By Jamie Johnson, WCI ContributorThe FIRE movement has been around since the early 1990s but became popularized in 2010, largely thanks to personal finance sites. Once the concept became more mainstream, many in the personal finance community began embracing the idea of an early retirement. But does that early retirement also come with a side of regret?
Historically, retirement was seen as something people did once they had to—you quit working because you were too old or became ill. Others lost their jobs due to layoffs or downsizing and found that retirement was the only option. In comparison, there’s something appealing about the idea of reaching financial independence early and retiring on your own terms. This allows you to spend the best years of your life in retirement.
But many FIRE devotees don’t consider the possibility that they could end up regretting an early retirement.
3 Reasons You May Regret Early Retirement
It’s impossible to live life without regrets, and when it comes to early retirement, there are two possibilities you must consider. First, there’s the possibility that you could regret working too long and wish you’d retired sooner. That’s especially true if you’re financially independent and burnt out in your career. However, there’s also a chance you’ll regret retiring too soon and wish you’d spent a little more time working and saving. Let’s look at three reasons you might regret early retirement.
You Could Have Earned More
According to the research firm Payscale, full-time employees tend to hit their peak earning years in their 40s and 50s. So, if you choose to retire at age 35, there’s a chance you could look back with some regret.
Working for an additional 5-10 years gives you more time to save and take advantage of compounding interest. Putting more money aside for retirement allows you to have a lower withdrawal rate so you can go into retirement with more ease. It also makes it easier for you to deal with lifestyle inflation.
More information here:
Financial Independence is Not a Number
Is FIRE Really Just an Empty Goal?
You’ll Probably Spend More Than You Think
Most people assume they’ll spend far less money in retirement, but the reality is quite different. A J.P. Morgan Asset Management study found that many new retirees spend quite a bit on travel, home renovations, or relocating. Of course, you probably didn’t make it to FIRE by indulging in a lot of needless spending. But even if you’re careful with your money, the odds are still high that you’ll spend more than you think you will in retirement—at least in the first several years, aka the go-go years.
Inflation has been high for the past few years which can quickly eat up your retirement savings. And if you’re too young to qualify for Medicaid, you’ll have to spend money on a good healthcare plan. According to Fidelity, the average 65-year-old needs $157,500 saved after taxes to cover healthcare costs in retirement. That number gets much higher if you’re retiring in your 30s or 40s.
You May Live Longer Than You Anticipate
Due to advances in healthcare, you’ll probably live a lot longer than you think you will. According to AARP, someone who retires at age 55 needs to make their savings last an average of 28.6 years.
The earlier you retire, the longer you’ll need to stretch out your retirement savings. The average monthly Social Security check is $1,907, which is only about $400 more than the average cost of rent. So, Social Security won’t be enough to help most people get by during retirement.
More information here:
8 Things to Do with Financial Independence Besides Retire Early
Life After Financial Independence
What Do You Need to Retire Early?
Of course, life is short and you don’t want to fall into the trap of waiting “just one more year” to retire. Burnout is increasing, especially among physicians, and if you’re financially prepared for retirement, there’s no point in staying in a career that makes you unhappy.
The key is to look for a balance when it comes to minimizing regret. You don’t want to leave your career and retire before you’re ready, but you also don’t want to look back and wish you had retired far sooner.
Ultimately, if you can meet the following criteria, you may be ready for early retirement:
- You’ve achieved financial independence by saving at least 25x your annual expenses
- You have passive and active income that can cover your expenses
- You’ve fulfilled the majority of your career aspirations
- You have a plan for retirement—you’re retiring to do something, not to escape something
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Thanks for writing this post- it was just what I needed to read today. Unfortunately I am dealing with the serious diagnosis type issue that you listed above so retirement may be forced on me soon anyway. I also just found out that my large medical corporation employer is already hiring someone to replace me so it may all be irrelevant soon. But I was just weighing things in my mind and this post provided a perfect framework.
I would also add the issue of guilt into the mix of influencing retirement decisions. I have been burnt out and strongly thinking about walking away for awhile but struggle with the guilt that I have the knowledge and means to help more families. I spent many years to train and have benefitted from the efforts of many teachers and mentors as we all have to become a physician. When is our duty to help others satisfied? I struggle with that question as much as any issue when considering retirement: my own needs versus the needs of future patients I could possibly help.
