Early Retirement Will Bankrupt Your Dreams, Here’s Why

[RobLJ]

While I agree with most of the comments, I don't think the article is aimed at the vast majority of peeps here, who clear the list of caveats or concerns listed.
It is aimed at people who want to retire who aren't ready, so I don't think it is a bad article.

[swakyaby]

The article mentions that 2/3 of retirees say they have a lower standard of living than when they were working. It would be interesting to see what the percentage is in this group. I think the majority of members here probably enjoy a higher standard of living as retirees, just my guess.

[Dtail]

Quote:

Originally Posted by swakyaby The article mentions that 2/3 of retirees say they have a lower standard of living than when they were working. It would be interesting to see what the percentage is in this group. I think the majority of members here probably enjoy a higher standard of living as retirees, just my guess.

Can be a little complex. We reduced our expenses by 60% in our prep for eventual retirement. So would be hard to classify whether we are living below our working years.

[Gumby]

Quote:

Originally Posted by swakyaby The article mentions that 2/3 of retirees say they have a lower standard of living than when they were working. It would be interesting to see what the percentage is in this group. I think the majority of members here probably enjoy a higher standard of living as retirees, just my guess.

That was a sine qua non of our retirement planning - we must have the same or improved standard of living after retirement. We were willing to work as long as it took to ensure that.

[daylatedollarshort]

We reduced our expenses and increased our standard of living in retirement by optimizing all our expenses.

[cyber888]

Well, the article was addressing the average person with $200K+ in savings, and telling them to work 10 more years to 65 so that they can have $496K. So, he was address people who wanted to retire at 55 with only $200K+.

[JoeWras]

Quote:

Originally Posted by youbet Yes, just another article written by folks who want to exploit us. By now, everyone that participates on this forum is aware that we were wrong to ever work at all. Every minute we spent earning income was wasted and we were fools to do so. Folks still working need to stand in front of the mirror and ask themselves why.

Well, that is the exact premise of the subreddit r/antiwork

[Koolau]

Quote:

Originally Posted by swakyaby The article mentions that 2/3 of retirees say they have a lower standard of living than when they were working. It would be interesting to see what the percentage is in this group. I think the majority of members here probably enjoy a higher standard of living as retirees, just my guess.

I can't recall specifically anyone admitting to a lower standard of living in these pages. I could be wrong, so YMMV.

[CaptTom]

Quote:

Originally Posted by Dtail Can be a little complex. We reduced our expenses by 60% in our prep for eventual retirement. So would be hard to classify whether we are living below our working years.

Almost exactly what I was thinking. How do you define "standard of living"?

Is it how much you spend, how much you consume, how often you buy a new vehicle or stylish clothing? Whether you get your morning coffee from Starbucks instead of at home? Whether you "blow that dough" instead of looking for value in your purchases?

By that definition, my standard of living is a bit lower.

But compared to going to work every day, it sure doesn't feel lower!

[Magus]

Yeah, it is tough to define standard of living. For example, folks that highly value free time may consider it a higher standard of living even if their spend has to drop by 20%+ vs while working to retire. Plus stress from working.

If you look only at things you can buy in retirement vs pre-retirement its a bit easier to measure (but perhaps not accurate). My wife and I will cut back on some things in retirement the first few years just to be safe and get the hang of it since it'll be so early (42-43, well she's already 'retired' for 6 years). For example, we plan to go down to one vehicle (plus a golf cart) and just use Uber/lyft the very small # of times we really need another vehicle (or borrow one of our retired parents). I don't think that will change our standard of living at all, but we'll see when we get there.

[Music Lover]

Quote:

Originally Posted by Magus Yeah, it is tough to define standard of living. For example, folks that highly value free time may consider it a higher standard of living even if their spend has to drop by 20%+ vs while working to retire.

That's true. My standard of living isn't just about money. It's about freedom. My pension pays less than when I was working but I consider myself to be better off.

