Is Early Retirement A Smart Goal? #638

There's so many different ways of saying and that obviously that's the acronym Fire, which I think a lot of folks might have been introduced to the idea of early retirement via Fire specifically, But there are all sorts of different people in the Fire movement and different kind of

takes on retiring early. But yeah, we have had different conversations about this in the past, but we want to talk about a whole lot of different things when it comes to retiring earlier, whether it's a good goal to have, and then yeah, yeah, maybe how to skin that cat if that's what you're going for. We like to talk about you and I as we are planning and thinking

through the different topics we're going to discuss. We always come up with different metaphors and examples, and I feel like fire earlier retirement it's just one of those things that folks have heard about. It's kind of like in the background, it's in their subconscious They've seen maybe different articles floating around, but they don't know exactly what it is or how they should be thinking about it right now. It kind of makes me think of AI, like that's

all the rage right now? And is it coming? Is it come from a job or is it just a cheap trick exactly? Is it a good thing? Is it a bad thing? I don't know. But before you you know one hundred percent and go after something and say that this is going to solve all of our problems, and in this case we're talking about early retirement, it is worth thinking through the different ramifications that it might have on your life. Yeah, we're going to talk about

it today with one hundred percent assurance. Chat chypt is not going to solve all the problems avail us. It might, like, you know, help on the edges. It might make some differences, but like it can't fix the pain in my back or anything like that. Yeah, that's true, it won't. But before we get to that, man, I've got a question for you because I was talking with Kate the other day,

and she made me aware of these shoes. I'm pretty sure they're buying a company called Golden Goose, which is incredibly ironic, as listeners will we'll soon hear if they already don't know what these shoes are all about. But these are some really really expensive sneakers, right, And here's

a thing. I'm not against spending some money on some sneakers, right, like, in particular, if they're really high quality shoes, or if they have like a lifetime warranty, like no matter what, just send them back in and we'll resol them for you for the rest of your life, or if like if there are specialty shoes, right. But no, they're just for the most part, they're just normal looking white sneakers. But here's the kicker. They come pre manufactured with dirt

on there. I get, like, I think they just print it onto the rubber. They just print it onto the to the leather, make it look scuffed, to make it look scuffed. These are normal looking shoes otherwise, and these things cost upwards of four hundred bucks. I saw some pairs are like I think six or seven hundred dollars for these silly Golden Goose sneakers, But I wanted to get your thoughts, like, what are your what are your thoughts? I think you know my thoughts. I think you know

my thoughts. I think it's ridiculous and it just makes me think of what is it like Neiman Marcus and some of those kind of expensive retailers selling you pre ripped jeans right sure that costs or with like paint splatter all over them. And if you can do that to your jeans yourself, if you want to, and you can just buy a pair of that costs less up front, and I, like you said, like, I'm willing to pay more sometimes for nicer goods, Like my jeans aren't twenty

dollars jeans. I've found out early on that buying the twenty dollars jeans meant I wasn't going to wear them, and they became misshaping quickly. Yeah they'll shred. Yeah, So I like you know, to buy I don't mind buying one hundred dollars pair of jeans because I literally have been wearing the same jeans for ten years, right, the same pair of jeans, So I don't mind spending more of them more or the same pair of jeans for when you're straight. You can't wear them like all the

time if you were for time. I've got like three pairs of jeans that I rotate, and one of them I have had for a decade. But it's it's one of those things where I'm just everyone's picturing like Joel's ratty jeans and feeling bad for him. Yeah. No, I'll get new jeans if I need him. Okay, I can, I can make that happen. But no, I think this is just kind of like it's really it's a attempt to signal that you get the cool goods. That's that's

one hundred percent. So that's conspicuous consumption. Yeah right, that like there is no additional value that you're paying for. It's just proving that you have the funds available in order to buy some of these these shoes. It's it's signaling. And that's the part that feels wasteful, Like that's the part and like I don't and that doesn't mean I don't want to go to Walmart and get the ten

dollar pair of shoes. Okay, like a middle ground somewhere, and again, like I don't want to yuck on someone else's yum. But I have a hard time getting excited. I have a hard time getting behind someone who's gonna say, like, yes, I'm gonna buy these shoes that intentionally come dirtied up, And like that's the other silly part, because if you buy rip jeans, well that's a real rip. When it comes to these sneakers, these shoes, not like rubbing real

dirt on there. It's just it's like it's it's predecided, it's designed dirt and it's printed on there. It's okay, what makes me think of Zoolander. It's like the Derelite campaign. Yes, okay. So one time my mom bought me some some Converse All Stars some Chuck Taylor's Classic for my birthday because I like Chucks. They're great, and they're a pretty inexpensive shoe, like thirty five five bucks, right, depending on the making

model you're getting of Chucks. And she said they actually came pre scuffed, and she's like, I cleaned them before I gave them to you, because I thought that this was like a flaw or something that I didn't know if they were pre worn or whatever. And I was like, I think that's they can't I don't know it was funny. Yeah, are you sure that it wasn't just a returned pair? It could have been, That's what I'm saying. I don't know.

It's like getting goods on Amazon. Now you're getting more and more things that you can tell somebody has like, yeah, oh they tried it on, like they didn't look worn on the bottom. So I just like cleaned up the white part real quickly. But you're like, oh, Mom, no, I don't care. All the cool kids, there's sho's already scuffed, like the hull scuff mom myself if I need to anyway, all that being said, if you are somebody who really lacks those shoes, I'm certainly not going to hate on you.

But yeah, not my cup of tea, Yeah, exactly. All right, matt Let's move on. Let's mention the beer we're having on this episode. This one is called Ferris Coffee Imperial Stout by New Park Brewing. This one was donated to the show by listener Matthew. We'll get to our thoughts on this one at the end of the episode. Yes, but let's get into it. Let's ask the question, is

early retirement a smart goal? And we've all had someone tell us to kick the tires before buying a car, or to look before we leap, before we make a big decision. They're all good advice. Yeah, they're all sorts of like slogans that cautioned us to perform our due diligence before we make a big decision. And I don't know why, Matt, this got me thinking about the movie Cinderella, and like the one from the eighties was the eighties, the animated nose before that too, it was like nineteen

fifties maybe even was it. Yeah, it's really old. Yeah, I guess that makes sense. Yeah. No, it's like a super Bowl. It's like one of the original I remember watching it as a kid. It was one of my favorites. I want to say fifty seven. All about those mice, Yeah, I thought they were awesome. Okay, Well, here's the thing.

