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By Dr. Leif Dahleen of Physician on Fire, WCI Network Partner
Yes, there are risks when retiring early, and people are quick to point them out when a person makes that choice. What about the risks of not retiring early? Those don’t get as much play.
I suppose ordinary people are not like surgeons at grand rounds. That is, they don’t particularly enjoy talking about morbidity and mortality.
However, there is a very real risk of illness, injury, and death, and the closer we get to a typical retirement age, the higher those risks are. We can protect against the financial implications of them with products like term life and disability insurance, but how do we protect against those things destroying our retirement plans?
The best way to maximize the odds of enjoying the long, healthy retirement you’ve got in mind is to retire as soon as you possibly can. That’s just the math. The longer you put it off, the more likely you are to miss out on the ideal post-career life you’ve envisioned for so long.
The Risks of Retiring Early
I should start by pointing out some of the obvious risks you accept when you do retire early. There’s a chance you could run out of money. Working as little as one more year can dramatically decrease your chance of failure. Your Social Security checks will be smaller. Plan accordingly and forecast your future benefit so you know what you’ll be giving up by retiring early. You might get bored. OK. Go back to work, then.
If you are unprepared for an abundance of free time to hit you all at once, any number of issues can arise. Relationships can be strained. Your social life may suffer if work provided most of it for you. You might take up dangerous hobbies that you never had time for before. It is best to go into retirement with a plan for your time, money, and relationships. You know, retire to something (or on something).
More information here:
Are Physicians Who Retire Early Abusing the System That Made Them Rich?
How Soon Do You Plan to Die?
You will definitely die. So will I. We just don’t know when. While the question posed sounds morbid, it’s just another way of asking how long you expect to live.
There’s plenty of data out there to show how likely a person your age is to live another year, decade, or 50 years. There’s a tiny, but non-zero chance that I may not survive the two days between writing and publishing this article. Conversely, I might live to see my 116th birthday, but that outcome is similarly very unlikely.
Flowing Data uses the Social Security Administration’s data set to show a range of possibilities with individual outcomes randomly generated based on probabilities.
Here’s what I got from a few minutes of running the simulation on Fast mode at age 45. I encourage you to run a simulation of your own with your gender and age, watching the gray balls fall where they may.
Based on my results, it appears that the mere contemplation of one’s own mortality may contribute to increased odds of dying within the next year, but I’ll chalk up that “fat tail” on the left to randomness.
There’s a 4% chance I won’t see my 55th birthday. Those are 1 in 25 odds that I’ll die in the next decade. The odds of dying in the decade after that are more than double, and I have a combined 13% chance of dying in the next 20 years before celebrating my 65th birthday. The odds of living to 85 are stacked against me at a 61% chance of death to a 39% chance of still being alive. The statistics tell me that I’ve got only an 8% chance to live to 95 or older.
Now, it’s important to realize that these numbers are based on me being average, and my mother has assured me for 45 years that I am certainly above average.
Kidding aside, if you’re a non-smoker with a normal BMI and a family history of longevity (all of which are true for above-average me), you’ve got a decent chance of beating the odds by maybe 5-10 years.
When it comes to your own personal mortality, though, the percentages aren’t all that helpful. You’re not going to be 39% alive at age 85. You’ll either be dead or alive. A 96% chance of making it to 55 doesn’t matter if you fall from a mountain peak at age 52.
The later you retire, the more you increase the odds of having a short or nonexistent retirement.
More information here:
Early Retirement and the Likelihood of Regret
Is FIRE Really Just an Empty Goal?
Declining Health
While it’s true that your presence among the living is binary—you’re alive and kicking or you’re not—your quality of life will vary along a wide spectrum. A major factor in your quality of life will be your ability to do the things you want to do in retirement, and your physical condition is a key contributor.
I didn’t start running for exercise until I was in my early 30s, and I’ve never been terribly consistent with it. In the first 10 years or so, the main things that kept me from running regularly were a busy work schedule, two young kids, and a lot of competition for my time. Also, laziness.
However, in the last few years, despite having plenty of time to jog, I’ve had to stop running for weeks at a time on at least three occasions. There was the stress fracture in my foot that made itself abundantly clear at the conclusion of a half-marathon in Barcelona. When I healed from that, some medial knee pain (possibly pes anserine bursitis/tendinopathy) sidelined me for a few weeks. Currently, I’m dealing with pain in the ball of my foot where my 2nd metatarsal meets the toe.
And I’m in my mid-40s.
