By Darrow Kirkpatrick, MarketWatch
I can’t do everything I want or have everything I want in early retirement. But that’s OK.
Every significant accomplishment in life requires trade-offs. It’s the law of cause and effect.
If you want to be an Olympic athlete, you’ll be training while others are relaxing. If you want to be a doctor, you’ll be grinding through medical school and long hours of residency while others are sleeping. If you want to be an entrepreneur, you’ll be working for years to implement the details and realize your vision, while others are spending more time with family.
It’s the same with financial independence and early retirement. Achieving those goals will require doing some things very differently from the rest of the population. To some, those differences will appear to be “sacrifices.”
Occasionally, I hear people express jealousy of my lifestyle. It is true that I enjoy enormous freedom now, thanks to the financial flexibility I achieved via saving aggressively and investing wisely throughout my career.
But it’s not true that I can do anything I want. And it’s not true that I have everything I could want in life. I gave up significant items that many of those who are still working take for granted. The important point is that those things weren’t as important to me as financial freedom.
To find out what I lost, and whether I have any regrets, read on….
Power/influence
There was a time when I had fancy executive titles at a growing software company, dominant in its field. The company looked to me for technical direction, and my views on the future significantly impacted our products and services. I had a half-dozen engineers reporting to me, and many more people looking my way for guidance. I made hiring/firing and technology decisions that determined whether we would succeed or fail. Our company became known as an innovator, a progressive source of new ideas. I wrote articles for trade publications and presented at conferences. We were well-known in the business.
That kind of corporate status and power are no more in my life. My impact on the software world is ancient history, held in dusty technical journals and occasional recollections by former colleagues.
Many of those colleagues went on to senior positions in the corporation. I’m proud of them. As the company was acquired, expanded into new markets, and grew vastly in scope, they’ve exercised more power than I ever did.
I occasionally wonder what would have happened had I stayed. But holding an executive title in the corporate hierarchy of a mature company wasn’t my path. I thrived in a flexible, creative, entrepreneurial environment on the bleeding edge of new technology. The staid corporate world of hierarchies and policies, annual plans and endless meetings was not for me. And I left it as soon as I could afford to.
It’s been more than a decade since I controlled significant business resources. Personally, that’s not a problem. As a textbook introvert, not only don’t I crave that kind of worldly power, but in most cases in my life I’ve run away from exercising it.
Yet there is at least one purpose for which I miss power: the ability to make positive changes in the world. It’s harder to do that if you have little say over how groups of people spend their time and money. We are facing many problems as a society that would benefit from the wise use of power and leadership.
Fortunately, my blog and books have had some impact on the world. More than a half-million visitors encounter these pages every year. And my books have sold thousands of copies. That gives me some small say in worldly matters, even in retirement, and for that I’m grateful. I hope I’ve been a positive voice for reducing consumption, investing wisely, and pursuing your highest calling in life instead of a paycheck, once that has become optional.
And I don’t want to downplay the importance of achieving power over yourself and your own life. That kind of personal freedom is where positive change in the world can start.
Big beautiful house
What’s the largest single purchase that the average person ever makes? Their home, of course.
Since a key component in the financial plan of anybody focused on becoming financially independent and retiring early is controlling expenses, it stands to reason that you’ll get a lot of bang for your buck by economizing on your dwelling.
Some will argue that a house is an “investment” that can actually serve your long-term wealth-building plans. And that can be true for some people, in some markets. In particular, if you have the skill set and interest for cost-effective do-it-yourself home improvements, you can add significant equity to your ownership. And if you are fortunate enough to live in an appreciating area during a rising real-estate market, that can add wind to your financial sails.
But those conditions are far from being the slam dunk they were in generations past. And if you require a fancy house to be happy, the wealth it represents won’t do much to build your financial independence.
There is no question that having modest taste in houses is a major asset on the path to financial independence. Fortunately, my wife and I are of that mindset. Only once in our married life of over 30 years now have we lived in a house that cost above the median or would be perceived as “fancy” by most people.
We rented that house for a year in tony Connecticut. I remember the initial buzz of moving into the beautiful new construction on a large lot in the country. Enormous rooms, hardwood floors, stone fireplace, high-end kitchen appliances and bath fixtures, beautiful trim everywhere. But as the year progressed, I grew disenchanted. The large rooms were impersonal. The location was inconvenient. And with work pressures mounting and the desire for financial independence dawning in my mind, the high rent looked like a drag on our eventual freedom.
If my wife and I could wave a magic wand and suddenly be transported to an upscale, perfectly decorated, three-bedroom green home with no maintenance, we would. But our daily priorities prove that we really don’t care that much. We are happy enough in our pleasantly worn two-bedroom townhome rental. We don’t miss managing renovations or fixing toilets, and we don’t have time for it. Over the years, we’ve found that house remodeling and maintenance are stressful and expensive for us. It’s questionable whether our quality of life would be improved by engaging in any more of it.
I know there are plenty of people out there who can easily drop $10,000 on furniture or $40,000 on a bathroom or kitchen remodel. Not me. I couldn’t possibly get enough enjoyment out of those things to justify the life energy (working hours) I would have to trade for them. I’d rather put some of that money into free time for camping and traveling.
But everybody is different. It just happens that our quality of life does not revolve around our house. A functional, comfortable and low-maintenance dwelling is good enough.