It's a weird story when you actually stop and think about it, right, the Cinderella and the Prince they danced for one night and then he ends up sending his goons around town to find the girl whose foot fits the glass slippers perfectly normal so they can get married. It's like, well, dude, me thinks maybe you're gonna attached a little too quickly. You don't even know her yet, and she might not be who you think she is because, like you said, Matt, she talks to animals. Okay, so

she could be a little whackadoodle in the brain. But there's like a reason that you go on dates for at least a few weeks before you propose, and hopefully even longer than a few weeks. But sounds like looking before you leap right, exactly. And so it's a matter of due diligence really, when we're getting to know somebody, you know, to ensure that the person isn't a psycho before we commit to spending the rest of our lives with them. And similarly, early retirement on its face, I

think can seem like the best pursuit. It can seem like a good idea and a worthy goal, and it might be for some folks out there, but we would say not before thinking it through on a bunch of fronts. That's right. Yeah, you might find out that earlier detirement is the perfect pursuit for you. More power to you, but definitely do your homework before deciding that this is the end goal that you want to achieve because it's

going to come with some significant ramifications. Not quite as significant as you know that the person you choose to marry if you're the prince, but if you're going after your life, let's be honest, she was a catch, She's a great girl. Sooner. If you're going all in though on early retirement, before performing that due diligence, you might be in a world of hurt. So we're going to offer our thoughts on how to decide if retiring sooner than your peers is going to be a good goal

for you. We're going to tackle a number of questions, both like financial and math related, but also questions kind of more on the personal front as well. And we think that these factors, Considering all these factors and answering these questions are going to help you to decide if

early retirement is going to be a goal worth pursuing. Yeah, and I think some folks might get at the end of this episode and they might say, Hey, that sounds like my cup of tea, like I want to join the early retirement movement, And other might say, yeah, it doesn't sound like it's really my jam, But they can go either way. I think like Internet articles often make it sound though Matt like early retirement is the bee's knees,

and I think that's true. That's part of the problem is they're they're selling a bill of goods or making it sound like it's just the greatest things in sliced bread. And there was a recent headline I saw on market Watch and it read this fire couple retired at the age of twenty nine. For them, it's always the weekend. And boy, that sounds appealing. I read that l twenty nine, I'm ten years too late to pursue this goal and what a slacker. And weekends are awesome, Like, I'm not

against weekends. I have a lot of good good times on the weekends. We go for family hikes almost every weekend, or bike rides, or we get out in nature. We do lots of great stuff together, we make awesome memories. But do I really want my life to be like one long, perpetual weekend. Do most folks want that? Maybe? Maybe not? Like maybe the weekend is so great because it marks the end of a successful week, not because

it's never ending. And it just makes me think of like the another movie reference here, Groundhog Day, right, and another classic from the fifties, right, Yeah, that was actually from the eighties. Yeah, and it's just a great film, of course. But if you recall the movie Matt Bill Murray, he starts to try to kill himself in multiple ways because you know, living the same day over and over actually starts to get kind of boring and ultimately kind

of depressing. So I don't know's it makes me think of that, Like, these are the kind of things that we want our listeners to consider before they say, oh, early retirement weekends and never end, sign me up. Like, the reality is that most folks who decide to pursue this lifestyle, they're you know, they aren't even doing it with the goal of perpetual weekends, right. Often, they're they're doing it with, like I would say, an even worse goal. They're trying to run away from a job than they eat.

Yeah no, I totally agree, man, Yeah, Like they think her job sucks. And it seems that like that, that's one of the top reasons that we see folks gravitate poards earlier retirement as ultimate goal. They are running away from something, not necessarily running towards something. But if that's the case, though, you know if that's the main reason. We feel like there are other potentially more appropriate solutions that folks might want to pursue, which will discuss later

in the episode. But for others, it can be dreams of what retired life could look like, right, And it's not a bad idea to have a picture of retirement for yourself, but it is important to be grounded in reality, because I think the fantasy of retirement can often be more delusional than an actionable plan. And you know, Joel earlier a few weeks ago in episode six twenty three, we talked about ways that you can maximize your income.

We are all four folks trying to find ways to maybe leave an employer that isn't going to be great for their career, or maybe that doesn't have a the most healthy environment. But simultaneously, I think for a lot of folks, just by changing their how it is that they view their work, right, Like, I'm just talking about more of like a like a mindset shift that might take place, or just displaying more ownership. I think these are ways that you can demonstrate to yourself that it's

not that my job sucks. I've just been thinking about it wrong. This entire time. I think that could be in just a very simple way to help folks to realize that, oh wow, my job actually doesn't suck all

that bad. I've just been thinking about it incorrectly. What makes me think of the show Dirty Jobs with micro and how he would always he would talk to people who had what a lot of us would consider the worst job, absolute worst, dirtiest worst job, the chrommiest dirtiest jobs, climbing through sewers, and I mean all sorts of nasty stuff. I didn't really watch the show myself, but from what I could tell, a lot of people that had those jobs seem to take great pride in their profession. And

I think you're right. A lot of it is kind of a mindset shift about how we view our work. And it doesn't mean that you can't get out of a and shouldn't get out of a toxic work situation or look to find something better in the future. I think growth is important and that matters too, But you're right. I think just running away though from work altogether, is like a bad motivation when it comes to pursuing early retirement.

