# Is early retirement a myth?



## Spidey (May 11, 2009)

By early retirement I'm referring to those who say they retire in their 30's or early 40's and not the "freedom 55ers". I tried dropping out of the work force in my early fourties and getting by with a frugal lifestyle. We were paying the bills but we found the lifestyle to be a little more difficult than we imagined. It can be difficult not to feel deprived when being frugal is a necessity rather than a lifestyle choice.

Anyway, it seems as though when you dig a little deeper into any of the so called successful early-retirement stories, they either work part time, sell books, become farmers or depend on their spouses income. It may be an inspirational example of doing what you want with your life but is that really retirement? Is anyone doing it with no income other than investments?


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## Sampson (Apr 3, 2009)

The ideal of retirement has changed so much over the past 20-30 years that I personally believe 'retirement' as a whole has now become a myth.

Factors such as financial freedom/independence (whether full or partial), increased lifespans and higher quality of life in our older years means that people often get bored and continue seeking challenges later in life.

Even if an individual has full financial independence (i.e. can maintain exactly the same lifestyle without working) at an early age (35-45 years old), could you imagine just hanging out, lawn bowling with friends, playing poker and sipping on mojitos for the next 40-50 years? 

Wait a second, that does sound appealing.


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## HaroldCrump (Jun 10, 2009)

Sampson said:


> could you imagine just hanging out, lawn bowling with friends, playing poker and sipping on mojitos for the next 40-50 years?


Hell, YA


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## CanadianCapitalist (Mar 31, 2009)

I'm not entirely sold on early retirement, in the sense that you simply live off investments. At least for me, it will be great for a few weeks or months before ennui kicks in. I like the concept of Financial Independence much better -- you go to work because you want to do something not because you have to. And if it comes to that you can tell anyone to go to hell. In that sense, a lot of these "early retirement" types are financially independent, not really retired.

I'm personally planning on retiring by 55. I'll probably do a retirement-on-installment-plan deal. Work a few months, take a few months off. Work part-time in the summer months etc.


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## Assetologist (Apr 19, 2009)

CanadianCapitalist said:


> I'm not entirely sold on early retirement, in the sense that you simply live off investments. At least for me, it will be great for a few weeks or months before ennui kicks in. I like the concept of Financial Independence much better -- you go to work because you want to do something not because you have to. And if it comes to that you can tell anyone to go to hell. In that sense, a lot of these "early retirement" types are financially independent, not really retired.
> 
> I'm personally planning on retiring by 55. I'll probably do a retirement-on-installment-plan deal. Work a few months, take a few months off. Work part-time in the summer months etc.


A agree CC - my plan is very similar. 

My plan necessitates investing until age 55 then work only to pay for life expenses until age 60. This should allow for an additional 5 years of compounding. ? full retirement by age 60 although you never know I may continue to work a bit more. 

I have built a number of safety margins into my plan... I think. 

I am fortunate to be able to take about 12 weeks completely off each year now which certainly goes a long way in helping me 'love' my job.


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## hylaride (Jun 11, 2009)

Personally, I plan on retiring when I can't work anymore. If I'm financially independent I can travel or whatnot, but also contract if I ever get bored or need a brief infusion of cash. However, who knows what the IT industry will look like in 30 years (I'm 27 right now). Today, getting lucrative contracts is easy (though I choose to work full time). Who knows what it will be like then or if I would still be able to handle it.

With as much money as I'm socking away, I hope to have the inflation adjusted equivalent to $1.5-2 million when I hit 65.


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## steve41 (Apr 18, 2009)

I have said before.... the FP community should remove 'retirement' from the lexicon.

We all have assets (a career which will deliver us pay and pension checks over time), partial (post career job) income, existing savings, potential windfalls (plans to sell the cottage or downsize the 5 bedroom family home) and future entitlements (CPP/OAS)

The emphasis should be on balancing these above assets against our need to secure a prescribed after tax (spending) lifestyle. If our 'assets' deliver that lifestyle out to a decent age (95-100 say), fine. If not, then we adjust our lifestyle, 'stop work at' age, etc accordingly.


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## Ben (Apr 3, 2009)

CanadianCapitalist said:


> I like the concept of Financial Independence much better -- you go to work because you want to do something not because you have to.


I like that too. I would add too that it doesn't have to be "work" (ie. paid) that you choose to do with your time, but anything and anything that is found fulfilling. 

