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The High Cost of Early Retirement
Old 02-18-2014, 11:04 AM   #1
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The High Cost of Early Retirement

The High Cost of Early Retirement - Yahoo Finance

"It's possible to retire early if you're lucky enough to strike it rich, or if you plan ahead, watch your budget and want a more modest lifestyle. But the price tag for early retirement is high. For some people it's worth it, but it's not for everybody."

Tom Sightings of the US News and World Report lists 5 reasons in the article against Early Retirement. I don't know if you have to necessarily strike it rich, but plan ahead, watch the budget and be content with a more modest lifestyle are important for the choice of RE.
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Old 02-18-2014, 11:24 AM   #2
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That was a fun article. The example (adjusted for inflation) pretty much described my own situation, income and overall status. Retired @ 53 in 1989, because of a health scare.
Despite all of the numbers (which would have scared the hell out of me at the time), everything worked out fine.

The hardest part of retiring early was the fear. We balanced that with the thought that we could "go back" if things got tough. Would do it again, without question.

We built our dreams around reality. It was easy.
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Old 02-18-2014, 11:50 AM   #3
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The article only talks about financial cost of going to RE. Time (and health to enjoy) is the most precious thing, IMO. 80 years (average life expectancy these days) of time on earth is not a long time and I have no intention to wait until 70 to enjoy the rest of my life (whatever is remaining). Work can be nice but there are million other things I can lose myself into.
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Old 02-18-2014, 11:56 AM   #4
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All 5 of his "reasons" seemed overstated to me. In my own case, the salary foregone was overstated, the benefits foregone were overstated, the SS reduction was overstated, pre-65 health care costs were overstated, and my prime earnings years were already way behind me because I was only working part-time when I ERed; my peak earnings years were my last few working full-time.
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Old 02-18-2014, 12:04 PM   #5
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I am spoiled because AFAIK all of our regulars here on the forum think about these things in advance! I guess I *DO* take it for granted that early retirees will think about the fact that instead of earning a salary and benefits, they will actually be spending money during those first few years of early retirement when they would otherwise be working.

If a prospective early retiree hasn't even thought of this, he or she is pretty oblivious and probably not too good with numbers or practical things, IMO. Because of this trait, he/she might do poorly from a financial standpoint even if he/she retired at a more standard retirement age.

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Originally Posted by robnplunder View Post
The article only talks about financial cost of going to RE. Time (and health to enjoy) is the most precious thing, IMO. 80 years (average life expectancy these days) of time on earth is not a long time and I have no intention to wait until 70 to enjoy the rest of my life (whatever is remaining). Work can be nice but there are million other things I can lose myself into.
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As one of the "later early retirees" here (retired at age 61.5), I think those last few years of cubicle life were very hard on my health. I feel like it might have taken years off my life expectancy, had I chosen instead to work until age 65-66.
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Old 02-18-2014, 12:05 PM   #6
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This article is written for the majority of people who didn't plan and save; written to make them feel good about themselves, at the expense of leaving out all of the good stuff about RE.
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Old 02-18-2014, 12:11 PM   #7
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Some areas of the south of France can cost less to live in than expensive metro areas in the U.S.. Average household incomes in France are less than the U.S. If you are renting an apartment and cooking most meals at home, I don't think it would necessarily be more expensive to live there part of the year:

OECD Better Life Index

On the flip side of some of his other arguments, working longer means paying more in state, federal and SS taxes, for some ACA subsidies may replace employer health insurance benefits and SS benefits for some may not increase much if at all from working beyond a certain point.

The Tesla would be a one time cost. I would agree with him that McMansions cost a lot not just in price but ongoing utilities, taxes, insurance, repairs, etc. but many people here either downsize or live in low cost of living areas where the costs are still not that high even with a big house.
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Old 02-18-2014, 12:14 PM   #8
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This article is written for the majority of people who didn't plan and save; written to make them feel good about themselves, at the expense of leaving out all of the good stuff about RE.
That is exactly what I thought.
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Old 02-18-2014, 12:20 PM   #9
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Article is not bad, but it makes it seem like a fantasy. It is not only for the lottery winners and inherited wealth babies.

In real world, and most on here meet this, you can do it with LBYM, max out retirement savings, and have moderate lifestyle. Stop trying to keep up with the Jones' and living the rat race. Learn sound financial planning and living. Keep debt down to minimum and avoid wasteful spending on stuff you don't need.