And let's talk about the origins of retirement and earlier retirement for a second map, because like, retirement is a pretty new concept overall, and so, yeah, where did it come from? And how long has this been like a

pursuit well, government financial support for the elderly. It's started in the eighteen hundreds, late eighteen hundreds in a country, former country called Prussia, right, And when social Security was instituted in the United States, that was like not none to like nineteen thirty five, right, Matt, when the Social Security Act was passed, and it had a completely different goal, not to fund decades of retirement, decades of leisure time, but really to aid the most vulnerable folks in our

society who ended up living longer than the average lifespan. So that concept of moving to Florida for three decades and walking the beach with your significant other, like that is you're going to stay with your metal detect that too, that might be your significant other some day. That's that's that's more of my speed. I could see you fallen in love with one of those inanimate objects like scooping

around for lost rings and watches. But some people like I just want to make it clear, like we are less than one hundred years or moved even from the institution of social security as a concept, and so the modern idea that we have of retirement is so new, right, and we're living longer now than ever before, and that's why I think social security has more of an impact on those retirement years. But that's also part of the reason that social security is bound to become insolvent. We

haven't fixed any of the problems. It's pretty hard to fund decades worth of leisure for a huge segment of the population, So it's becoming untenable in our politicians don't don't seem to want to do anything about it. They don't seem to want to fix the problem. And we talked talked about that back in the episode four thirteen, Matt, something's got to give. Nobody wants to address the elephant

in the room. I think it's possible to find a way to make social security sustainable, but it's easier said than done, especially when you're talking about elected officials who don't really have any desire to do anything. They just want to grandstand about it. Sure well, they're not willing to do anything about it because, like nobody wants to

be the grown up in the room. It's it's like it makes me think of like when you're a parent and you've got kids and all they want to do is eat candy, But you have to be the parent that says, no, you can't just sit there and watch TV and eat candy. You go to your room, clean your room, do your homework. And also, you're gonna eat real food. You're gonna combat right now. You're gonna eat some protein and some vegetables, some fruit. You're gonna have a real meal at this point. That's what needs to

happen with Social Security. But I think that that kind of just reframing and making it helping our listeners understand that this idea of retirement hasn't been around for hundreds of years. It's still pretty brand spanking new to think about it. And now it's kind of like expected, well, sure I need to say for forty years of retirement, and now the early retirement community is saying, no, we want to save for like sixty or seventy years of retirement,

which is even newer. Sure, yeah, it is much like it seems like it's almost something that's as old as like the United States, but yeah, much much younger, yeah than the founding of our country. It's a novel concept. And actually nineteen ninety two feels like the first time that early retirement became a popular concept. That's when the book Your Money or Your Life came out Vicki Robbins

and Joe I Forget Joe's Lost Joe Dominguez. And actually it wasn't really until twelve twenty thirteen, ten years ago. This was not that long ago that different blogs and podcasts and different books on the subject of early retirement started to be released. And so, yes, traditional retirement is pretty young. Early retirement is honestly, it's still in its infancy, and it's important to realize that because a lot of things are still unsettled within the world of early retirement.

For instance, can you work at all and still be retired? A lot of fire folks still make money doing different fun projects or starting their own businesses things on the side, But that's not the traditional view of retirement. Mats And would say exactly, so it's different, right, like, are you wanting to quit work to pursue your own thing or are you looking to travel and perpetuity? Does that make

it a more legitimate retirement? Are you actually retired. If you're still making money or at that point are you, are you considered to be semi retired. I think that's one of the criticisms of early retirements, and a lot of folks have voiced that. Actually, somebody who reached out to us because we highlighted a friend of the show,

Rachel Richards, in our newsletter. We talked about how she retired early, but simultaneously she's busier than ever, which I see the maybe we shouldn't have turned it in that way, because honestly, what Rachel has done, she certainly shifted careers, but she's still working. It's more I think she's working on her third book as we speak, and she's probably working harder than ever. But it's more entrepreneurship in her case than you know what oftentimes folks considered to be

early retirement. I think when we talk about earlier retirement, oftentimes people are saying, like, I could afford to live a meager lifestyle and don't wouldn't have to work if I didn't want to. But most people choose to do something meaningful with their time because that's kind of what humans were made to do in a lot of ways, and we'll talk about that as well on today's episode.

But there's also just different kinds of early retirement, right, So it's the definition is hard to understand, But then there's different monikers that have been created for a bunch of specific routes that you can take on the path to early retirement. And these different routes attempt to acknowledge the reality that it's going to look different depending on your goals, your age, and your level of financial preparedness.

For example, coast fire is when you've got a healthy chunk set aside in your portfolio and then you can take your foot off the gas. So basically, for let's say ten to fifteen years, you're saving a ton nose

to the grindstone mentality. You're frontloading the sacrifice in a major way in those early years, which gives you more options to increase your spending or just to quit completely your job or quit saving for retirement at least after that initial phase, that initial stint of frontloading those contributions. Or there's like lean fire adherents who mostly just want to amass enough to squeak by right there, ultra frugalites, and so those are the folks living in a trailer

in the woods, living on like twenty thousand dollars a year. Yeah, they want to save just enough so that they can do whatever they want. But whatever they want has to be within massive amounts of reason because they have to live frugally because they haven't saved enough to do much beyond that. And so, yeah, when you're considering whether or not early retirement is for you, it's not a one size fits all proposition either, which makes it a little trickier.

You got to figure out what kind of early retirement lifestyle you want to live first before you even start to answer the other parts of that question. That's right. Yeah, So not only are there different flavors of fire for folks to consider, different types of early retirement that might fit their situation the best, but we also have a

number of different questions that listeners can ask themselves. We've got some specific like financial or number related questions, as well as some non monetary factors that you need to consider as well, and so we will get to all of those right after this Alm, Matt, let's keep going.

We're talking about early retirement and whether it makes sense for the average person, and it's definitely not for the average person, right, because I think if you both those instances, I thought you're going to say the average bear it was like a yogi Yeah, well, did you ever watch that one back in the day, a little bit hand of bar I mean that was talking about old school cartoon that was pretty old too. But we're falling into this slight nostalgia of the mindset that we need to

probably stop. Yeah, well, I think it's it's definitely not for the average person because you have to be very different than average and have a different kind of mindset if you're going to achieve early retirement. You can't just kind of do what the average person does because like when you look at the averages, the average person doesn't have enough money to cover a four hundred dollar expense.

The average person doesn't have very much money in their emergency fund, and their savings right, the average person savings right is in a three percent range. So you got to be way, way, way above average if you want to achieve early retirement. I think you said average linerds in times I probably said yeah, so yeah, don't be average. But yeah, let's talk about the the We're gonna talk about the non financial aspect here. In the second of what you're going to want to consider before you set

your course for earlier retirement. But first, let's talk about some of the money mechanics for a minute. Matt and like, how will people know if they have enough money set aside in order to retire early? And the math behind early retirement is actually not terribly complicated. Mister money Mustache, who's one of the foremost profits of the early retirement movement.

