A while back, Forbes had an interview with Jeremy and Winnie from Go Curry Cracker. They lived a modest lifestyle and invested most of their income which enabled them to retire in their 30s. They planned to travel the world and live off their investment income. They just had a baby and are taking a short break in Taiwan until they are ready to travel again.
Of course, this being the internet age, we have some criticisms. Mainstreet.com interviewed several financial advisors and here is Why Retiring in Your 30s is a terrible idea for anyone. Early retirement isn’t for everyone and it is predictable that financial advisors are against this. They have been trained to help people retire at 65 and they can’t imagine the alternative. Financial advisors are the last people who would support early retirement because you’re picking their pockets. Instead of hiring financial advisors for 20+ years to help manage your finances, you are taking control and planning to retire in your 30s and 40s.
Why early retirement is a terrible idea
Let’s go through some of their concerns and see if I can make some rebuttals.
You are not adding value to anyone – One of the main concerns is if you can retire by 40, then you must be special. You are letting your talent and skills go to waste by shutting down early. You are depriving the world of your special talent and that’s just unconscionable.
Come on, unless you are a genius like Steven Hawking, you are replaceable. The world will go on even if you retire early. Actually, by retiring early, you are clearing the way for smarter and hungrier young folks. There are only a few truly irreplaceable people and guess what – progress will continue even after they leave. Everyone likes to think their work is important, but the modern world is set up so most of us are just a cog in the machine. A financial advisor should know this because there are plenty of financial advisors out there.
As for adding value, I am adding a huge amount of value to myself and my family. Our quality of life is vastly improved now that I’m not an engineer anymore. Life isn’t all about money, productivity, and efficiency. I wasn’t a genius engineer anyway; there are plenty of people smarter than me.
Retirement period is too long – Normally, retirement can last 20 to 40 years. If you retire in your 30s, then you’ll need to add 20 years to that. That is a long time and life can take many drastic turns in 50 years. You might have a child or two, get divorced, get remarried, or became ill. You can’t plan for all possibilities. Can your retirement portfolio last 50+ years?
It’s true that life isn’t static and a lot can happen in 50 years. Our investment looks like it could support us indefinitely according to the 4% rule, but we can’t know for sure. However, we don’t make a plan and stick to it for 50 years without making any changes. We will continue to evaluate our finances every year and react accordingly. If you are smart enough to figure out how to retire by 40, then you can figure out what to do when life throws you a curve ball. Divorce is a biggie, though. You’re on our own for that one. Anyway, those kinds of life changes occur whether you’re retired or not. I’m sure I would have a lot more health problems if I continued working in a stressful job that I hated.
You will be bored – Yes, some people will be bored out of their minds after they retire. Many people identify themselves through their job and retirement can be a difficult adjustment. This is a good thing to find out in your 30s. If you can’t handle retirement, then you can go back to work. It’s much more difficult to go back to work when you’re in your 60s. Personally, I haven’t had a single boring day since I quit my job almost 3 years ago. I’m sure most early retirees feel the same.
You won’t be able to keep up with your friends’ and family’s spending habit – Your friends and other family members will get promotions and earn raises. You’ll be left behind on the spending curve and you’ll be sorry. This shows you how financial advisor thinks. They cater to the mainstream and it is our culture to keep up with the Joneses.
Early retirees need to think differently and we eschew the Joneses. We make financial independence our mission and that require a different trajectory. We need to spend much less than we earn so we can invest our saving. Keeping with others isn’t a big concern for us. If your mission is to keep up with the Joneses, you will never reach financial independence. There will always be someone who is richer than you (unless you’re Bill Gates or Warren Buffett.) They are giving most of their money to charity so beat that.
Working keeps you occupied and prevents you from spending money – “Unless you plan to sit at home idly once you retire, your expenditures might grow in retirement rather than shrink.” This is another display of rigid thinking by the financial advisors.
It’s true that your expenses may increase when you retire early. Health insurance in particular can be a big expense for early retirees. However, working isn’t cheap either. It takes money to look professional. You need clothes, a nice vehicle, and possibly time spent in a salon or barbershop. You spend most of your time working so you need to hire services to do a lot of stuff for you. Many families eat out or buy convenient meals because they don’t have time to cook. Work also ties you down to a particular location and for most of us, it’s a location with high cost of living.
When you don’t work anymore, you are free to live anywhere you want. Jeremy and Winnie had a much higher quality of life in Mexico and they don’t spend as much as when they were in Seattle. We are still in Portland, but I hope to live in Thailand or another more affordable country for half of the year when we both retire. If you are creative, you won’t spend much more money after you retire.
Early Retirement isn’t for everyone
Early retirement really isn’t for everyone. Our culture pushes us to work hard and spend most of our earnings. Financial advisors mean well, but they are part of the machine. It’s their job to tell you to work until you’re 65 so they can earn some commission. If you want to get out of the rat race, you have to think out of the box. You need to work hard early on and invest a significant chunk of your income so you can take advantage of compounding. You have to be adaptable for the rest of your life so you can deal with surprises. Most importantly, you need to take control of your finance and make financial independence your mission. Financial advisor can be very helpful, but sometime you need to ignore good advices if you want to go your own way.
Do you think it’s a good idea to retire in your 30s?
Can you really retire for 60 years? Paul and Vicki Terhorst retired 30 years ago in their 30s. They seems to be doing just fine.
Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!
Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.