Many of us would be thrilled to be able to retire from our regular 9-to-5 jobs long before the standard retirement age of 65. There is a vibrant community of people dedicated to finding a way to retire when still quite young. However, most of the early retirement enthusiasts have plans without a large enough safety margin to suit me.
One blog dedicated to early retirement is Canadian Dream Free at 45 run by Tim Stobbs. Stobbs has a detailed plan to retire at age 45 on savings of $1.1 million. He and his wife plan to live on $2000/month, which sounds low, but they “both plan to do some work on the side after pulling the plug to fund some luxury items and trips.”
Most readers of this blog who plan to retire early and have described their financial plans online expect to have roughly the same low spending levels as Stobbs, seemingly without the plan to work on the side. In general, these plans look quite realistic as long as these people are able to keep their costs down to the planned levels.
I definitely understand the desire to leave the rat race and enjoy life. For several years I did consulting work that paid sporadically and gave me tremendous freedom. However, even though I have a larger net worth right now than most of those planning early retirement expect to have when they retire, I continue to work.
This is in part because I enjoy the type of work I do, but it is also because I’m quite conservative about my possible future spending needs. I had been thinking in terms of being able to spend $5000/month (after taxes). When I was young I lived extremely frugally, and I know I could do this again, but I don’t think I want to. There is also the possibility of age-related health issues leading to increased spending.
Some time ago I made a projection based on conservative spending needs and conservative investment returns, and I found that there was a risk that if I retired immediately, I might run out of money some time in my early 70s. I have very marketable skills right now, but I doubt that employers would be as interested when I’m over 70.
So, while I wish the early retirement crowd the best of luck with their dreams to amass the lump sum they think will allow them to retire permanently, I will work toward a larger lump sum.