Why You Should Retire Early

“Oh, I’ll never retire — I love working too much! I’ll be working until I can’t.”

I’ve heard that answer a lot when I bring up the subject of early retirement. Lots of people in traditionally “white-collar” professions like accounting, finance, marketing, and engineering, “love” their jobs. But what do they love about them? Here’s what I’m guessing:

  • A sense of engagement with the task at hand.
  • Fulfillment from seeing a project come to completion.
  • Socializing with colleagues.

But, the truth is that the world doesn’t need any more paper-pushers. Unfortunately, the world has incentivized useless work.

All that time you spent conducting discounted cash-flow analysis on some widget factory or building pretty graphs in Excel could have been spent solving one of the 10,000,000 tragedies the world faces. Child abuse, crime, food shortages, inequality of opportunity — pick your poison.

Of course, you need an income. That’s the idea behind early retirement and financial independence: Work hard, save 50% (preferably more) of your income, and then use a safe withdrawal rate of 3–4% possibly augmented by a side job to free up your time for more important work.

It’s easy to retire early even on a middle class income. The Early Retirement Calculator from Networthify demonstrates how an individual earning $35,000 of after-tax income can retire in around 16 or 17 years by saving $17,500 per year.

Does living on $17,500 require sacrifice? That depends on your lifestyle. If you’re constantly going out to eat, spending money on products and services, and not keeping a budget, then yes, it will require some changes.

It’s worth it, though. If you’re 25 years old now, you’ll be 41 or 42 when you retire assuming you receive no raises or windfalls. You’ll have sufficient income to fund the lifestyle you had been living prior to retirement, and your investments are more than likely going to grow over time.

The reason that this whole project can even be successful is that you’re putting your money to work for you. Instead of saving everything in a bank account that earns a paltry interest rate, you’re putting your money in a diversified array of investments, including domestic and international equities, bonds, and perhaps more creative investments like real estate and P2P loans.

All of these financial forces will coalesce to form a stream of income that you can use to free yourself from a full-time job. By augmenting your investment income with a side job or freelance work, you can get there even faster.

For those of us who want to attack a problem that has no financial remuneration, this approach is possibly the most responsible one. You’re taking care of yourself first so that you can take care of others from a position of strength.

You could, of course, attempt to solve such a problem without getting your own financial house in order. Will you truly be able to commit yourself to that project? Maybe — many do. But, you’re going to experience a lot more stress and anxiety as a result, and that could affect your ability to solve your chosen problem.

What will you do with your newfound freedom? Remember, there are 10,000,000 real problems to solve. Pick one. Or don’t.

It’s your choice.