[scrabbler1]

Quote:

Originally Posted by swakyaby The article mentions that 2/3 of retirees say they have a lower standard of living than when they were working. It would be interesting to see what the percentage is in this group. I think the majority of members here probably enjoy a higher standard of living as retirees, just my guess.

One unbreakable condition for my being able to ER was that there would be no change in my everyday lifestyle. IOW, I would not have to go on some "austerity" budget, different from how I was currently living, in order to ER. I set up a cushion into my ER budget to cover me in case I went on a small spending binge in any given month, something which happened from time to time prior to ER.

[daylatedollarshort]

Quote:

Originally Posted by CaptTom Almost exactly what I was thinking. How do you define "standard of living"? Is it how much you spend, how much you consume, how often you buy a new vehicle or stylish clothing? Whether you get your morning coffee from Starbucks instead of at home? Whether you "blow that dough" instead of looking for value in your purchases? By that definition, my standard of living is a bit lower. But compared to going to work every day, it sure doesn't feel lower!

We made a lot of changes to retire that didn't impact our standard of living, like renegotiating the cable rates every year, putting solar lights outside and LED inside, and weather stripping. Hundreds of those kinds of small changes really added up, especially the recurring ones, over a 40 year retirement horizon. We still live in the same house and upgraded one of the cars in retirement, so no big changes there.

There's a ton for free stuff to do that doesn't cost a lot where we live, like Groupon passports to Napa wineries, last minute tickets to plays and concerts, and library passes to many of the Bay Area tourist attractions. I have fun events planned for most days in May for around $300 total. Not having to work or commute and going to a picnic on Angel Island on a work day feels like an upgrade to our quality of life, even if it doesn't cost us a lot to do so.

[ncbill]

Quote:

Originally Posted by Koolau I can't recall specifically anyone admitting to a lower standard of living in these pages. I could be wrong, so YMMV.

Not unusual over on Bogleheads forums to see people post about older relatives in retirement and now in financial trouble & asking for advice.

[GravitySucks]

Quote:

Originally Posted by Koolau I can't recall specifically anyone admitting to a lower standard of living in these pages. I could be wrong, so YMMV.

My spending dropped to around 2/3 or less than pre retirement for me for the first five years.
When the car died it was replaced with a Camry instead of a Lexus or Cadillac. No loss of joy in driving though.
Food cost dropped as I ate at home and healthier. Better standard of living for less money.
Travel increased but the cost didn't. Drive and train instead of flying. Some couch surfing. Traveling with my dog buddy camping or Red Roof Inns. Again an increase in my standard of living, but lower cost.
Plan A was to sell my house and buy a small condo to cut spending. I'm still in the same old house though. (Which was around plan D. Thank you Mr. Market.)

[prudent_one]

Quote:

Originally Posted by foxfirev5 Excellent point that is currently overlooked. I got caught in the Jack Welch forced ranking BS at age 58.

We used to have a CEO who parroted everything Welsh did. When the forced rankings showed up, I was running a group that had gone from 40 people down to 12 via automation and we only kept the best obviously. So all 12 were people were historically rated 4 or 5 on a 1-5 scale. Plus they adapted and learned to leverage the new automation. The group had been lauded for their productivity and for how well they adapted to the new processes. I was told one of them must be rated "does not meet expectations" and one must be rated "partially meets".

I said I have no idea how to do that given the history I mentioned above. How does someone go from a 4 rating to a 1 in three years while improving output and accuracy at the same time? We might have had a 1 or a 2 when there was 40 people, but no longer. My VP squirmed and said talk to HR. HR manager just echoed the CEO's explanation - in any group, people can be rated against each other, and in our "pursuit of excellence" it is necessary that we weed out low performers. Completely ignoring what I said about our specific circumstances. Then I made a mistake by saying "so what you're saying is that we should hold onto some low performers in case someone says we're going to have forced rankings and that way you have someone to sacrifice, because if you were proactive earlier you'll be punished? And we're going to punish my group for taking action before this system was in place? So what message are we trying to send?"

Ooh, that hit a nerve. HR guy said you know what has to be done, we're not making exceptions because everyone like you would be outside my door. Thanksforcomingbyandhaveaniceday.