He has a post called the Shockingly Simple Math behind Early Retirement, and he's right up until a point, like, I think the math in his post is not terribly complex, and at the simplest level, the number that you need to have saved up inside your investment accounts is twenty five times your annual expenses in order to not run out of money, And mister money Mustache he assumes a five percent rate of return after inflation and a four percent annual withdrawal rate. I think the simplicity of that

post and of his approach are really great. On one hand, they can help you visualize how few trade offs, just a few trade offs can help you ratchet up your ability to reach financial independence more quickly. But it's also far from perfect given a bunch of other factors that we need to consider here, that's right, factors that include some of the different expenses that we experience in life. And so a large part of knowing that you have

enough is to forecast your expenses. And a lot of folks in the early retirement community are banking on certain things just continually being true that they're just going to remain stagnant. But it is hard to predict the future. So inflation, for instance, that could throw a wrench in someone's early retirement plans. It's something that we've seen recently, especially if they're opting for a more more of the lean fire, right, like more of that lean, hyper frugal lifestyle.

When eggs costs, you know, just double in price in the course of a year, that's going to mess up if you're lean fire and you're grocery bill just went up fifty percent and that tight, Yeah, that's going to have an impact. Yeah, a few months of those higher costs here and there are going to add up if you're trying to live on twenty five thousand dollars a year. And so we think that if you really want to retire before your peers, that it is important to save

more than you think you'll need. Don't just purely count on that twenty five times your annual expenses. Again, it's a great rule of thumb, it's a great place to start. But we think it's it's good to have more on hand than you need. That'll give you just additional options, that will give you some peace of mind. Because hotter inflation numbers, you know, they're still going to be tough to endure in the moment, but they won't completely wreck

your personal finances. They won't completely throw you off track. And I was kind of joking about egg prices like wrecking someone's budget to the point where it completely derails their early retirement. But that is, you know, people's grocery bills have been affected in a major way obviously by rising inflation. But something even more important that's going to be a bigger line item in your budget is your car insurance. And car insurance rates have been skyrocketing too.

People people in our Facebook group have been saying my car insurance went up six hundred dollars this year or something like that. It's been like, that's a lot of money to absorb. Significant if you're not Yeah, if you're not bringing in any money and you're trying to live that early retirement lifestyle, and so it's important not just

to bank on a best case scenario. You have to have kind of contingency plans right in place in case inflation runs hot four years on end, and in case you're you have to have that flexibility, right Matt, Like you were just talking about additional options, And if you're banking on things working out perfectly with that twenty five x annual expensive scenario, you might be in for a

route awakening, a pretty sobering surprise. But let's talk about something else that early retirement adherents often run up against, and that's that they end up spending more than they think they will once they do retire. JP Morgan did a study of traditional retirees and they found that those folks often experienced what they called a spending surge in the two to three years post retirement. They often spent on home renovations and fun trips, which makes sense like

early retirees are likely to experience something similar. What's the point of bagging work if you're you aren't going to exploit your newfound freedom and go on some cool trips

and do some excursions and stuff like that. You know, of course, I would say people in the early retirement community, they're likely to take those trips frugally, right, utilizing credit card card points or hostile stays or you know, other low cost methods that are going to ensure that these trips don't cost them nearly as much as the average person.

Of course, they're certainly not guaranteed to spend more, but it's something to be aware of because again, you know, more padding, like you were talking about mat a larger cash cushion can allow folks to increase spending for some of those post retirement excursions without completely freaking out exactly.

And it makes it makes sense too from I guess the traditional retiree standpoint, because oftentimes when you retire, you're you're not anchored to a specific location from a geographic standpoint, You're you're free, right like you are no longer tied to a specific city, which I think oftentimes means that you can then maybe move to wherever the kids are. You can move to the beach, because you do want to be on the beach with the same Scooper metal

detector or but either way, I think it is. It's smart to not necessarily count on the most meager lean existence possible, and it's something else to account for is the high cost of healthcare. And so I'm specifically talking about the premiums that we pay, that folks pay, but the same is true if you end up using your coverage, right if you actually get sick, or if you have

to go to the doctor or the hospital. Makes me think of a quick, frugal or cheap that we could do about me making an appointment Joal for a doctor's visit that I resolved myself, But we won't go there. Let's not. But there are there are certainly going to be ways to reduce these costs, obviously, but they're not full proof. So, for instance, there's going to be more subsidies out there for folks who are buying policies on at the website healthcare dot gov these days, but that

may not always be the case. Health sharing companies that can be another option that can make sense for younger, for healthier folks who are willing to self ensure, but again it's not they're not for everyone because it's not technically insurance. And actually it can be easier to get cheaper healthcare if you plan to live overseas instead of

here in the US. Here in the States. But obviously, like what if you don't want to go move to Portugal with everyone else who's retiring and going abroad who doesn't want to move to Portugal, that it's hard to have a full proof plan because there's just no silver bullet answer to the question of these ever increasing healthcare costs that are going to fall squarely on our shoulders once we've decided to quit our jobs. Yeah, that's definitely.

I mean, I think if you're pursuing early retirement or thinking about it and you haven't thought through the high cost of healthcare, then you haven't been thinking about it long enough, because that is going to be one of those the most burdensome costs that falls squarely on your shoulders. Like yeah, said, it's going to be all on you,

it is, simultaneously, it shouldn't. It's likely not going to be prohibitively expensive, right because I think oftentimes in folks minds, that is a roadblock and it keeps them from even considering early retirement. But God, the encreased the numbers and see how much it's going to cost you, because yes, it's going to be expensive. It's in particular if you haven't been with a company who I mean, there's a lot of new companies out there who are covering like

virtually all of the healthcare costs of their employees. And if that's you, you are in for a rude awakening. But for everyone else, you know, I don't know, if you've been employed by a normal company where you've had to flot some of those bills yourself, you might find that it's actually not all that more expensive than it was being employed. But I think, like you said, it might not be right now because of the great subsidies

for so many people on the exchange. But those subsidies could go away, and so so much depends on whose in power and what sort of legislation pass when it comes to how much you got to pay for the health insurance that you want. Sure, Yeah, all right, Well, let's talk about something else that early retires have to

think about, and that is sequence of returns risk. So let's say you've got your expenses all figured out, you've got enough invested to be able to retire, and you can afford to spend a little extra and you can

afford now that expensive healthcare policy. Well, it's a bowl market and your net worth is growing, But the market could just as easily cool and like we saw a stock market route in March of twenty twenty, right, and last year was pretty rough for investors too, But what if the market remained in a bear market holding pattern for a few years? Right. Complicates things in particular for early retirees who are attempting to live off their investment portfolio.