Thanks for what you do!
I can relate to all that. Guilt, purpose…all important to the decision. Here’s Richard Nixon of all people weighing in:
https://www.youtube.com/watch?v=YPAesqaJ9tc
Wow- words of wisdom from unexpected source. You can clearly sense the life experience in him backing up those words. Thanks for sharing that video!
All most of us know about Nixon was that he was impeached for Watergate, but there was certainly a lot more he did in life.
For sure. Lots of folks on the right (and left) forget that he founded the EPA. Also, opened lines of communication with Russia and China. Still did some very bad things, but some good things as well.
I am sorry to hear of your diagnosis, and your situation at work sounds rough.
That guilt can be assuaged by the fact that your employer seems to have found your replacement already. You can help other families or you can spend more time with your own. After all the years of putting others first, now may be the time to make yourself and your loved ones the priority.
Best,
-PoF
Tough situation, for sure. But at some point, you have to take care of yourself first, just like in finance, you have to pay yourself first, otherwise you can’t help others. Hopefully, this is just a short break for you, and you can return part-time, or in some other capacity that satisfies your will to contribute. Good luck.
Don’t need to post this, but I think your pre-requisites reads like all four are “or”, which I don’t think is the intent. Perhaps just combine the first two or sub-bullet the “or”. Great article.
I hired a coach to walk me through my thinking before I FIREd. Best $400 I ever spent.
I am making it happen this year.
I am 58 in April. I’ll finish with full time work in August and we will (hopefully) have sold our “big house”.
I’ve posted here before on the “big dog” conundrum – that is that tall men don’t live as long. My financial plan ends at 85.
I’ve also posted on the concept that I don’t see too may people over age 80 with enviable quality of life due to the changes associated with aging. Only one male in my family lived past age 85, going back several generations on both sides. My father spent his 70’s dying slowly of Alzheimer’s.
My father (an RN) had dropped to part-time at age 62 and retired fully at age 65 on social security alone, then subsisted on about $700 a month for almost 15 years in (1980 to 1995) and his advice was: “Don’t end up like me”.
I have a plan, a budget, a small pension (from age 60 to whenever), and can work very part time and cover our new budget with one day a week of work and two weeks of locums work. Lucky me.
Good luck on this decision. Mine is made. No guilt, minimal worry, and a backup plan to work more if needed.
Congratulations on reaching the finish line!
Somehow, I was unaware of the connection between height and mortality, but I just looked it up, and sure enough, the data doesn’t bode well for people like me, Dr. Dahle, or you, apparently.
But at least I’ll be able to reach things on the top shelf at the store and the cabinet above the fridge while I am still around. 🙂
Cheers!
-PoF
I have estimated the new safe withdrawal rate to be 0.5% for Millennials, which is controversial and not something people want hear.
https://millennialmusingsonmoney.com/safe-withdrawal-rate/
However, you can’t QE to infinity without severe repercussions.
Fortunately, I have reaped some of the extraordinary gains for 2021. Still, I think most people are drunk with optimism of future returns. I think many FIRE folks don’t talk about the fact that they’re doing odd jobs to make ends meet for a similar time commitment yet less pay than they were making before. Successful FIRE folks are running a fully online business with significant passive income. They’re making good money with a nominal time commitment. That’s the goal.
I think the key is to be doing what you love for as long as possible while saving and investing.
I’m sorry that’s ridiculous to consider the SWR to be 0.5%. Put it all in 0% TIPS and I Bonds (i.e. 0% real) and you can go 50 years at a 2% WR. 3% is already very conservative for an early retiree. Anything lower is silly.
At any rate, a variable strategy is far smarter.
For someone with a 50+ year life horizon, I don’t think 0.5% is ridiculous. Others, like Financial Samurai, have arrived in a similar ball park. The publication that quoted the ubiquitous 4% is now old and somewhat flawed in its methods as it applies to today. Inflation will likely be 7% at least, thus you need to get > 7% for a real return. That’s even if you believe the published 7% inflation, which is always an underestimate.
I HOPE 0.5% is ridiculous.
