Wow, what a seductive word beckoning us.
It smells of freedom and success, but my experience in advising working-class clients shows it’s usually an avoidance mechanism that obviously shields a more important issue.
It’s self-deception at a deep level.
Let me explain.
A couple their 30s with 2 kids, came to me with an aggressive retirement goal – they want to be financially independent in just 5 years.
It is normal when you are in your late 40’s, but it is not normal if you are in your 30’s.
As I evaluate their goals versus what they are currently doing, it is painfully clear their goal was unrealistic given their values, lifestyle, and contradicting goals.
Here's the thing:
If you have yet to accumulate a substantial net worth, early retirement comes with impossible savings objectives (such as saving 80% of your income) and required investment strategies that were too risky (such as 50% annually).
Massive, massive sacrifice to the extent of being unrealistic.
After showing them the massive gaps in what they have and what they want to achieve, new questions emerged, revealing a lot of underlying personal issues.
Mistake #1 of Early Retirement…Dislike of your job
Let me tell you straight,
An aggressive early retirement goal is an escapist fantasy that masks a much more important issue.
Consider the following questions…
- What’s motivating your desire to rush toward financial freedom in the first place?
- What does financial freedom mean to you and why do you need it now?
- What will you do with your life after you achieve financial freedom?
For most people, the answer is they dislike their careers and just want to end the pain so they can do something they really want.
Is this you?
You might be prostituting time for money and want to change life paths ASAP. There is no fulfillment in what you are doing now.
Money is a means to an end, and the only end they see is retirement – the faster, the better.
Unfortunately, this is all an illusion. The goal isn’t to retire. It’s a lie. Most people have no intention of “retiring” in the true sense of the word.
Your real goal is to have sufficient financial security so you can give yourself permission to do what you really want with their lives.
You are in a rush to retire because they want to end their current careers and get a new life. You have other dreans and goals you’re ready to pursue - hopefully productive ones!
Unfortunately, you labor under the myth you need financial freedom to do it.
Mistake #2 of Early Retirement...Post Retirement Plan?
Think about the above question for a moment because it’s critical.
Retirement implies the cessation of productive work, but that’s not what most early retirees seek.
You can't be sitting at home, watching the grass grow!
Instead, they’re motivated to retire by what they’re trying to escape from – work drudgery and obligations.
Very few people are motivated by what they’re retiring toward – a better life, entrepreneurial dreams, encore career, hobbies, etc.
Is your retirement goal driven by what you’re “moving toward” or by what you’re “running away” from?
This is a critical distinction because “going away” goals lead to momentary satisfaction – a honeymoon period – before dismay and discontent set in. “Going toward” goals are what lead to happiness and fulfillment.
Mistake #3 of Early Retirement...Overlooked the Financial Needs
Most people absolutely have no realistic understanding how much money it takes to retire early.
The savings required defies intuition because you must build a perpetual income stream in excess of expenses and inflation.
It is probably that you can’t spend principal when your retirement time horizon exceeds 40 years. This makes the retirement financial needs at the onset of retirement surprisingly large.
Your retirement shortfall figure will be so challenging-ly large that you'll miss a few heartbeats.
Will you pay a price in terms of lifestyle choices and self-imposed limitations to reach the goal? Yes, and that’s the problem.
The Fundamental Problem With Early Retirement
The no-worry-travel, and umbrella drinks on the beach seem like paradise when you’re unhappily slaving away.
The “Catch-22” reality is when you’re intelligent, driven and goal-oriented enough to achieve the early retirement dream, there’s almost no chance a leisurely lifestyle will result in happiness or fulfillment.
That’s why you see so many early retirees launch new ventures and get back to work in one way or another.
The prospect of endless years of permanent leisure doesn’t equal happiness at a deep level.
It begs the question, “Why bother with early retirement at all?” Why not just skip the whole thing and move straight to the new venture that’s motivating you in the first place?
It may be cliche, but happiness is about the journey – not the destination. It doesn’t wait for you when you end this slavish career and retire.
It results from creatively living your dreams by pursuing goals that honor your values – today, tomorrow, and every day thereafter.
Notice there’s nothing in that definition of happiness that’s premised on financial freedom, money, retirement, time freedom, lack of work, leisure, or anything else implied by “retirement”.
Early Retirement - this is how it *could be done
Here’s a simple but powerful idea…
There’s no need to put a formidable obstacle like achieving financial freedom between you and your life goals. If you have other dreams that conflict with your current career path, then try your best to live them now.
This may sound idealistic, and I’m not claiming you won’t sacrifice to follow this path. You may have to reduce lifestyle, or maybe one spouse will need to work in a dissatisfying career temporarily until you can make ends meet.
It’s not necessarily any easier, but is this option (and all its consequences) any worse than spending your days doing something you don’t like?