All sorts of maladies can and will arise that can limit your ability to run long distances and also make it difficult or impossible to perform regular activities of daily living. The older you get, the more likely such impediments become. It may not be one injury or diagnosis that slows you down but the aggregation of small annoyances that add up to you becoming incapable of doing the things you wouldn’t have thought twice about doing when younger.
A seven-mile hike might sound like a good idea if it weren’t for your arthritic right hip, the extra 25 pounds you’ve accumulated, your sensitive GI tract combined with the street tacos you enjoyed for lunch, and the achy back you’ll probably get from the two-hour drive to the trailhead. Not to mention the fact that the cell phone reception out there is lousy, and the likelihood of some sort of emergency seems to have increased right along with your waistline as you aged.
One of those factors alone may not dissuade you, but the combination leaves you at home, comfortably close to a toilet, television, and telephone.
The younger and healthier you are when you retire, the more things you can check off your bucket list rather than crossing them off because they’re no longer feasible.
More information here:
Getting Rich and Ripped: How WCI Principles Help Build Wealth and Improve Your Physical Fitness
The Specter of Cognitive Decline
While you can expect your body to decline physically over time, your mind may remain sharp for decades to come. Or maybe it won’t.
Even worse, you’ll be the last to recognize it if cognitive decline begins to impact your decision-making abilities. An ailing brain may not realize its own failings.
Sadly, the FBI reports that elder fraud, as in financial scams that target the elderly, leads to losses of $3 billion and growing in the US every year. Senior citizens are targeted because they are more likely to have accumulated assets; they may be overly trusting and, perhaps most importantly, they may not have the mental faculties that they once did.
Alzheimer’s and other forms of dementia are more likely to affect individuals beyond the normal retirement age, but early-onset dementia absolutely afflicts those in their 40s and 50s.
Retiring early does nothing to protect you from cognitive decline, and it could possibly contribute to it if you become a firmly-planted couch potato. But if you keep your mind active, you should have more years with your wits about you to look forward to when retiring young.
No Time to Recover from Financial Stressors
When your retirement date is based upon a standard retirement age and you’re saving and investing accordingly, you could be in rough shape if the economy doesn’t cooperate.
For example, if you expect to have the money you’ll need to retire by the time you’re 65, a layoff at age 55 becomes a financial emergency. A bear market leading to a harsh sequence of returns in the final years you planned to work could force you to work several years longer than you’d like. If you’re in your 40s, you deal with it. If you’re in your 60s, losing a few years of your retirement could be a serious hardship. You don’t know how many good years you’ve got left!
Even if you’re not dead set on an early retirement, becoming financially independent at a reasonably young age should be a life goal. Having the ability to leave work without major financial consequences can make so many potentially disastrous events much, much easier to navigate.
Your Job May Become Less Fulfilling
I don’t know whether to be envious or sad when I hear that someone loves their job. Sure, it’s great to get paid to do something you thoroughly enjoy doing, but on the other hand, it’s an unrequited love.
— dinosaur (@dinosaurcouch) June 1, 2021
For the love affair to last, two conditions must remain true.
First, the job cannot change in a way that causes you to love it less. Any change in your work schedule, obligations, compensation, benefits, or work colleagues that negatively impacts you can leave you feeling less amorous.
Second, you and the things you value and prioritize must remain indefinitely steady. The odds of this being true over a career lasting even a decade or two are on par with the chances that I fail to survive long enough to see this article published.
Think about who you were five, 10, or 20 years ago. What mattered most to you then? Who were the most important people in your life? How did you balance a career with family, hobbies, and other outside interests? How has that changed?
Being excited about or even content with the job you’ve got is a lot better than despising the work you do. Just realize that as time goes on, the odds of remaining in love with your job will likely diminish. With a shred of luck and some proper planning, your relationship with your career will not be of the “’til death do us part” variety.
It’s not supposed to be.
Lost Opportunity for Low-Tax Years
If you retire in your 60s, you’ll be collecting Social Security within a decade, and by age 73 (or by age 75 in the year 2033, thanks to the Secure Act 2.0), you’ll be required to withdraw RMDs from tax-deferred retirement accounts.
That leaves little time to do Roth conversions in a low tax bracket. You may never reap the benefits of being in the 0% long-term capital gains bracket (which also applies to qualified dividends).
It may sound silly, but one aspect of full retirement that I most look forward to is the possibility of paying very low taxes or converting hundreds of thousands of tax-deferred dollars to a Roth IRA while remaining in the 24% federal income tax bracket. Many early retirees qualify for an ACA subsidy to help pay for health insurance, a benefit that few standard retirees will ever get.