Get an education that has the ability to support your lifestyle and offer ability to save beyond just surviving. A liberal arts degree that once graduated enables you to barely make $10/hr is not a wise financial investment in college and life. Driving a new car every 2 years is not good financial use of money. Don't get caught up in consumerism and needless spending. And many other examples....

Yes, there are sacrifices to achieve early retirement. But the reward is also worth it!
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Old 02-18-2014, 12:32 PM   #10
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I like the bit at the end: "He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up."

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Old 02-18-2014, 01:01 PM   #11
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The article is right, of course, about the monetary aspects of ER. We all must weigh our lifestyle aspects against the monetary ones and make some choices.

As others have pointed out, it's not just about the money.
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Old 02-18-2014, 01:08 PM   #12
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For most of us in this forum, I don't think luck has much to do with RE. If some of us had little luck, we could have retired in our 40s . I've certainly had little luck, and less than average foresight in macro economic trend . It was mostly hard work and discipline that got me in the current position.
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Old 02-18-2014, 01:22 PM   #13
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I personally think the negatives should be emphasized before you pull the trigger as it is hard to create a "do over" and the author certainly covered that. But the fewer fortunate pensioners like myself, the math is different. Yes, if you work longer your pension is bigger, but you lose the pension money you could be receiving by retiring. If I had worked 2 more years, my pension would have been 10k more, but if would have taken about 15 years to recoup the "lost" money I passed on by retiring later. Then you start subtracting your pension from your salary and dividing it by your hours worked and you start coming up with numbers like working for $1 an hour so you quit!
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Old 02-18-2014, 01:24 PM   #14
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Originally Posted by robnplunder View Post
For most of us in this forum, I don't think luck has much to do with RE. If some of us had little luck, we could have retired in our 40s . I've certainly had little luck, and less than average foresight in macro economic trend . It was mostly hard work and discipline that got me in the current position.
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.
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Old 02-18-2014, 01:27 PM   #15
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I personally think the negatives should be emphasized before you pull the trigger as it is hard to create a "do over" and the author certainly covered that. But the fewer fortunate pensioners like myself, the math is different. Yes, if you work longer your pension is bigger, but you lose the pension money you could be receiving by retiring. If I had worked 2 more years, my pension would have been 10k more, but if would have taken about 15 years to recoup the "lost" money I passed on by retiring later. Then you start subtracting your pension from your salary and dividing it by your hours worked and you start coming up with numbers like working for $1 an hour so you quit!
On the flip side, many pensions, like mine, have been frozen. And luckily for me, my frozen pension was based on my peak earning years, so working part-time after it got frozen did not reduce it. Nor did leaving my company have any effect on it. In an odd way a company freezing its pension can actually encourage ER! My frozen pension is one of my "reinforcements" out there available for me to tap into in about 15 years from now.
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Old 02-18-2014, 01:39 PM   #16
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Then you start subtracting your pension from your salary and dividing it by your hours worked and you start coming up with numbers like working for $1 an hour so you quit!
I think that is a really important consideration for some households. I am sorry we did not do those calculations earlier in life. For us it wasn't just the pensions but also adding in lower income and SS taxes, financial aid for college, ACA subsidies, money we saved from having DH home, etc.
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Old 02-18-2014, 01:45 PM   #17
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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.
I hear you. In my case, I wasn't even lucky to be born in US or had parents who guided. But I was lucky to come over to US in my teen years, went to public school, learn to speak English, and given a chance at higher learning. That's more luck than others born in some 3rd world country, fighting for daily existence. I am lucky in that sense.
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Old 02-18-2014, 01:48 PM   #18
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To summarize, we made our own luck!
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Old 02-18-2014, 01:52 PM   #19
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I like the bit at the end: "He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up."


And earns money from google ads.

Some of these Yahoo Finance articles should be dramatized (comedyized?) into sitcoms.
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Old 02-18-2014, 02:04 PM   #20
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To summarize, we made our own luck!
Life isn't fair but it's equitable. We all had an equal chance to be born to that crack addict with HIV but I suspect none of us here were. We all had an equal chance to spend nine months in Warren Buffet's wife's womb. Most of us are somewhere in between. Having financially comfortable parents gives one a statistically higher chance of doing well in life but it certainly isn't a guarantee.

We all start at different places making "success" either statistically more or less likely. Starting at either extreme does not preclude achieving "success."
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