Early Retirement Will Bankrupt Your Dreams, Here’s Why

[Music Lover]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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

 

[skyking1]

I really appreciate this data you all have gleaned along the way. The different days of the week thing I have explored, but not the ~45 day window.
What makes me laugh a bit about the title of the quoted article is, the author has no clue what anyone's dreams are.
One of my dreams is a new house the way I want it, and a dream shop. The author would assume that this dream would require a great deal of money so I could pay someone else to do it, but that would be THE big mistake.
I want the time to do this myself. My dream is completely dependent on early retirement.
Making and creating and building things makes me happy, and I have enough resources to do as I wish in this regard, in about < checks calendar > 12 months. < checks again > Now

 

[Magus]

Yup - I've found the best deals basically as soon as the flights are available to book (10-11 months out) or 30-45 days out. But if you have a list of cities you want to visit - check them all - if you have 10 or more you will almost certainly find one with cheap flights and/or hotels.

 

[2HOTinPHX]

I think Batteries Plus might be able to rebuild the battery if your interested in saving a tool from the dumps.

 

[Original Wally]

I'd suspect most of the retired folks on this board qualify for this exception.

Bingo.


Wally is now 13 years downstream (Out @ 55 1/2) and life is grand. Sold big house, moved into a 55+ community. Mrs. Wally is tickled with the options - we/she do Aerobics, water aerobics, water volly ball, bocce ball, participate in the local wine club and generally enjoy life.



We have more income than ever, and have hardly touched the portfolio - WAYYYY less than projected.



Life is good.

 

[badatmath]

Yeah, must be true - recently went to a funeral of an early retiree.

Forgot to mention he was 89 (retired at 55).

 

[Bryan Barnfellow]

Why is it that the popular press tends to use 8-12% average annual compounded growth in equities when they are pushing a positive slant; but uses (as does this article) only 6% when they are trying to gloom and doom their readers?

I am reminded of the "Is this the End of Stocks?" headlines that invariably appear at serious downturns in the markets.

-BB

 

[Pellice]

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.

I know, but we get to brag here, so we can refrain from bragging elsewhere. Very useful in keeping family and friends harmonious.

I STILL think there should be a dedicated thread in this forum for "ER Fear Porn" articles.

 

[Koolau]

Yeah, must be true - recently went to a funeral of an early retiree.

Forgot to mention he was 89 (retired at 55).

Heh, heh, sounds pretty good right now. Sounds like he had about as long a retirement as w*rking life. I'm hoping for that, but not too confident. BFF (who is 77 and half a mil in debt) has exceeded that with 29 retired, and only 26 at megacorp - of course he did do a 4 year hitch in the US Army - so there's that. YMMV