The sooner you retire, the more years you’ll have to make low-cost Roth IRA conversions, potentially pay no tax on your capital gains and qualified dividends, and smile because you’ve got something in common with Jeff Bezos and Elon Musk.
More information here:
Missing Out on Time with Loved Ones
If you retire at 65, will your parents still be alive? Based on the actuarial tables, it’s not all that likely.
If you’re working when they fall ill, how difficult will it be for you to be at their bedside on short notice? What if they need assistance for weeks or months? How will you make that happen? Looking at the other side of life, if you have children, how does work affect your ability to spend time with them and be there when you’re needed most?
Think about how you might travel differently if you didn’t have a job to get back to. Imagine how a year or two of worldschooling as a family would compare to the usual routine.
We also have loved ones beyond our blood relations. Friends get married. Friends get divorced. Friends invite you to join them for a coffee or a beer, for a boat ride or for an amazing vacation.
If you’ve got a full-time job, you will rightfully suffer from FOMO— the fear of missing out. The less you have to work, the more you can join your friends and family when you’re invited or needed.
You Only Live Once
Hashtag YOLO. I get it. You only live once, so you should live life to the fullest!
I’m on board with the concept but often disappointed with the implementation. YOLO is often used as an excuse for spending excessively while ignoring the future. That’s the wrong approach. Since you only have this one precious life to live, you should absolutely enjoy it now while also putting yourself in a position to make the most of whatever number of remaining years you’re granted.
Imagine how much easier it would be to live life to the fullest if you had another 40-60 hours to do as you please every single week. If your dream life consists of spending most of your days in a clinic, cubicle, or cath lab, perhaps your career has you living life to the fullest already. If you’re like me, though, you’ll find it’s much easier to embrace a #YOLO mindset when your schedule is wide open.
You don’t know how many years you’ll get, you don’t know how well your body and mind will hold up, and you know that time is a precious and non-renewable asset. Take a page from the FIRE movement and make the most of yours.
Did you take the plunge on early retirement? What ultimately made you decide to do so? If you haven't FIRE'd yet but plan to, what's your biggest worry about early retirement? Comment below!
“It may not be one injury or diagnosis that slows you down but the aggregation of small annoyances that add up to you becoming incapable of doing the things you wouldn’t have thought twice about doing when younger.”
“I don’t know whether to be envious or sad when I hear that someone loves their job. Sure, it’s great to get paid to do something you thoroughly enjoy doing, but on the other hand, it’s an unrequited love.”
“Just realize that as time goes on, the odds of remaining in love with your job will likely diminish.”
“If your dream life consists of spending most of your days in a clinic, cubicle, or cath lab, perhaps your career has you living life to the fullest already.”
I loved this article. The folks that read my articles here know why.
My simulation said: At age 59 (April 2nd this year for me), it appears I have about an 11% chance of dying before age 69, a 33% chance of dying before age 79, and a cumulative 74% chance of dying before age 89. Sounds about right.
My largest likelihood bracket at 40% was the 79-88 year old bracket because I’m already about 59. As you say, that does not take health history, weight, habits, genetics, and fitness into account.
I’ve been living each year like it might be my last since I was about 50. If I die in the next year, I will have knocked many as many things off my bucket list as I could fit in comfortably.
I darn sure don’t want to leave many of my accumulated dollars on the table like many of the anecdotal retirees I have memorized.
Great article. Only issue I would have is I do not desire to have a few years of such little income to make cheaper Roth conversions or pay lower capital gains. That’s not a goal of mine. As much as I hate taxes, I want my income in retirement to be plenty high enough to do what I want when I want.
I would caution against confusing income with money.
Doing what you want when you want requires money. Income is a transfer of money that is (usually) taxed, and you don’t necessarily need or want too much of that.
It’s quite possible (and getting easier with tax brackets shifting to the right with inflation) to have a six-figure annual spend while paying zero federal income taxes. See The Taxman Leaveth: https://www.physicianonfire.com/the-taxman-leaveth-taxes-in-early-retirement/
If you want to spend multiple six figures, you’re most likely going to face some tax burden, but it all comes down to how much of your spending money is sourced from taxable income.
Cheers!
-PoF
Chat Rikki on the topic …
The prospect of retiring early is often met with skepticism and warnings of financial ruin, much like the Empire’s retaliation against the Rebel forces in Star Wars. However, what is often overlooked is the potential risks of NOT retiring early.
As we age, the risks of illness, injury, and death increase, much like a ticking time bomb set to go off. While we can take steps to protect ourselves financially through insurance products, we cannot guarantee that these events won’t impact our retirement plans, much like the difficulty of defending against the destructive power of the Death Star without a proper shield.
