10 Reasons Not To Retire Early? Uh-Oh!

I always get a kick out of the financial and personal advice given in mainstream financial and business magazines such as Money, Kiplinger, and Forbes.  The advice can usually be paraphrased as “Here is how to do things 3% better than the average thoughtless drone sitting in the cubicle next to you.” **  And the early retirement articles are the worst, because their definition of “early retirement” usually means retiring before turning 60.  So I thought it would be fun to take a completely random article about early retirement from one of these websites and see how it compares to an genuine early retirement (before turning 40).

(**) I suppose this makes sense, though, since most of the authors are experts in journalism rather than in the topic they are writing about.  Unlike blogs, where often the author is not so good at the journalism piece, but they are more likely to be experts and passionate about the topic they write about.

So I googled “Forbes early retirement” and found this article which is written as a contrarian piece against early retirement.  Fair enough, I’m up for a debate, so let’s break down their top 10 list one at a time.


1. Easier access to retirement accounts

Technically, this is true.  After 59.5 years, it certainly is easier to gain access to your 401k and IRA accounts.  But the details of this in the Forbes article is absolutely wrong.  They state that you can’t access money in your 401k until you are at least 55 without a penalty.  This is untrue, you can move that money into a Roth IRA, sit on it for 5 years, then pull the original money out (not the gains) penalty free (you do have to pay taxes, of course).  You can also use the 72(t) rule to withdrawal money.  With the 72(t) rule, with $500K in retirement accounts, you could pull out about $10K-$15K per year up until age 60, at which point you gain full access.  There are, of course, negatives to using the 72(t) rule, but that’s beyond the scope of this debate.

The author also seems to rely on an assumption that the vast majority of savings are in tax-sheltered accounts.  However, for many people with high incomes, they could easily be maxing out their 401K and still have enough left over to be saving in taxable accounts.  For me, over 60% of my savings are in taxable accounts, which most likely makes early withdrawal from my IRA irrelevant.


2. More Savings

Of course, this is true.  If you work longer, you’ll save more.  But the author hasn’t considered the marginal utility of money.  Once you have enough money saved, there’s no need for more.  In other words, it’s not about having more, it’s about having enough.  And enough is usually far less than people think if they are creative, and adventurous.  Besides, this is just another way of saying “you need to have enough money to retire” much like #1 above.


3. Buy stocks low

Here, the author makes a pair of bad assumptions.  First, she assumes stocks are at a low point on a cycle.  But making a retirement decision based on what you think you know about the future market is a very bad idea.  Market timing is bad enough with stock purchases, let’s not try to time your retirement with the market.


4. More investment earnings

This is true, of course.  The longer you work, the more time you give your investments to grow.  But this is really just a duplicate of #2, and my response is the same.  Once you have enough to retire and live your desired lifestyle, the additional earnings are irrelevant.  So far we are 4 arguments into the article, and they are all different ways of saying “make sure you have enough money before you retire.”


5. Higher Social Security benefits

We’re talking about early retirement, which means you are 20 at least 20 years away from collecting any social security. I would advise against having any dependence on social security, even if you are more optimistic about it’s future than I am.


6. Possibly higher pension benefits

My first rebuttal of this argument is that so few people still have pension benefits. And even if you do work a job that gets a pension, then this is still no different than the previous 5 points about having enough money.


7. Lower health care expenses.

OK Forbes, this is getting ridiculous.  All you are talking about is money.  Yes, I will concede your point that there are various reasons why working longer has financial benefits.  Let’s merge points #1-#7 together as one argument.


8. More home equity

Sort of, but there’s no reason you can’t pay off your mortgage before an “early” retirement as opposed to a “late” or “normal” retirement.  It doesn’t require you to be working, it requires money.  Which leads me to my next point, this is no different than the previous 7 arguments.  Whether you you look at paying off your mortgage as a reduced expense (no mortgage payment) or as an income (reverse mortgage) it’s still just about money.


9. Fewer years to draw down savings

Hmmm, very unique – another point about money. Nothing to see here.


10. Will you be emotionally ready to retire?

Finally, after 9 different arguments all centered around money – author Liz has brought new material.  She has brought up a very important point that needs to be considered.

The author sites Warren Buffet and Bill Gates as people who continue to work even though they don’t need to.  This is a good point.  And if you asked them if they’d continue to work if it were unpaid, I’ll bet you they would say yes.  In fact, both of them have given away much of their money and have pledged to give nearly all of it away in the future.  To them, work stopped being about money long ago.