Well, certainly the longer the time horizon the more uncertainty there is. But come on. 0.5%? That’s insane. Run the numbers. You’re talking about spending 1/200th of your portfolio per year. So without inflation, it’ll last 200 years without any growth whatsoever.
Now you’ve got to adjust for inflation and for likely growth and for the fact that no one is going to live 200 years. When I do that, I get back up into the 3-5% range. You really think there’s zippo real growth over 50 years? Really? That’s extraordinarily pessimistic.
Predictions are always difficult – especially when they are about the future. Ha!
You seem pretty sure of all this. 7% inflation? Possible, but not certain by any means. Many economists I follow are quoting well less than half that #.
And as far as investments:
Vanguard’s 10-year annualized return projections are as follows:
Global equities: 5.2% – 7.2%
U.S. equities: 2.3% – 4.3%
Global bonds: 1.3% – 2.3%
U.S. bonds: 1.4%– 2.4%
If you aren’t sure, then save more, work longer, spend less. There is pleasure and virtue to be found in serving others, striving for goals, living frugally, and investing well. Those habits serve us well no matter the SWR.
The U.S. Bureau of Labor published 6.8% and this is a well accepted figure.
https://www.bls.gov/opub/ted/2021/consumer-prices-up-6-8-percent-for-year-ended-november-2021.htm
I shouldn’t argue with Alexander Hamilton. But you are talking about the past (2021) and I’m talking about the future.
Here’s a quote from today by BU economics professor Larry Kotlikoff: “ Actually, the market’s estimate of annual Inflation remained fixed at 2.25%. I.e., the average implied inflation rate in December was the same as in June. So, we’ve left our default inflation rate at 2.25%.”
You talking about the spread between a nominal treasury and a TIPS? Seems as reasonable an estimate as any, but who knows when the Fed is monkeying around.
QE likely has little bearing on anything.
I came to this article from another one on that very topic. (I also come here regularly anyhow).
Check it out…
Is the Fed Responsible for an 800% Gain in the Stock Market?
https://awealthofcommonsense.com/2022/01/is-the-fed-responsible-for-an-800-gain-in-the-stock-market/
0.5% at what asset allocation and for how long a retirement? Neither your comment or your linked article give any context. Have you actually done the math? A millennial looking to retire and spend 100k a year needs 20M to retire? 250k/yr needs a 50M portfolio? That is so ridiculous I am going to have to assume you are trolling. By the way, Financial Samurai is not exactly great company to keep.
The absurdity of the 0.5% safe withdrawal rate has already been addressed, so I’ll ignore that.
I would like to speak to the comments on successful FIRE folk and point out that for every FIRE blogger or side hustle podcaster, there are thousands of people with no online presence or substantial side gig living their early retired lives with little or no fanfare. You don’t read about them because they’re not being written about. But they’re out there, reading the blogs, participating in the Facebook groups, subreddits, etc…
Cheers!
-PoF
I imagine 95% of Camp FI attendees don’t have a blog/business of their own, correct? Of course, many of those aren’t FIREd yet.
True and true.
I don’t think you can use 7% inflation going forward on a long term basis, and I don’t think a 0.5% WD rate is realistic either.
If those are true, and a 4% drawdown doesn’t work for 20 years, I’ll be broke by age 78 and hope my kids have a basement apartment for me.
I hope Depends undergarments are affordable in 2040. By then, my major concern may be when my next colonoscopy is scheduled. Again, I’m not finding the 80’s to be an inspirational decade. I’m not Betty White. Little old ladies live to be 100, but tall men clock out at 75-85.
I’m sure there are anecdotes to the contrary and I hope to be wrong, but I’m spending a lot of my money by age 75. I’m definitely not interested in giving it to a nursing home…
It’s not just tall men, it’s all men that die earlier, vs women.
And it also probably relates to body mass in tall men, as much as being tall.
E.g. tall and beefy = earlier demise. Tall and skinny = you might last a bit longer. 😉
Mortality
https://www.cdc.gov/mmwr/volumes/69/wr/mm6931a5.htm
Life Expectancy
https://www.cdc.gov/nchs/data/vsrr/VSRR10-508.pdf
https://www.simplyinsurance.com/average-us-life-expectancy-statistics/
Great post PoF. There are 3 big reasons that prevents someone from retiring early. (Even when they want to):
1. Lack of purpose in retirement : some people don’t like to travel, exercise, follow their hobbies. They never worked on them or simply don’t know how to. They don’t know anything besides work, sitting down and talking about medicine or chatting with work colleagues. Like relationships, they never invested time and effort in their families, friends or hobbies.
