoo Finance authors spend more time thinking up creative titles for their columns that will generate the most clicks, and very little time actually researching and writing the column

[Greencheese]

I look forward to "suffering" and "struggling" as this author seems to think the journey to and journey of early retirement is.

[Co2012]

The price to not retire early may be too high. I think your sanity and perhaps your very life is too much to pay. The workplace, at least in my arena, has changed. The stress, competition, trying to do the work of three people (and getting no thanks), learning and relearning computer systems and programs.

No thank you. I don't care if I could make billion dollars more. Nothing is worth the peace and joy I have in retirement. Besides, I'm fine financially and live exactly the way I want.

[photoguy]

There's no doubt that ER has a *high* monetary cost. I'm pretty certain I would hit 5-10M net worth (current dollars) if I kept working to 60. But I guess I've decided that I already have enough.

Interestingly, the author himself is an early retiree so he also came to same conclusion as all of us on the board.

[Gumby]

Quote:

Originally Posted by Bestwifeever Here is a recent story about the governor of Massachusetts and his first cousin, where luck came into play: From Wabash and 54th, two roads diverged - Chicago Tribune .

One of the best books I have read in this vein is The Other Wes Moore: One Name, Two Fates. Often, our fate hinges on the smallest things.

[pb4uski]

At the end it says he was eased into retirement. Sounds like sour grapes to me. His five reasons are a perceptive glimpse of the obvious that most people on these boards have planned for.

[robnplunder]

Quote:

Originally Posted by Co2012 The price to not retire early may be too high. I think your sanity and perhaps your very life is too much to pay. The workplace, at least in my arena, has changed. The stress, competition, trying to do the work of three people (and getting no thanks), learning and relearning computer systems and programs. No thank you. I don't care if I could make billion dollars more. Nothing is worth the peace and joy I have in retirement. Besides, I'm fine financially and live exactly the way I want.

Yeah, sounds about right.

[Socal Tom]

After my wife and I have died, I hope we leave just enough behind in our bank accounts to pay for the urns our ashes go into. Why would I work one more day just to put money in the bank? If you have earned enough to stop working, then why keep working?
Tom

[daylatedollarshort]

Studies vary, but after a certain point saving extra money isn't going to buy any additional financial security or happiness:

"Good news! Apparently, happiness is on sale for the new, low price of $50,000."

"So it seems the sweet spot is somewhere between $50,000 and $75,000. If you make under $50,000, you might be stressed about your financial situation. If you make over $75,000, the additional returns on working longer hours might not be worth it anymore. "

The Salary That Will Make You Happy (Hint: It's Less Than $75,000) - Forbes

In the article they focused on longer hours but additional work years in an ER context might be a logical substitution.

[comicbookgujy]

Quote:

Originally Posted by Bestwifeever Here is a recent story about the governor of Massachusetts and his first cousin, where luck came into play: From Wabash and 54th, two roads diverged - Chicago Tribune .

How about Whitey Bulger? One became the most powerful mobster in Boston while the other brother became the President of UMASS and a Senator. Oh wait they both became gangsta.

[scrabbler1]

Quote:

Originally Posted by daylatedollarshort Studies vary, but after a certain point saving extra money isn't going to buy any additional financial security or happiness: "Good news! Apparently, happiness is on sale for the new, low price of $50,000." "So it seems the sweet spot is somewhere between $50,000 and $75,000. If you make under $50,000, you might be stressed about your financial situation. If you make over $75,000, the additional returns on working longer hours might not be worth it anymore. " The Salary That Will Make You Happy (Hint: It's Less Than $75,000) - Forbes In the article they focused on longer hours but additional work years in an ER context might be a logical substitution.

As it relates to my own situation, it actually makes some sense. When my (full-time) salary reached the high $70s back in 1999-2000, I switched to working part-time because I really did not "need" the extra money as much as I needed to rid myself of the awful commute which had just worn me down. Working part-time, my salary dropped into the low $40s but eventually hit $50k before I asked for another pay cut, 17 months before I chucked the whole thing.

[photoguy]

Quote:

Originally Posted by daylatedollarshort "So it seems the sweet spot is somewhere between $50,000 and $75,000. If you make under $50,000, you might be stressed about your financial situation. If you make over $75,000, the additional returns on working longer hours might not be worth it anymore. "

I've seen this figure before, but I always interpreted it as the sweet spot is making 50% more than your peers (median US income = 50k). Certainly many will not be happy trying to survive on 50k in more expensive urban areas.

[Katsmeow]

Wow! That's a terrible article. Basically - If you retire early, you will have less money than if you don't. Talk about stating the obvious.....

[daylatedollarshort]

Quote:

Originally Posted by photoguy I've seen this figure before, but I always interpreted it as the sweet spot is making 50% more than your peers (median US income = 50k). Certainly many will not be happy trying to survive on 50k in more expensive urban areas.

I think the exact number is going to vary depending on where you live and the lifestyle you are used to, but I interpret the general take away from these kinds of studies as each person reaches their point of diminishing marginal utility in terms of income, or the income their savings can provide, at some point in time.

Bill Gates probably wouldn't be happy living on $50K, but then again earning another $1B probably isn't going to make him a significantly happier person either.