It's commonly said that you should find the job you love. Easier said than done for most people, for different reasons. I have a hard time picturing anything that I love so much as to spend 8 hours a day at it. 

I have a much easier time picturing an existence where I do one thing I love for 2 hours, then a different thing for 3 hours, then something else with the rest of the day. I hope to reach a level of Financial Independence by 55 that allows me to pursue days filled with purpose in lots of different pursuits, where only a small amount of that time needs, or happens, to be paid. 

Visiting with and learning from seniors, participating in a community organization like Kiwanis or Lions, influencing the young to ensure the world is in good hands in generations to come, gardening for a time, running a landscaping company for 15 hours a week, staying close with family, catching up with friends, travelling, learning about topics in history, learning better how to play the piano/guitar, participating in debate on issues of the day, monitoring investments and cashflow, washing the cars by hand, having an afternoon nap in a hammock, going for a swim, playing sports and maintaining physical conditioning, trying a job that I've never done before, learning basics of various trades and applying those skills to various hobbies, on and on and on. 

All these activities and more, that occupy and improve my mind and body, and hopefully leave the world and the people around me better for my short time in this world.

------------------------

I suppose I should respond more directly to the original question too. Early retirement, or true financial independence, does seem like a tall order to achieve for most people, and requires a combination of high income and modest spending. It seems that, more often than not, people have only one of these traits, and not both. It takes a significant nest egg to fund the gap between early retirement at age 55, and kick-in of CPP/OAS at 60/65, without risk of capital draw-down. 

Some barriers to early retirement, assuming your career begins at 25 and you live until 85, with conventional retirement at 65:

1. The years between 55 and 65 are often the highest paying years of your career.

2. Retiring 10 years early means you have 75% of the time to generate 100% of the required nest egg. Further, assuming that the nest egg income does not completely cover your expenses and some level of capital draw-down is modeled, the size of the nest egg required at 55 is actually larger than that required at 65 to generate the same retirement income.

3. Retiring 10 years early also means that you have 150% more years to stretch the nest egg. 

4. A retirement portfolio invested and grown for 40 years will be a heck of a lot larger than one held for only 30 years, due to non-linear compound growth that only becomes truly significant in the latter years.


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## Sampson (Apr 3, 2009)

Ben said:


> I like that too. I would add too that it doesn't have to be "work" (ie. paid) that you choose to do with your time, but anything and anything that is found fulfilling.


Well said. I'd love to not think about money, volunteer 3-5 days a week at hospitals and senior centres. Dedicate some REAL time to hobbies (photography), spend more time with family just hanging out and perfecting my barbecue skills.

Of course that last one means I'll have to get a yard big enough to get a giant fire pit, I'll need an outdoor refrigerator, stove, charcoal grill, pressurized beer tap/dispenser.

Looks like I've got a few more years to work first.


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## Jon_Snow (May 20, 2009)

I can't tell you how much time I spend fiddling around with retirement calculators. I'm pretty damn determined to retire by 52, 15 years down the road - now depending on which particular calculator that I use I'm either lookin' good or have no bloody chance.


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## steve41 (Apr 18, 2009)

> I can't tell you how much time I spend fiddling around with retirement calculators. I'm pretty damn determined to retire by 52, 15 years down the road - now depending on which particular calculator that I use I'm either lookin' good or have no bloody chance.


Think about that for a minute. The rules of compound interest and the time value of money aren't subject to interpretation... they are cast in stone. Ditto the taxation (T1) parameters and CPP and OAS rules. If you enter the same information.... rates, age, province, salary, retirement age, current capital (reg/nonreg), isn't it reasonable to assume these calculators would all return the same results?

The fact that they don't tells us that these web calculators are all wrong, or badly approximated. After all, when you enter the same T4 data in both Cantax or Quicktax, you expect to get the same result. The fact that these web calculators are all over the map tells you something... It's the old GIGO axiom.


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## Taxsaver (Jun 7, 2009)

You can never be sure you have "enough" money. You may need medical care not covered by the government, your house may require major repairs, your grandson may need financial help with his education, etc. 

I don't mean you should work 40 hours a week until your last breath. In my case, at least 3 days a week until I can no longer work.

Once I paid off my future house, I will have much less pressure on my back. I will be able to afford being without work for much longer than if I had a big mortgage to pay.


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## robert99a (May 23, 2009)

I think I will retire at age 70. I consider that very young and I hope to be lucky enough to do that.