But Bill and Warren are anomalies and hard to relate to, since they have more money than most of us can comprehend.  Let’s bring it back down to earth and review a conversation I had recently with my 62 year old mother-in-law, who was questioning the wisdom of my retiring early.  After some debate, I asked her if she would work for free (like Bill and Warren I’m presuming).  While she is not yet financially independent, I asked her whether she would work if she was FI.  After a little thought, she didn’t know her answer and it was getting late, so we all went to bed.

The next morning at breakfast, she said “You know, I couldn’t sleep last night thinking about your question.”  Having mostly forgotten our conversation since it wasn’t quite as important to me than it apparently was to her (or maybe it was the Kentucky Bourbon Barrel Ale I was drinking during our game of Trivial Pursuit that night), I had to ask her to remind me of the question.  She said that see was up for hours laying in bed, wondering if she would keep working if the job didn’t pay.  (By the way, I have a ton of respect for a 62 year old woman who is mostly set in her ways, yet is willing to listen to her 33 year old son-in-law with such a socially unaccepted philosophy).  She said that she would work for free, that she really truly likes her job.

And this is really the whole point of an extremely early retirement. I am currently 34 years old, and in the peak of my physical and mental health.  My social life is primarily my wife and my two young kids. My personal fulfillment comes in raising the kids, and providing for my family.  While my job can offer me some fulfillment and some social benefits, these are needs I don’t need my job to fulfill.  My mother-in-law, on the other hand, is on the downward slope of her physical health, and has already raised her three daughters who have now begun their own families.  Her job, it seems, fulfills her personal needs.


Let’s Wrap This Up

I think the Forbes article boils down to two things to consider before retiring early.  First, you need to have enough money to fund your desired lifestyle.  This is the first, and most obvious consideration – and can usually be answered with simple math (you need 300-400 times your monthly expenses accessible savings).

Second, you need to consider whether you are mentally and emotionally prepared for retirement, or if some critical personal needs such as social belonging, self-esteem, and sense of fulfillment are dependent on your job.  Of course, this is a dynamic consideration, which is what makes the term “early retirement” sort of ambiguous and definitely dynamic.  I suspect that in my situation there will come a time where I don’t meet all of my personal needs from my hobbies and my family.  That time may come when my kids are teenagers and don’t think daddy is so cool anymore, or when they leave home and start there new lives.  Maybe sooner.  If that day comes, and nothing else fills my personal needs, then return to work is always possible. The same applies to everyone – life situations change, and the value received from having a job rises and falls.  When considering early retirement, I suggest you consider the present and the near future situation, and not consider it a permanent and irreversible decision.

32 Responses to 10 Reasons Not To Retire Early? Uh-Oh!

  1. Krantcents says:

    As someone who retired early, I agree with you . The biggest reason not to reitre early is not being emotionally ready. In retrospect I think I was not ready. I returned to work 7 years later.

  2. I am geared to retire at 43 with a pension, but I will not stop working. I would love to go to school, complete a degree, and work in a sector that interests me. So to get to the point, I do have to say the biggest factor (in my eyes) is if your are emotionally ready.

  3. What a goofy article (the Forbes). This shows that most personal finance advice is either regurgitated garbage or propaganda designed to keep you working well beyond the marginal utility of money.

  4. Joe O. says:

    You got two things wrong on the Roth info.

    You said “you can move that money into a Roth IRA, sit on it for 5 years, then pull the original money out (not the gains) penalty free (you do have to pay taxes, of course).”

    First, you don’t have to wait 5 years to withdraw principal penalty free. You can do that at any time.

    Second, you don’t pay taxes on it. You never pay taxes on a Roth, that’s the whole point of them.

    They both help to strengthen your point of being easy to access before 59.5, but better to not have that misinformation.

    • Joe –

      I think my point wasn’t clear. I was referring to money that was originally in a tradional IRA or traditional 401k (which is what most people have). You have to pay taxes when you move it from a traditional IRA/401K (money that’s never been taxed)) to a Roth (money that’s already been taxed, but not taxable afterwards).

      When doing this, it’s my understanding that you do need to wait 5 years. If you know otherwise, I’d be interested to see your source. It would make things that much easier for me.

    • By the way, here is more information about converting from traditional to Roth IRA’s, and avoiding penalties after holding for 5 years in a Roth.

  5. I’d like the option to retire or scale back before I’m 60, but I have a feeling that I’d like to remain engaged in the workplace and be compensated for my work through my 60s (health permitting). That means after graduate school I might work long hours for a few years, but once I get to my 50s I might want to spend more time doing things that are not as lucrative monetarily but more satisfying, perhaps.