I told my VP what happened and that I was not going to rate anyone a 1 or a 2, and if he wants to overrule my ratings that is his right. But I cannot honestly do it and I won't act dishonestly.

Well, turns out my VP ended up lobbying the CEO on behalf of my group using my arguments and it turned out the CEO LOVED that we took action before he got here. And we got a pass for three years on the forced rankings. But HR guy held a grudge against me for 2 years until he left.

[GenXguy]

Quote:

Originally Posted by swakyaby The article mentions that 2/3 of retirees say they have a lower standard of living than when they were working. It would be interesting to see what the percentage is in this group. I think the majority of members here probably enjoy a higher standard of living as retirees, just my guess.

Yeah. When I am planning retirement spending, I base my necessary living expenses based on my current budget (with inflation adjustments), so nothing changes there when I retire as far as paying the same required bills.

But my discretionary spending in retirement could be like 25X as much as it has averaged in recent years as a worker because I have such a high savings rate and very low discretionary spending in recent years and plan to really open up the discretionary purse screens when I retire. The stash dollars show I could spend many times as much as I have been during these working years. In reality, I might not go quite that crazy with discretionary, but I would have to call it a higher standard of living.

[zaqxsw]

Quote:

Originally Posted by Koolau So glad you "wasted" your money on medical insurance. We've been using ours a lot lately. Trust me, wasting it is much better.

I never mentioned "wasted", it's insurance. We buy it for lots of things and don't expect to get our money back. Sorry, my point was the cost was the main worry early in my retirement.

Sorry to hear you really need yours. Not what I expect when I buy insurance. It's just insurance.

[Magus]

Quote:

Originally Posted by GravitySucks My spending dropped to around 2/3 or less than pre retirement for me for the first five years. When the car died it was replaced with a Camry instead of a Lexus or Cadillac. No loss of joy in driving though. Food cost dropped as I ate at home and healthier. Better standard of living for less money. Travel increased but the cost didn't. Drive and train instead of flying. Some couch surfing. Traveling with my dog buddy camping or Red Roof Inns. Again an increase in my standard of living, but lower cost. Plan A was to sell my house and buy a small condo to cut spending. I'm still in the same old house though. (Which was around plan D. Thank you Mr. Market.)

Even if you continue to fly you can still massively cut your travel bill in retirement by traveling somewhat out of season - most folks are forced to travel either when their kids can - usually the most expensive - and hot- summer month - or when its convenient for work. You can get some unbelievably good travel deals if you are flexible on both location and timing (eg: flights to Paris for $268 in March a few years ago + $100/night 4* hotels). I keep a list of about ~10 places that we are interested to going and just search for flights and hotels at random when we can take vacations (still working). I'm always amazed at people who tell me they spent $10k, $15k for two people to go to Europe - you can do the same trip somewhat off season for about $2.5k in coach and $5k in biz class if you have flexibility on timing and location.

[Koolau]

Quote:

Originally Posted by Magus Even if you continue to fly you can still massively cut your travel bill in retirement by traveling somewhat out of season - most folks are forced to travel either when their kids can - usually the most expensive - and hot- summer month - or when its convenient for work. You can get some unbelievably good travel deals if you are flexible on both location and timing (eg: flights to Paris for $268 in March a few years ago + $100/night 4* hotels). I keep a list of about ~10 places that we are interested to going and just search for flights and hotels at random when we can take vacations (still working). I'm always amazed at people who tell me they spent $10k, $15k for two people to go to Europe - you can do the same trip somewhat off season for about $2.5k in coach and $5k in biz class if you have flexibility on timing and location.

Our latest travel plans seem to confirm that 45 days out is still a sweet spot for air travel reservations. Also, we found big differences in price even during the week. Used to be Tuesday was good, this time it was Friday. Who knew? Last year, we piddled because of Covid and bought tickets 2 weeks ahead of time. Even with price increases this year, we're paying $400 total less (for two of us) than last year. YMMV