Marjorie writes in:
Why would you and Sarah want to retire in your 40s? You seem like a very productive person. I can’t believe you would want to retire that young.
This is an interesting question. Why would I want to retire in my 40s?
Let’s start off with a little backstory.
Right now, Sarah and I have a target of being able to completely live off of the income generated by our savings and investments at about the time our youngest son graduates from high school. We will no longer have to work for money at that point.
It’s a point that we refer to as “retirement,” because it indicates an end to the stage in our life where we have to work in order to earn a financial return on our time and efforts.
Right now, we need to earn a financial return for much of our time and effort during the day. That’s the reality of almost all adults of working age. We have to have a job to pay the bills.
However, we’re saving a substantial portion of our income each month so that in several years we will be able to live entirely off of the income from those savings if we so choose. That means, of course, that we’re spending substantially less than we earn each year.
So, about this “retirement”… why are we “retiring,” anyway?
The reality is that we probably won’t retire in any way that’s anything like the popular idea of retirement.
First of all, Sarah has already said that she will likely not leave her job when we cross that line. Why? She loves her job. She would do it for free if we had enough money to support ourselves, so that’s essentially what she’s going to do. She will probably walk away from that job at some point in her fifties, but that would mostly be to facilitate some other things that she wants to do and we want to do before she becomes physically incapable of doing so.
As for me, I’m pretty much constantly doing things. I constantly try out new small enterprises and I have dreams of many more when time isn’t as much of an issue. I constantly get involved with different groups. I’m involved in community politics. I have infinite interests, many of which have the potential of earning money.
Right now, I have to choose among those things with a strong eye towards what will earn a healthy income stream – in other words, I want a job to keep food on the table for my family and enable us to continue to save. When we reach that “retirement” point, those requirements won’t matter any more. Our immediate family size will have dropped from five to two at that point, with just Sarah and I meeting our basic needs from our income without children to support.
Sarah and I will both have the freedom to do what it is that we value without needing to worry about the income produced from it.
For some, that might mean doing very little. It might mean relaxing all day.
I’m just not wired that way.
For me, it means that the horizons are even wider than they are right now.
I will be capable of devoting a year to political volunteering if a candidate or a cause arises that I believe in. I may even be that candidate.
I will be much more capable of volunteering for and participating on community boards and other such engagements.
I will be much more capable of devoting a great deal of time to thoroughly researching and writing a nonfiction book that I’ve thought about for many years, one for which the scope is just tremendous.
I will be much more capable of being much more engaged in local charities, some of which I am involved with on a very limited basis right now but would love to be able to engage with more.
I will be much more capable of developing and releasing a great personal finance education curriculum for free that any school or community organization can use to teach people about the basics of money management. I’ve worked on this off and on for years, but the amount of work to be done to match what I have in mind is immense and, honestly, it wouldn’t return much money to my pockets.
I will be capable of helping a close friend launch his board game publishing company that he’s been trying to get going for years. He has great ideas and with a partner that has an eye for detail, great things could happen with it.
I will be capable of stepping up to the plate for my own children in their adult life when they need it. I certainly know that my parents have done this sometimes with us, watching our children to give Sarah and I some time alone together as adults and helping out in the most trying of moments. The last thing I want to do is be so career oriented at that point that I don’t have the necessary time for family.
Perhaps most important of all, I will be able to walk away from situations that turn out to have hidden agendas or requirements that leave me feeling ethically troubled. When money is on the line, especially money that is needed to feed my family, that’s much harder to do.
Right now, I don’t have the time for such things, given my role as a father and also my need to spend hours each day working with income directly in sight. Together, those things keep me from diving into all of those dreams.
For me, “early retirement” simply means knocking down those walls and opening the floodgates to a long list of possibilities.
The simple thought of what is possible makes me very excited. It makes every choice that I make to spend less money much easier to swallow – and, actually, makes the choice often joyful. I’m quite happy to give up some middling treats today in exchange for those kinds of possibilities in the very near future.
For me, that’s what “early retirement” holds. It simultaneously holds a much broader world of possibilities and the capacity to walk away from them without financial disaster if I so choose.
It’s not a dream, either. It’s on the verge of becoming my reality.
And I can’t wait.
* * *
So what exactly is “early retirement,” then? There really isn’t a good term out there to describe it, at least not one that’s in common use. “Early retirement” is often used because the methods for getting there are similar to people saving for a typical retirement, just more accelerated. Having said that, it’s worth nothing that some people have a less family-friendly term for it, but I’d simply call it “walk away money.”
It simply means that you have enough money in the bank to be able to walk away from unrewarding situations without any real consequence, and you have enough money to take on challenges where there is a strong chance of failure without worrying about basic needs.
You can walk away from abusive bosses, unethical work situations, and unfulfilling jobs. You can spend months or even years trying full time to make something that you believe in work out well for you and for the people who might benefit from it – and you can walk away when it is clear that it won’t pan out.
Without enough money in the bank to sustain yourself, you don’t truly have that freedom. Without that money, on some level, you need to be able to have earnings in the future. If you have that money, that need vanishes into thin air.
That, to me, is what “early retirement” is all about. It’s not about relaxing on the beach or watching television for the rest of your life. It’s about the ability to take on challenges that you personally value while being treated with respect, and having the ability to walk away from those challenges if they don’t match your personal values and you aren’t treated with respect.
Sounds pretty sweet? It sure does to me.
The question is, does it sound sweet enough to convince you to save 20% or 30% or more of each paycheck? For a small but growing number of Americans – myself included – it does sound that sweet. For others, it doesn’t.
Just remember that the next time you hear about someone who saves a lot and is careful about their spending, often they’re saving for a dream like this one. They dream of having “walk away money” so that they can pursue their true calling or so that they can walk away from an oppressive situation. That’s well worth skipping out on some of life’s less essential perks, at least in my opinion.