International travel
At age 50, when I first let it be known among family and friends that I would be retiring early, an older relative chastised me. I couldn’t possibly have enough money saved yet. Health care was expensive, and had I budgeted for international travel? A few package tours overseas every year for a couple could easily run up bills over $20,000, after all. And doesn’t everybody dream of overseas travel in retirement?
I chuckled to myself. The health-care concerns were real. Though, almost a decade later, we’re doing fine paying for our health needs. But the “need” for international travel was laughable. Though I realize it’s not the hip attitude, even among many early retirees, I actively dislike getting on airplanes and being a tourist in a foreign culture. You’d have to pay me $20,000 to do anything like that on a regular basis!
So not only can’t I afford prepackaged international travel in retirement, but I don’t miss it one bit!
To be honest, this is not true of my wife. She has a modest bucket list of international locations that she’d truly love to visit. That she will probably not reach all of these is a non-trivial sacrifice she’s had to make for our early retirement. But it’s part of the price she’s paid for all the other benefits of partnering with me and pursuing our lifestyle. If she’d wanted more money to spend, she could have chosen to work longer. But she, too, elected to retire early from her schoolteacher job at age 55.
And it’s not like we have no travel options. I’ve done dozens of camping and backpacking trips in spectacular regions of this country, and have many more planned. We’ve been all over the American west in our small RV, and will likely make treks to Canada and possibly Alaska eventually.
With careful planning, even the occasional international trip is not out of the question. Just last year Caroline engineered a budget trip to China organized by our local Chamber of Commerce. It had always been one of her dreams to visit that immense and immensely important country. She signed up to go, and had a great experience seeing a number of the highlights in China for only a few thousand dollars.
Most likely, she will orchestrate another budget trip or two overseas in the coming years. I will happily sit out those excursions. Though, perhaps, if we have some more good stock market years, we’ll fit in a once-in-a-lifetime trip to Japan or New Zealand. But my life will be complete and happy whether or not I ever make it.
After listening to the stories about China — good and bad — from my wife and other friends who were there last year, I am perfectly content to remain an armchair traveler to most of the far-flung regions of the world.
Guaranteed long-term security
Up to this point, the “sacrifices” I’ve discussed — worldly power, big house, international travel — have a certain opulent, expendable feel. If I fussed too much about missing those, you’d rightly call me an elitist crybaby.
But there is one area of sacrifice that gets to fundamental, everyday concerns. It’s a domain where people who worked longer and harder than me, and put away substantially more money could well turn out to be better off.
And that’s long-term security, especially long-term health care.
As I explore in my articles on long-term care insurance, there are not-impossible scenarios that could bankrupt us. Though I believe the odds for those are far less likely than the fear-mongers touting long-term-care insurance would like me to believe. The possibility that we would need more than a year or two of very expensive daily care is very low. The average duration of care for men and women in one set of studies was less than 9 months.
Most long-term-care policies are expensive and defray only a portion of your expenses, and only for a few years. In the end, we’ve chosen to forgo long-term care insurance, feeling the premiums are a bad value for the financial benefit. But we don’t have an extra million or two to throw at the problem. If one of us needs a decade of $80,000 care annually on top of other expenses, then frankly, we’ll just run out of money.
Yes that’s scary. But I long ago decided not to let the fear of low-probability scenarios dictate how I live my life. Yes, I’m aware of them. Yes, I prepare for them, as best I can. We care for our health assiduously, and continue to live as frugally as possible in early retirement. But I refused to sacrifice years of freedom to cover an eventuality that is statistically unlikely to happen.
If it does, we’ll make adjustments, muddle through as best we can, and, yes, it might be hard.
What I got for retiring early
At this point, understand that what I gave up to retire early isn’t necessarily what you or others would have to give up. Some will retire early thanks to extreme frugality and give up far more. Others, relatively wealthy, will own multiple retirement homes and jet around the world, making minimal sacrifices.
Still others will find alternative trade-offs to make. You can achieve the same goals I did, but optimize differently. You can tilt your financial life to allow for a large house, or international travel, by cutting back in other areas. (For example, we own three vehicles now, counting our camper van. Perhaps you’re an urban dweller who can get by with one or none.)
But you can’t optimize everything.
The vast majority of people who manage to leave the workforce early will do so at some cost. This post discussed mine.
Yet, as you might surmise, it’s not like I didn’t get anything in return:
• Since retiring, I’ve enjoyed unprecedented personal freedom. I get up every morning and do precisely what I want all day. The wealthiest people on the planet don’t have much more personal latitude than I do. Many have much less.
• We buy all the gear and clothing we can use. And we eat very well, both at home and dining out when we wish.
• I’ve traveled throughout the American West and Southwest — riveting areas of the country, if you love nature and history. That includes dozens of road and backpacking trips and hundreds of hikes.
• I’ve enjoyed an encore career, creating and growing this blog, which, as I’ve said, has reached millions of people. I’ve published two books, a lifelong dream of mine.
• I’ve enjoyed less stress and measurably better health. I’ve had more time to spend with family and friends. And I’ve made many more of the latter, thanks again to this blog.
Yes, I paid a price for my financial freedom. For some, the cost would be too high. But, nearly a decade in, though I understand more clearly what I gave up, I still don’t regret it.