The best way to ensure a healthy and fulfilling retirement is to retire as soon as possible, much like a timely escape from the grasp of the Empire. The longer we put off retirement, the greater the chance that our plans for post-career life will not come to fruition, much like missing the opportunity to destroy the Death Star before it’s too late.
The Risks of Retiring Early
It’s important to acknowledge the potential challenges of retiring early, such as running out of money, receiving smaller Social Security benefits, and facing boredom. These risks can be mitigated by careful planning and forecasting, much like mapping out a strategic plan before entering into battle.
Retiring early also brings with it a sudden abundance of free time, which can lead to unexpected challenges such as strained relationships, social isolation, and dangerous hobbies. To avoid these pitfalls, it’s important to have a plan for how to spend your time and manage your finances, much like a well-equipped spaceship ready for any mission.
Ultimately, much like the choices faced by characters in Star Wars, the decision to retire early is a personal one that requires weighing the potential risks and benefits. May the odds be ever in your favor as you navigate this important decision.
I consider those risks more to be trade offs of not retiring early. Every decision has its opportunity costs. And adding those up versus the benefits, it surely sense for many, if not most, to retire much earlier than at full retirement age. But it is not for everyone. Making the argument to those of us who exceeded all our aspirations in the work world is like telling Tom Brady to retire when he was 35, so he’d have more good years left with his family. He would have looked at you like you were demented. He was living his best years right then. Being a star in business feels the same. You love it and until, or unless, the passion fades you don’t want to walk away. Clint Eastwood is still making movies in his 80’s. That’s what he loves. I worked until 60 for the same reason. And now I’m still living my best years, retired. Nice take on the prices you pay to not retire early. They are risks worth weighing.
Tom Brady’s decision to come out of retirement apparently played a major role in disrupting / ending the family life he had tried to protect. 35 would have been way too soon for him, but his life might be a lot different now if he had remained retired.
Cheers!
-PoF
Yea I was thinking maybe not the best example for the point Steveark was trying to make.
It looked like NOT retiring after his wife made it known that she strongly desired him to retire cost him his marriage….but there are reports they were having problems all the way back in 2015.
It’s tough to be a public figure. Lots of empathy there. I wish the best for both of them.
I do not accept the notion that, if you like your job, nothing can change at work without making you unhappy. Things change. That is life. Even if one is deliriously happy every moment at work, that hardly means that any change must be for the worse. Maybe you will find new things to like about your job even more as it changes.
My job today is far different than it was when I started working. More of those changes have been positive than negative.
I also do not accept the notion that everyone wants to retire early, avoiding the “risk” of “working too long”.
I do not want a long retirement. If all goes well, I expect to work to an age that will leave me a far shorter retirement than some on here desire.
If I hit 75 and am still in demand and the ravages of age have not rendered me unable to keep up, then I expect to keep working. In my field, it is possible, but it takes luck to be in good enough shape to do the job at that age. Too soon to tell whether I will hit the jackpot with old age health.
I do not have a long list of things I want to do that working interferes with. On the other hand, I definitely have professional goals that I cannot accomplish by not working.
As for the joy of low income years for Roth conversions, this means earning less money over a lifetime and paying lower taxes as a result. My financial goal in life is not to minimize the taxes I pay. Instead, it is to maximize my networth. If I quit long before RMD age, I will pay less in taxes because I will earn less money. The outcome will be a lower networth. That would be the opposite of what I want to do.
No. I do not agree that living life to the fullest means doing as little work as possible.
The work I do is part of my life. I did not abandon it when I could afford to retire and I have no intention of quitting simply for the sake of doing nothing.
You only live once. Do something useful with your life while you can.
Afan, I’m glad to see your ideas and goals to help me understand your perspective a bit better. I do think as far as this topic, we disagree on a lot. But, that’s OK.
Many in medicine do have a list of things they’d like to have more time for. By working l less, I have more time for hiking, swimming, cooking, yoga, travel, writing, reading, learning new things, etc. That’s why people want to win the lotto…to be able to have more “free time”.
“I have no intention of quitting for the sake of doing nothing”. Well, of course, neither do the rest of us that want to retire. That is not the outcome sought by most FIRE folks. Although I do like a day here and there of doing very little…
“Do something useful with your life while you can”. Leisure is useful. Travel is useful. Taking care of oneself physically and emotionally, and taking care of one’s family is useful. In medicine, when you are working, it’s “life or death” and the expectation is you will, at times, put it before your family, and your own well being. Many of us do this routinely…for years and struggle to find a balance.