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## Rickson9 (Apr 9, 2009)

*Retiring at 55 Increases Death Risk*

I've seen similar studies about retirement, but here's one.

===

Retiring at 55 Increases Death Risk 

Researchers admit poor health may have been reason for early retirement in first place

Oct. 21, 2005 – A study published today indicates men and women who retire early at age 55 have a significantly increased risk of death as compared with those who retire at 65. In this research, death was almost twice as likely in the first 10 years after retirement at age 55 compared with those who continued working. 

The study, published online by BMJ, was adjusted to take into consideration factors such as sex and socioeconomic status. Although some workers in the study retired at 55, because of failing health, “these results clearly show that early retirement is not associated with increased survival,” conclude the authors. 

On the contrary, mortality improved with increasing age at retirement for people from both high and low socioeconomic groups.

The authors said there has been a widespread perception that early retirement is associated with longer life expectancy and later retirement is associated with early death. But no consensus has been reached on the effect of early retirement on survival.

Retiring early at 55 or 60 was not associated with better survival than retiring at 65 in this study of past employees of the petrochemical industry.

The study population consisted of all past employees of Shell Oil in the United States who retired at 55, 60, or 65, and employees who were actively working at 55 or 60, during a period of 31 years between 1 January 1973 and 31 December 2003.

In contrast to those who retired at 55, employees who retired at 60 had similar survival to those who retired at 65.

Study Highlights

Subjects who retired early at 55 and who were still alive at 65 had a significantly higher mortality than those who retired at 65 (hazard ratio 1.37, 95% confidence interval 1.09 to 1.73). 

Mortality was also significantly higher for subjects in the first 10 years after retirement at 55 compared with those who continued working (1.89, 1.58 to 2.27). 

After adjustment, mortality was similar between those who retired at 60 and those who retired at 65 (1.06, 0.92 to 1.22). 

Mortality did not differ for the first five years after retirement at 60 compared with continuing work at 60 (1.04, 0.82 to 1.31). 

Regardless of socioeconomic status, employees who retired at 55 had a higher risk of mortality than those who retired at 60. 

Employees who retired at 55 in the high socioeconomic group had a 20% increase in risk of death (hazard ratio 1.21, 0.88 to 1.67), whereas employees who retired at 55 in the low socioeconomic group had nearly a 60% increase in risk (1.58, 1.15 to 2.18). 

The study found no difference in mortality by socioeconomic status in the group that retired at 60. 

Women accounted for about 11% (10% among early retirees and 12% among those retiring at 65) of the study population during follow-up. 

More than half of early retirees who reached 65 (57% who retired at 55 and 53% who retired at 60) were in the high socioeconomic group whereas less than half (44%) of those who retired at 65 were in this group. 

For most of the follow-up period the survival curves were similar for employees who retired at 60 and those who retired at 65 (581 and 541 deaths). 

The probability of survival for the group who retired early at 60 was higher in the last eight years (after age 83). 

The risk of dying was about 80% greater in men than it was in women (1.83, 1.34 to 2.48) and retirees in the low socioeconomic category had a higher mortality than retirees in the high category (1.17, 1.01 to 1.36). 

Mortality was lower among more recent retirees (0.98, 0.97 to 1.00). Among employees who retired at 60, mortality was similar to those who retired at 65 (hazard ratio 1.06, 0.92 to 1.22). 

Men had a higher mortality than women (1.48, 1.16 to 1.89), and mortality was lower among more recent retirees (0.97, 0.96 to 0.99). Mortality did not, however, differ significantly by socioeconomic status (1.09, 0.97 to 1.23). 

Regardless of socioeconomic status, employees who retired at 55 had a higher risk of mortality than those who retired at 60. 

Employees who retired at 55 in the high socioeconomic group had a 20% increase in risk of death (hazard ratio 1.21, 0.88 to 1.67), whereas employees who retired at 55 in the low socioeconomic group had nearly a 60% increase in risk (1.58, 1.15 to 2.18). 

No difference was found in mortality by socioeconomic status in the group that retired at 60. 

The study could not assess directly the issue of whether employees who retired at a younger age were in poorer health than those who retired later as data were not available to identify the type of retirement for each employee (for example, retirement due to disability compared with normal retirement). 

If early retirement before 65 is taken by some workers because of failing health, however, mortality would be expected to be higher early in retirement.


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