And of course, yes, the market has returned an average of ten point two percent over the past fifty years, but the fact is the market is unpredictable in the short term and you might retire at the wrong time into an era of low to no growth, which if

you're looking at predictions, which we don't really do. We try to stay away from predictions most of the time, you're seeing a lot of predictions for meager growth in the coming decade, and that could be a difficult thing for regular retirees to endure, right, even if they have social Security to provide some income mixed with those investments.

But if you retire at the wrong time, and you're early retiring, you might find yourself attempting to draw down four percent of your portfolio a year, year after year at an inopportune time, draining some of that capital, straining your ability to actually retire. Well, yeah, that's right, Yeah,

that's sequence of returns or risk. Right. Imagine you're going to live off of your portfolio over the next thirty years, and imagine somewhere within those thirty years you're going to have two years in a row of returns a negative twenty percent. Well, if you experience those two years right after you retire, you're gonna have much much less on hand than if those two years were to occur at

the very tail end of those thirty years. It has a massive impact on your lifestyle and your ability of the ability of your portfolio to hold up over that period of time. And this is also the fear that keeps folks handcuffed to their jobs essentially, Right, Like, folks say that the market could tink, So I'm just going

to work a little bit longer. But at some point we have to be able to confidently retire, you know, even knowing that we can't predict the future, or even knowing that our own health what that's going to be, or what the market's going to do in our first jobless decade or you know, first twenty years, thirty years.

But again, this is where having just maybe a little bit of extra wiggle room and planning for more than just that twenty five times your current expenses is going to be helpful because you might not always want to live as frugally as you're living now. You might think, well, na, I'm always going to want to do the van thing

and drive around the country. May not. You know, you might do it for maybe you'll get the seven year itch, like, maybe you'll do it for five to six seven years, but at that point it might be something that you want to move on from, especially the things that you are okay within your twenties, Like I'm not I know, I'm about to broach forty, and I love being frugal, but I'm not frugal in the same ways that I

wasn't my twenties exactly. I'm just not willing to travel or to do some of the things that I would have done back then to save a buck now exactly. But you know, you may not need to save and invest like a fat fire adherent right like where you're just living high on the hog and you've got tons of nice expenses that you're accounting for, but the lean fire approaches, it's kind of scary. It's a little more risky from our advantage point. Yeah, let's talk about something

else too that really inhibits your ability to retire early. Again, not that it's not possible, and not that it's not a decent goal for some people, but we're kind of trying to. I guess we're like steel manning the case against retiring early here right now. But a lot of people would say, I want to retire early, but I'm literally not old enough to withdraw from those retirement accounts yet, which is a big deal. We talk a lot about

investing in those tax advantage retirement accounts of reasonable arguments. Yeah, and so, well, how am I going to get my money out of these things when the government tells me I have to be fifty nine and a half, which is still just odd. Why half? I don't get it. But that is the age you need to be in order to withdraw funds from those accounts in order to tap them without having to pay penalties, right, And that makes it even tougher to map out a strategy for

early retirement. While maximizing the most efficient buckets for investing for your future. And that's why a whole lot of early retirement adherents opt for a strategy that involves ROTH accounts, so then you can pull those contributions out tax and penalty free in averytime nice real estate, because that gives you cash flow, not just seeing your investment grow, but you're actually making returns on a month to month basis.

Taxable brokerage accounts you don't get the tax benefit, but they're to the same extent, but they're more flexible HSA's. They're somewhat flexible with maximum tax advantages in addition to the regular old four oh one K or four or three B that we love as well. There are ways to take money out of those tax advantaged accounts even before you hit retirement age, but they're not ideal, and so coming up with a strategy that allows for additional

flexibility is key to making early retirement possible. It's not as easy as just maxing out your four ohn K for a decade and then leaving work right. You have to think about how you're going to be able to get the money out in an efficient manner that doesn't come back to bite you and eat away at the

cash that you've so diligently saved up. So now I think we've gone through a lot of money questions here, a lot of the financial aspects of what it looks like to retire early and how there's a lot of stuff you need to think through before you just all of a sudden say yeah, that's my goal. I'm gonna shoot for it, and you willy nilly kind of start meandering down that path. You really need to kind of have your ducks in a row from a money perspective

in order to do it well. But it's not just that, Right, Let's talk about the non monetary and personal aspects of approaching early retirement. We'll get to some of those right after this. All right, we are still asking the question is early retirement a smart goal? And joll we just covered a bunch of the different financial implications, some of the different financial questions that we need to be asking ourselves.

And we've looked at both sides of the equation. Right, We've talked about the income side of the equation, different fluctuations in the market and that how that can affect our ability to retire early as well. As some of the different expenses that we're all going to face. But now let's talk about the non monetary side of the earlier retirement lifestyle. Let's talk through some of those questions, because we think it's worth asking a few of these

questions before going all in. One of those is to think through your time and how it is that you're going to be spending that right Like do you have enough hobbies and interests to pursue if work is no longer going to be a part of your day to day And so in this in an effort to make sure that you are prepared potentially for early retirement, we want you to start thinking through what your idea day is going to be like and what you're likely to

spend your time doing. A friend of the show West Moss, he talks about how the happiest retirees out there, how they have an average of three point six core pursuits and these can be anything from like volunteering at a local homeless shelter. It could be playing music, like playing the piano. It could be wood working or pickleball. That's the newest one, folks writing to the list, and he's actually got a core pursuit finder over at a site

that we'll link to in our show notes. But don't expect to easily be able to find and then work on these pursuits only once you've left your job. We think it is important to prioritize them before you pull the early retirement trigger. We want this process to be something that feels more seamless, as opposed to a clear partition where all right, that was life when I was still working, and this was life after work. We want it to be something that feels more just like more organic,

more blended. What you're saying, these people aren't just going to turn over a whole new leaf and become a new person and find awesome new hobbies once they reach retirement age. They got to start working on those things now. Yeah, makes me like you have to cultivate those interests. Yeah, and so maybe you will like pickleball when you're retired, But have you even gone out to try playing once? Now?