Working half time is plenty for me. I’m glad to have more time for leisure. Time for freedom. More time to nurture my family and marriage. Time to consistently take the best care of myself possible.
Work until I die to be useful…in pursuit of “net worth”. Nope. The people at my funeral: “Yes, he was only 65, but look at his net worth.” I hope not.
As I have said before, “to each their own.”
I’m financially independent. But I’m still working.
I don’t want to change anything right now.
I’m the boss at work. I own the practice. I travel to far flung places multiple times each year. I meet with friends and we exercise outdoors every day. The work I do contributes to making so many lives better.
Why would I want to change anything when I am living the life I want to live and spending my time the way I want to spend it?
I think the docs and other professionals that own their own practice or business and are the boss have a nice situation.
Having always been an employee, I got used to the decisions of others affecting my life in major ways…not all good, of course.
Now, working half time from my basement at will and doing a few long inpatient weekends is the closest I’ve been to the captain of my own boat. I can choose to work more, or less at any time, I can take as much time off to travel as I want to, and it feels pretty good.
Having agency over your life and work schedule due to financial planning allows one to continue to work more or less by choice. This is a good place to be.
Employed white coats who have
I think I have said many things even more critical of the idea that one’s goal in life should be quitting work as young as possible. I feel sorry for people who have concluded that there is no gainful employment from which they can derive satisfaction. My reading of some of these posts suggest that they have not tried to find meaningful work. Some appear to be so wedded to the idea of work as endless drudgery that they have not even looked.
My work has changed in almost every way since I began my career. But it is better now than it was in the past. It is harder, the hours are longer and we have had discussions of how they are soon to become longer still. But it is also more interesting and more productive. I am happy with that tradeoff.
Will I work until I die, never retiring? Maybe. Luck of the draw with what kills me and when.
Would I consider it some sort of tragedy that I never made it to the promised land when I no longer had any work to do?
Not at all.
It might be a tragedy if I were to die far short of my life expectancy, but no less so if I were to retire before death.
I save for the future so I will have money should I need it and because I like generating income, saving and investing it. I do not do this to shorten my career. I read WCI to get ideas about money management, not to accelerate my retirement
Whether I retire or keep working until death depends on how long I live and how my health plays out. If I am still able to do my job, not so impaired by age or illness that I have to quit, then I will keep working until that changes.
Most of the things people plan to do in retirement or currently do now that they are retired fall into two categories:
1. Things I have interest in or intention of doing, now or in old age. Travel and eating at fancy restaurants are solidly in this group.
2. Things I do now and have no need to retire to pursue: hiking, exercise, reading.
I suppose if I were to retire I could spend more time on group 2. I am not sure I want to spend more time on group 2.
I am quite sure I would not want more time on group 2 if it mean reducing to zero my efforts on group 3.
3. My work. I am well paid but I do not do it only for the money. It is interesting. Far more interesting than lying on a beach or flying off to some remote destination.
My post was explicitly to point out that not everyone sees early retirement as a goal. There is a range of opinions about this. Which is why I posted.
Sorry if this offends you but I am puzzled by the reaction. Surely you know that not everyone agrees with you?
Happily married and both of us are still working.
Afan, I appreciate your view.
It’s quite different than mine, but that’s OK.
What is your specialty, if I may ask?
I think I got a bit toasty in mine (Psychiatry) by age 50.
It’s good that you and the other post above could stop work if you wished, but simply enjoy it very much. It’s a good choice to have.
Hey Leif. Don’t reject the idea of living to 116 just yet. All the research out there on reversing aging is incredible, some of it is producing amazing results in animal models. All I’m saying is don’t sell your scooter when you get to 115. 😂
Personally, I think working to adopt an outlook each day where you are living in the moment and prioritizing time for activities that encourage such mindfulness all while working is the best of both worlds. The retirement life isn’t all it’s cracked up to be – trust me – if you worried about money even a little you may find yourself worrying about your finances even more once it finally sinks in that you won’t be collecting any more paychecks. Also, the bittersweet truth of retirement is that you may not retain the health or vigor to truly enjoy it to the fullest (no matter how many marathons you run or kale smoothies you drink). Health or even LIFE in the future is not a guarantee – and life FEELS more valuable when you are being challenged and stimulated and those are superimposed against a background of a stabilizing routine. I recognize that not everyone wants to work til they drop and I’m not really advocating that extreme approach. Just offering a cautionary suggestion to those who dream of retirement. After the 9,000,000th hole of golf or the 5th cruise around the world it begins to feel like being forced to eat an entire chocolate cake. Sounds great at first but by the end you might find yourself wishing for a plate of broccoli…