2. Lack of option: there are only few specialities that give the option for people to work less or create their own schedule to overcome burnout and enjoy their work more. ER, Hospitalists or urgent care to name a few. An Endo or rheum has very limited option to work part time or go locum . Add location preference, forget about it.
3. Lack of confidence ( Guilt of quitting early): a 60 y/o vs a 45 y/o physician quitting the workforce for the same reason is seen with a different lense by their family, peers and society.
Also, do not take financial Samurai or Jim Cramer too seriously. They are entertaining and are good at talking such absurd things to draw attention.
The problem with a 0.5% SWR is that even it can fail. I’m in the 0.01% camp and you should be, too.
Yeah I retired at age 60, now working about 4-5 24 shifts a month earning $80,000/year. I pay for my own health insurance. I withdraw 3% of my savings/year. We sold our big house. It has been a big change.
I couldn’t keep doing the full-time trauma/acute care surgery thing any longer. Totally burned out and sleep-deprived, no help from hospital. The sad thing is that I spent years accumulating vast amounts of knowledge and skill that is now slowly going to waste. I see the younger surgeons struggling without a mentor. The hospital doesn’t recognize it. Oh well, life moves on.
I now work for a small hospital system as much as I want and they are happy to have me. It is low stress and I feel appreciated. I’ll probably do this for another year or so. Looking around I see there are lots of doctors gravitating to a similar set-up: Work hard for 15-20 years, then do part-time as needed and desired.
Sincerely,
Anonymous
I’m not sure why you are using the phrase “retired” while you’re still working the equivalent of 15 days a month! That’s full-time in some specialties!
Sorry to be the Internet Retirement Police (my kids don’t believe me either when I tell them I’m retired), but I do applaud your efforts to find a sustainable and enjoyable level of work that is right for you.
I have experienced events on both sides of the reasons to retire early vs late. Another reason to keep working is you came to medicine late and still owe student loans. Medicine is my third career and I still have a pile of loans.
But as WCI is fond of saying (and I definitely find to be true), no doctor is more than 10 years away from financial independence.
I am mid-50s and have been practicing about 10 years now, but only saw the “financial light” about 4 years ago. I’m a relative super saver now, and plan to retire in about 5 years, hopefully still being fit enough to enjoy some of my active hobbies of fly fishing and mountain biking.
Although I don’t accept the predicted 0.5% as the maximum safe withdrawal rate, by chance that is about what we are planning to do. Maybe a hair less. More if there are big changes in tax laws, prolonged downturn in the markets or major increases in our expenses.
Calculating SWR based only on current 10 year Treasury yields and some arbitrary inflation rate does not provide much guidance. The Trinity study assumed a meaningful amount in stocks, not all in T bonds.
The study also looked at a 30 year retirement. Early retirees, if healthy, should plan for a lower SWR based on longer retirement.
I figure I will retire when health or demand for my services mean I cannot work longer. I do not know when that will be.
I hope NOT to have a long retirement. That would be a long period of such poor health, physical or mental, that I would be unable to be economically productive. Sounds horrible.
On the other hand, kicking the bucket in my office, where hospital staff, rather than my family have to deal with the cadaver would be far preferable to dying at home.
I’m curious what sites people are using to determine if they are ready to FIRE? I’ve tried the vanguard nestegg calculator and Firecalc and always aim for 100% success that my money won’t run out….even 5% possibility of failure scares me especially being a petite Asian woman I may need to plan for a long time horizon like 50y even if I plan to retire at 50yo based on my observations of asian women longevity around me…a blessing and a curse I guess?! What ballpark should I be aiming for if I had to plan for a 50y retirement, spending ~100K/y??
Figure out how to use this website…
https://www.portfoliovisualizer.com/financial-goals
Fill out the starting portfolio, ending portfolio and financial goals tabs.
Use this site to run any ‘what if’ scenario you can think of.
It’s a very powerful tool.
Around $2.5-$4 million is the ballpark.