I mean if not, Like, I could see myself playing pickaball retirement, but I've not played once yet, and so I would want to make sure I gave that a thorough go before I all of a sudden assum that I was going to beat the pickleball court three days a week. Makes me think of my mother in law.

She's retired and they ended up buying just a giant RV to drive around in right afterwards, and they realized pretty quickly we thought we were going to spend our times r being around the country, but we didn't like living out of an RV. And that happens to so many people. Well that's why buying a used RV makes so much sense, or because that happens to a lot of folks, or even as like running one exactly given it as who week go and seeing how that works.

Think for you exactly, like think about how you're going to spend your time, but don't just think a bit in abstract terms. You use information from how you spend your time now in a non retired state to say like, well, could I do more of this than I'm doing? But if you're just thinking, oh, i'd definitely see myself doing that,

well you don't really know until you've tried. And you can picture an ideal lifestyle, but it might not be what you think it is, and so you have to kind of, yeah, give those things a go before, like you said, pulling the trigger all together and saying I'm retired early now I'm going to dive into these That

is not a great way to pursue it. Another question to ask is like, what are my closest friends and family going to be doing, because, if you're honest, many of them will likely still be working if you opt to retire, let's say in your thirties or your early forties, Right, are you going to be happy not going to work when the folks you want to spend more time with

don't have the time and flexibility that you have. Maybe you're at the bar but they're not, so then now you've got a problem because now you're drinking alone, and that's not a good thing. I think a lot of people envision that they're going to be spending their early retirement years with people that they love, but the truth is that is harder to come by, right unless you're planning to save up enough to pay for their early

retirement too, which you're probably not. So those are the kind of things that need to be considered when we're thinking about early retirement, well, like who are we going to be spending time with and what are my days going to look like? It's not that there aren't all sorts of interesting pursuits that you can get into as an early retiree. You just have to know what they're going to be, and you have to have thought through what that's going to look like before you decide to

quit your job and put in your two weeks notice. Totally. Yeah, and I'll say, you kind of mentioned this earlier, but it seems like we're kind of we're creating an argument

against earlier retirement. But to kind of flip that script a little bit, I think it can be helpful to maybe change how it is that we think about those retirement years as well, because I think the vast majority of folks they see like their working years, they see that as like the main course, like that's the bulk, like that's the feature film part of their life, and

they see retirement years essentially as like the leftovers. But I think it can be helpful if we actually consider, because what we're talking about here is a long period of time, given life expectancy, that we're going to continue living, and if we sort of flip that script a little bit and then you those quote unquote retirement years as the main course, I think that could essentially change how it is not only that we view relationships, but also

some of the different hobbies that we pursue. Right Like, Basically, I guess what I'm saying is nobody sees leftovers as like a good thing except for me, perhaps I love leftovers.

But if you change how it is that you view though you know, the literally we're talking about decades of life here, I think that might allow some folks to realize, oh well, I think it makes some of the detriment years seem less daunting, essentially, because like we are talking about a big chunk of time, right Like, although COVID has impacted life expectancy in recent years, like, there's still a good chance that healthy how many listeners are going to live a really long time when you look at

the actuarial tables, Like if we're talking about a healthy sixty five year old couple, there is a forty six percent chance that one of them is going to live to the age of ninety five. So do the math there, nine sixty five from ninety five, you're talking about three decades. That's thirty years. And you know, like that's just what someone who is retiring at the quote unquote normal age

is going to have to account for. Earlier retirees might have to plan for something like double that length of time, right, and that only complicates the calculations from a financial standpoint. But again, right now we're kind of talking about the more the mental and psychological factors to think through. And again this doesn't mean that early retirement is not a worthwhile goal, but it does add some important context to

the equation. But I do think that by viewing those thirty years, or if you are an earlier retiree and we're talking about sixty years left, I still think that there's a lot of life to live, right, Like not to discount all the friends that we've made up until the point that someone retires, and not to discount the time that could have been spent pursuing some different hobbies

before you retire as well. So honestly, it makes me think of a gentleman who is sort of like a mentor, I guess, but he is a generation ahead of me. He had kids that were closer to my age, and I remember asking him one time if he felt that the period of time that when he had his kids at home, if those were like the most important years and he was like, honestly, he's like, it's been awesome being an empty nester, like having the kids away from home.

The time that my wife and I have been able to spend together has been so incredibly sweet, and he was still working a little bit. The work that I'm now able to do has been so incredibly fulfilling and gratifying. So I don't know, I guess when I'm just putting an argument out there that the time after we quote unquote retire can also be incredibly fulfilling if we don't

necessarily look at it like this leftover time. Yeah. Well, well, and I think if we don't think about it in just self indulgent terms, which I think a lot of people think of retirement in those those ways, as well as opposed to like productive years, it's very like, how am I going to entertain myself and enjoy the time that I have? And I think if we think about it in terms of like service to others, I think early retirement or regular retirement can take on new and

deeper meaning. Right, So totally, And let's talk about transitioning into retirement because I think it's important to mention when we talk about earlier retirement. We're often talking about something fairly extreme and feels like an all or nothing sort of proposition. Well, I'm either retiring at thirty five, I'm just gonna keep going tell him sixty five. But it doesn't have to be that, and it doesn't have to

be just this all or nothing sort of framework. And before you decide that you never want to work again and that there is no alternative you'll even consider, think about easing into retirement instead. And I think that could look like cutting back on your hours at work now right, This is actually a trend that's kind of starting to happen in general these days. I think people are working on average one to three percent less than they were in twenty nineteen, which I think is a great thing.

