My Early Retirement Litmus Test
The following is a guest post from Rob, a fan of My Own Advisor, who enjoys retirement stories.
A recent column from Mark generated tons of buzz and a lot of heated questions. Maybe rightly so. However, I have a different take.
Based on the comments I read, people were quite skeptical about how someone so young (age 32) can “retire”. As one person calmly put it, “the numbers simply don’t add up.”
I can appreciate this skepticism. It’s par for the course these days with social media.
Yet talk to any early retiree who dares to share their story and you’ll find the same reaction. Derek Foster (profiled on Mark’s site here), MMM aka Mr. Money Mustache, Frugalwoods are a few examples but the list goes on.
I mean really, how on earth can anyone, in the case of Frugalwoods, spend under $1,000 per month outside of their mortgage? It can’t be done! Or can it, based on your choices?
Anyone who’s departed from the age-65-retirement model is usually looked upon suspiciously. The younger you are the bigger the barbs. As of fan of reading these retirement stories, I put together my simple two-part litmus test to see if someone is really retired or just flat-out bullshitting you.
Part One – The Math
To paraphrase Charles’ Dickens famous quote:
Annual investment income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result early retirement. Annual investment income twenty pounds, annual expenditure twenty pounds ought and six, result employee.
It doesn’t get any simpler than that. If your investment income is greater than your expenses, then you really have no need to earn additional money. Of course, the devil is in the details but in the end math will prevail.
Part Two – Mornings
This might seem like a very odd test to prove you’re truly not an employee anymore. But bear with me. Again, this is my post not Mark’s.
Everyone claims so-called retirees like Kornel Szrejber or Derek Foster or many others can’t possibly be “retired” because they have businesses to run, they write books, they own blogs, and thus are wage slave earners just like most of us – not early retirees. I mean if you were truly FI (financially independent) then why on our great green earth would you work?
(Today, for example it was my intention to write this blog post first thing this morning. But when I got up it was like meh, really don’t feel like it, so I watched an hour of TV. Then I wrote this post for Mark.)
Why Early Retirees Still Work
I can tell you from personal experience why…
Early retirement can be boring. Sure, the slopes or trails are far less crowded on a Monday but that’s because all your friends are working. What good is a wide-open trail if you don’t have anyone to share it with?
Not working can be lonely at times. But here is why any early retiree works: work is way more fun when you don’t need the money. You can’t possibly appreciate that until you’re there.
Pension Follows Passion
I still remember the massive flame war that Derek Foster got into when he first published his book, Stop Working. (Check out a summary of this online storm from one of Mark’s friends who wrote for Canadian Business magazine – article from 2009.) The arguments then are the same now. He can’t be retired, he’s too young. He still works. He makes money from his books, he’s not credible. The names may have changed but the arguments haven’t.
When working for big money is no longer your biggest issue you can follow your passions. And when that happens, a pension (an income from your passions) follows.
Derek Foster, Mr. Money Mustache and even our latest victim Kornel Szrejber are guilty as charged – all of them have their own business. They work to earn some money, sure, but they don’t really need it to cover life’s necessities.
I realize for every early retiree there is an element of frugalness, luck, great investment timing and much more. Check out Mark’s self-made millionaire guide for a recipe that has worked for many including the names I mentioned above.
But even at my age, 57, it’s not too late – to get your financial act together (as Mark suggests) and chase some dreams. I honestly never expected in a million years that we might be positioned where my wife can take a buyout and leave work at age 57. Sure, age 57 is certainly not the new 32 but considering most baby boomers may never retire or some Americans have nothing saved for retirement that’s still pretty cool.
The following is a guest post from Rob, a fan of My Own Advisor from Germany.
What’s your take on some early retirees – who still work? Do you question their methods? Their math? Their choices? Leave a comment as always below and continue the dialogue.