Retire Earlier

Retire Earlier

I think we misuse the concept of early retirement in this community. Most don’t retire. Sure they shed the bonds of the W2 wage, but they don’t leave the world of work. Some even work harder. This is natural. The point is not to become a complete slouch, but rather to spend time pursuing one’s passions. Often these passions involve expending energy and making money. This is a natural progression. As the financial independence movement has evolved, there is a move to retire earlier and earlier.

For these twenty somethings, “retirement” is not retirement at all, but rather the process of removing oneself from the daily grind of indentured servitude. Creating passive income streams and side hustling on passion projects is the main thrust.

I think this path is laudable, but it does come with a certain amount of risk.

Financial Base

Much of the fuel for my FIRE came from having a strong financial base. The money I made in my twenties and early thirties not only compounded, but gave me the freedom and space to pursue better investments. My real estate holdings were all paid for by savings from my W2.

Beefing up my investments and my emergency fund as a young person created all sorts of advantages. It gave me the stability and courage to go out on my own and start my medical practice. Even though I had only minimal business experience, I had a strong financial base on which to lean on.

Failure would have been disheartening, but certainly not devastating.

If I had decided to retire earlier, or never entered the traditional work force after schooling, I would have been in a much more precarious position. Especially if I failed my business ventures, I would have no savings and no net worth backstop. I could have found myself entering my thirties a pauper with no assets to take advantage of the magic of compounding.

Wages

Traditional work generally will start you on a much higher wage scale with better benefits. When you add in health insurance and 401K match, it is hard to meet these bonuses with a side hustle or a self created gig at the beginning of a career. While you might not need the money because you have limited your cost of living, eking out an existence doesn’t allow for much wealth creation.

It’s true you might not need the extra cash if you create the next great blog, podcast, or App, most are not so lucky. Most new business ventures are mediocre, and only a small percentage of them create enough wealth to live on.

I’m not saying that these opportunities should not be pursued. More that the traditional method of working a W2 that pays well, and then creating side gigs with spare time is probably the safer route.

Safer is not always better. But when you are talking about the ability to retire earlier, it’s nice to hedge your bets.

Compounding Time

A few years in your twenties could cost you decades in your forties and fifties. Put another way, failing to accrue wealth in the first decade after college will have dyer consequences. You will definitely pay tomorrow if you fail to succeed today.

That’s why I think YOLO is a no no. Striking out on your own in your twenties and failing can devastate a financial plan. Starting with a reasonably high paying W2 job, side hustling, and then leaving in your thirties with a strong financial base, a decent amount of investments, and some side hustle income makes much more sense to me.

If you are going to retire earlier, you should do so in a way that is much more likely to succeed.

Final Thoughts

I only know my experience. I have only lived my life. Leaving college, spurning a traditional W2, and building a life of passion out of the box may work for you. I can’t tell you not to retire earlier.

For me, the economic base I built in my twenties, the high wages I earned, and the sacrifice have been the key to success. They have allowed me to live a very comfortable life in which I feel supremely in control.

That, to me, was worth some hard work and sacrifice in the beginning.