Like baby steps speaking exactly, take it back, just a little bit, work a couple hours less a week, he said, all right, all right, yeah, And so if you're like somewhere, if you're like, I'm really interested in this early retirement thing, I don't want to like work fifty hours a week and tell I'm sixty five. I get that. I get that, but why not test out working twenty thirty hours first

before you call it quits. You'll still have income, which is great, but you'll also have extra hours to fool around with and you'll kind of get to see, well, what what what are my days is going to look like? When I have let's say Thursday and Friday. For you, I'm only working Monday through Wednesday. It's kind of like waiting into the waters of early retirement before you just quit your job all together. And it makes me think of my mom, Matt, That's what she did. She's working

three days a week. She's about to fully retire, but she's you know, traditional retirement age. But that kind of helps to see, well, how will I spend this day? And you're kind of going into it slowly as opposed to going from like full on to completely off. Yeah. Yeah, it kind of depends if you were like a wait end, you know, into the shallow wand kind of person, or

if you're more like cannonball off the diving board. You and I think it's important to mention this, Like, we work half days on Fridays, so almost forgot it's it's

kind of gotten normal for us. Yeah, and we've talked about how maybe at some point we would consider doing like no, no, Fridays at all, or maybe half taste Thursday saying half taste Fridays, and so like, there's ways in which well, especially it's easier when you're self employed, I guess, but it's there are a lot of traditional employers who would say, no, we still want to keep you around, but you don't want to work on Fridays. Sure,

it's gonna involve involve a cut to your pay. Yeah, but if they don't want to lose you, they'll often say they'll sign on the dotted line and say, sure, that's fine, that's fine with us. But those are the kind of things I think that cutting back on those hours can help. You see, well would I do with that freedom? Am I completely lost here? Or am I jones in for more time? You know, six months into

that experiment? Totally? Yeah. I think this is why we're such huge proponents of Coast Fire, because by having done that heavy lifting early on that Coast Fire gives us options to then start something like a podcast about money that may or may not make any money, you know, like five years ago were it felt kind of risky, but we also would have been totally fine because we had set ourselves up in a decent position. Obviously, we've continued to invest since then, and we are in an

even better position over the past five years. But essentially, what I'm pointing out here is the fact that we've got options, and that is absolutely one hundred percent something that we want everybody to be able to experience. So you're talking about cutting back the number of hours we work kind of like on a regular basis, but I think looking at essentially taking our vacation days, I think

that is really important as well. Honestly, this might be like the very first up because fewer workers are actually taking time off, and the number of folks who are taking significant chunks of time off for personal enjoyment has been in decline for decades. Um. You know, even with the quote unquote unlimited PTO, like that is becoming a more frequent benefit than I guess just a dirty trick.

Employers are offering up there playing it's not cutting it because they know how we react and they know that unlimited PTO means we're not going to take We're going to do it unless there is guilted into not taking it, unless there's a culture set of that being the path that you should be following. And so if you say that you want to retire early but you're not willing to even take your vacation days off, then it might

not be a great fit for you. You You know, at least make it a point to take the time off that you're given at first. And again, not to point to you and me Jill as like these shining perfect examples, but this is something that I'm proud of us for improving on because I think, you know, a few years in, like maybe let's say three years ago, we're like, oh, the podcast is doing pretty good. We don't. It's it's

hard to break away from it. It's hard to step away and say, all right, we're gonna let's take a week off. Let's take a couple of weeks off for Christmas. Let's take a week off for you know, like a summer beach trip something like that. But I think was it earlier this year we kind of looked at the calendar and we might be taking something close to two months off by the end of this year, not all at once, but kind of scattered around here and there.

I guess I'm tooting our own horn here, But I think that's admirable, and I think it's something that's worth working towards, not just from us. You're not going to get there overnight. It's technic no long time to get there. But I think it's a good goal. I'm a little nervous about this year and how much time we're trying

to get off, but I'm also excited about it too. Yeah, but I think it's good though, because we are working on Obviously, we've worked on it from a financial standpoint, right, we have prepared and we are hopefully in a financial position to be able to handle that. But it also takes practice on an internal mental level as well, even aside from the finances of it. From a mental personal standpoint, do we have the guts? Do we have what it

takes to step away from work? And I know that sounds silly to say, but I think it takes more courage than people realize, because oftentimes, when you enjoy your work, it can be so easy for us to find ourselves like gravitating back towards it, essentially as opposed to pursuing some of those other things that we have identified as being so important, especially when we didn't grow up in a culture like Australia where they take like two month

holidays like every single year, which which is awesome, mates, but that's just not the culture that we live in here, and so we feel I think, guilty when we take our vacation time, or we feel guilty by saying, hey, listen, I want to work thirty or so a week and not forty. Those are the kind of things that in the US culture, those are not normal, but I think they're worth pursuing instead of saying it has to be

all or none. These are like in between steps that people can and should consider and take before they get to that point totally for that mental reason, but also for financial purposes too, And I think many retirements are just another option, like consider taking a full month off or longer, maybe a few months. And especially with the fact that people are working remotely now in such large numbers,

this is something people can do. They can work from abroad and take weeks off while they're abroad and get a taste of what it would look like to live somewhere else if that's what they're A friend of the show coach Carson, he describes many retirement like this, and I really like this what he says. He says any extended break that alters the rhythm and ingrain patterns of

your work and home life. Which is a great approach, like throw a wrench in things and like it and give a many retirement a shot, you know, and more companies are offering things like sabbaticals for employees who have been there at number eighty years. You might not be

able to get paid for it, but who cares. Like, if you're getting to that financial position where you think you're ready for earlier retirement, take the sabbatical first, and kind of even if it's unpaid, give it a shot, because early retirements even more complicated than a two month stint off right and a shorter endeavor makes sense to me. I think before you go all in and you say early retirement lifestyles for me, well, how do you know? And have you have you taken the approach? Have you

tried it out yet? And we'll link to one of a blog actually that Coach Carson wrote about many retirements. I think is really helpful for people who are considering one totally. Yeah, so what is it? Ever since you mentioned the Australian and you said mates, so after high school, what is it called when they take essentially take a year off when they'd like travel the world. Rum Springer, No, I'm just kidding. I don't know, like there's there's something different,

there's a term for it. But but yeah, I mean I agree. I think there's a lot of different life experiences that we should be opening ourselves up to. Whether it's after a career of having worked for multiple decades and it's just time for us to start testing the waters a little bit and saying, oh, is this something that I want to pursue or achieve sooner or even

you know, like right after high school. I don't think it would be a bad idea to travel the world and see all that is out there before you sign yourself up for four years of indebtedness with a high cost of college. Or yeah, I take a little gap here, gap year, that's that's the word. Yeah. I thought you were talking about what Australians do and I was like, I don't know what they do. No, you're talking about it's just yeah, generally speaking, take years, you take a

gap year. Yeah, Well, I mean, well I took three months off. I quick I took I got my first job in radio. I did it for six months and then I was like, you're not really working out for him, and so I cry, you know, you're probably you're you're getting to the end of your bank account basically right. Well, well, the pay was not very high, but I'd saved up like five grand and I went on a three month trip around the United States. I mean you're three months. Oh,