    My boss is in his early 50s, he has paid off his mortgage, is in a very well respected position as a senior executive, and seems to enjoy a dynamic career. His kids are all out of the house. He has managed his finances well and his career well, and now he kind of gets to have the best of both worlds.

  6. Poor Student says:

    Right now I have plans to retire early, before for 40. But this also depends on how much I enjoy the career I choose after I finish school. If I become a physiotherapist and find it makes me happy to go to work then that is what I will do. I will still go through all the steps and accomplish financial independence, but I would keep working. The acts that early retirement requires are helpful to everyone whether they want to retire or not. Early financial independence is the goal for me, not necessarily early retirement.

    • I am right there with you on this Poor Student. I’ve had the last week off because it is in between terms and I don’t have to go to work. It’s been like a mini look into early retirement (I’m still getting paid my normal wage but don’t have to work). Maybe it’s the initial shock of having three weeks off and no plans but I find that I need some kind of work to keep me fulfilled. Perhaps if I one day have kids like BNL that would be enough and I don’t need the work anymore. I think freedom is the goal, early FI is the path to get there.

  7. I also enjoy reading these kinds of articles (and generally ignoring their advice).

    It’s one thing to actually retire and another thing to be in a *position* to retire if you wanted to. It’s hard for me to imagine but I guess some people will have a hard time filling up their days without a job. That’s fine if you want to work. But *wanting* to work is different than being *obligated* to work, which is a dangerous position to be in.

  8. […] Brave New Life mocks another one of those mainstream financial posts that question  bold money  moves like retiring early. […]

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  10. bdub says:

    Is it coincidental that going to read the Forbes article requires me to sit through a pop-up advertisement for some random consumer financial product?

    Don’t forget who all of the commercial financial “experts” are working for: their advertisers. Forbes magazine wouldn’t be in business long if they were espousing the same virtues as BNL or MMM.

  11. John says:

    I took a friday off and went to DC for Free Entertainment and Free Exercise. Trust me there is more Free Hobbies and almost unlimited free goals to accomplish with acquiring skills in this world, then Govt and Big corps want you to know or ever realize. Watch “The Hunger Games” when it comes to the library or read the book, for Financial Independence Inspiration if you are fearful of boredom, loneliness, or self-induce failure from your career. Those are all just mental traps to keep you working till you die, so they can tax you till you die and then double tax you at Death!

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  13. uspsfanalan says:

    Hello BNL,

    It’s been 3 weeks without a new post. Hopefully you have some cool new project to tell us about when you get back.


  14. RateRace says:

    Hope all is well! Keep check back for new topic.

  15. superfi says:

    Where’s BNL? Looking forward to new articles and updates!

  16. Sarah says:

    Where did you go?

  17. Russell says:

    I love your updates. Keep them coming.

  18. I’m taking a sabbatical now, and frankly, all I’m doing is working! lol

  19. […] 10 Reasons Not To Retire Early? Uh-Oh! – BNL puts to shame arguments from another personal finance article on why you shouldn’t retire early. I think these arguments were made so that all the normal people would feel better about their crappy situations, knowing that they may never be able to retire. […]

  20. […] New Life critiques the popular culture message that retiring early is a bad idea. Really, it all depends on your lifestyle and what you consider […]

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  22. […] 10 Reasons Not To Retire Early? Uh-Oh! – BNL puts to shame arguments from another personal finance article on why you shouldn’t retire early. I think these arguments were made so that all the normal people would feel better about their crappy situations, knowing that they may never be able to retire. […]

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  28. Jake says:

    Late to the party, but I am burning through this blogs archives and really appreciate the content, Thanks! I particularly enjoyed this article because it reinforces something I’ve been toying with for awhile… partial retirement! Although I truly enjoy, the social, purpose creating, and mentally challenge aspects of my work. Having to do so much of it, so often, drains other aspects of my life. I am a bit of a late bloomer in realizing that early retirement is even possible (in my late 30’s). However, my chosen line of work provides many different “part-time” options. After learning to save more than half my income, I can now actually live off of less than half time work. I don’t need 300-400 times my monthly income to do this. 100x would be more than enough of a buffer, and with 20+ years of growth to a Forbes style “early retirement”, that nest egg should be looking prettier. I think I just need the cojones to take this plunge. This may be the best of both wolds for a guy like me… Any thoughts from the readers?

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