I thought you said the three months didn't work out. No, the three months was great, Okay, it was the job that wasn't working. I was like, this is I don't really want to be here a bunch longer. And so but I'm young enough. I can find something else when I'm done with this, and I can live so cheaply in the meantime that it doesn't matter, and that three months well worth it. I've got the best memories from that.

So I don't want people to think that this is like some sort of like pro work until you die episode. And I hope that we've come across pretty clearly in that in that regard that you and I like, I'm planning to retire at some point, probably I'm about to turn forty. I'm not going to retire like in my duels, like not gonna live forever, not gonna retire anytime soon, though, But taking these interim approach at least, I think for you and me, Matt, that makes more sense. For us.

It's like, yeah, let's take a significant amount of time off during the year. Yeah, let's do half day Fridays, and but let's also still have meaningful work that we enjoy to do with part of our lives. So I don't know, it's all about kind of finding balance, and ye's going to look different for everybody else totally, yeah, Because I mean so early retirement is going to attract a certain crowd. I think for some that goal is

going to be incredibly enticing. We're all for increasing your savings rate, We're all for ramping up your financial margins so that you are going to have more flexibility and more choice in your life. But quitting work all together like cold turkey right about now, even though we likely could, that doesn't sound all that great, you know, like we've chosen instead to pursue something that we love instead of

opting out of work altogether. And so we wanted to talk about this today because we are trying to encourage everyone out there to choose your financial goals wisely. Because I think they're going to impact how it is that you live life now, because like early retirement, it might make the most sense for you, we want you to think about some of the alternatives that will make your life awesome potentially in the here and now, before you've dedicated your life to a goal that might not actually

make you happy. And you know the other thing too, If you pursue early retirement while you neglect your health and relationships, it's not going to be worth it. That's something as we have friends who are in the fire space, that is something that they have continued to come back to.

They've said that if they could do it all over again, they would possibly continue holding the job that they had with all the great benefits, but that they would have prioritized different things like taking care of their body, meaningfully investing in some different relationships along the way, as opposed to that nose to the grindstone mentality when a lot of them were working fifty sixty plus hours to achieve this goal in a shorter time frame, which led to

unhealth for a lot of those working years. And so I think that is one of the trade offs that a lot of people trying to pursue earlier retirement end up making and so those interim years until you reach that point, they become kind of a slog. They become kind of hard to remember. Maybe you didn't get to enjoy yourself. Maybe you missed out on a fun trip with friends, because no, no, no, all my extra money's got to go into my four one K and I

RA and HSA right, because my goals retiring early. But I think if you take that hard nosed approach to early retirement, I think you're gonna retire early and do it well. But I think if you take that hard nosed approach to retirement to early retirement, you're likely going to have missed out on a lot of great stuff along the way, exactly. And those are years that you may never be able to get back, you know, like youth and flexibility and other and you and me the

ability to go without a whole lot of sleeve. Yeah.

As saying this as somewhere who had their kid wake up, we're already to the four times in the middle of the night last night, you and me, We're already to the point in our lives where we can look back on some of those years with fondness and it's like we're removed enough from youth that I look back and I'm like, oh, those were good times, and I'm glad that I wasn't like hold up in an office working too much, trying to pursue this goal, like too dedicated

to the cause of financial independence. And it's not that, like, like you said, frugality and investing and developing more margin your life aren't important. But man, if it means that you're missing out on the rest of the good stuff, then that to me, I think that's a mistake. Exactly totally agreement. Let's get to the beer. You and I we enjoyed a Ferris, which is a coffee Imperial stout. This is a beer by New Park Brewing. Another one sent to us by Matthew. Thank you so much for

sending this one our way, Joel. What are your thoughts on this one? So this one was roasty and a little bit bitter. Oh yeah, which I kind of like because it was made with coffee from Jay Renee. Okay, I guess that's the coffee roaster that's probably they're in West Hartford. Okay, Yeah, So I would say this was a really good a really good stout and I some people really like the sweeter milk style stouts. I prefer

kind of a more bitter coffee stout. So this one's up my alley with a little more pep in the step. It's almost like an espresso. Yeah, kind of like an espresso style coffee coffee stout. So I dug it, what about you? Yeah? It was pretty so not espresso from like an acid d bite kind of way, because I would say that this drink really smooth, like it almost was like a milk stout, had a nice creamy mouth feel too, like there was some lactose in there or something. Yeah,

but yeah, really well balanced. Definitely enjoyed this one. And did you pick up on the label? By the way, this was called Ferris. Do you understand the graphic? Nope? Have you ever seen like magnets when they interact with like metal shavings? So Ferris is like fee, the symbol for iron. Right. Oh yeah, So I think it's supposed to be like the way that metal or iron reacts to magnetic fields, right, science nerd, you get it, you get it. You're the bill ny how the money Matthew exact? First,

I was like, what is on this label? And then when we read the name of the beer, I was like, oh, Ferris like iron, not like Tim Ferris spelled differently. Anyway, we hope that you've enjoyed this episode, if you got a lot of value at this one and you haven't yet left us a review over at Apple Podcasts or honestly even over at Spotify. They make it so easy, just match. They got the five stars right there, you know,

go all the way to the right. Include all five stars if you don't mind, But it really does help us to get the word out, helps others to learn about different personal finance concepts like earlier retirement. Will make sure to have links to some of the different resources we mentioned during this episode up on our show notes at how to money dot Com. No doubt. All right, that's going to do it for this episod Old Matt until next time. Best Friends Out, Best Friends Out.