Is an “Early” Retirement Good Stewardship?

I am in my 60s and still working in a full-time job. If I were to retire tomorrow, I wouldn’t be considered an “early retiree.” In fact, because I am 64, I’m older than the average retirement age in the U.S., which is 63.  It’s not that I can’t retire, I just haven’t wanted to because I like working and I like my job.

You may have read something about the “early retirement movement” in the personal finance media and/or blogosphere. It’s usually the topic of articles with titles like, “Tales of Early Retirement: the Path 3 People Took.” One of the examples in the article describes a husband and wife, ages 62 and 55, who retired early and moved to Panama and started a small coffee farm.

The early retirement movement holds that it’s possible to retire much earlier than the “normal” retirement age of 65. What is required is consistent saving, starting very young, and spending less than you earn.  And oh yes, you have to do all three of these, in earnest, every year leading up to retirement.

On the far-end of the spectrum, is what is called the “early retirement extreme” (ERE) movement. (There are even a blog and a book by that name.)

The ERE basically says that all of us in developed countries are rich by any reasonable standard, and that we can live a materially sufficient and happy life on a very small portion (say, 25% or less) of what we typically spend – known as “extreme frugality.” By doing so, we can retire extremely early.

The ERE Wiki site explains it this way:

…if you live on 20-25% of your wage and invest the rest, you may retire in 5 or 6 years…This requires accumulating an investment account corresponding to 25-33 times your annual expenses in order to have a safe withdrawal rate of 3-4%.

Other values that the ERE movement espouses are independence and self-sufficiency through personal skills development. Increased skills reduce reliance on others and the need to pay for some services, resulting in significant expense reductions in some categories.

ERE is a popular movement (i.e., people like to read, write, and think about it), but only a minuscule percentage of people can accomplish it.

I am not anti-early retirement, but..

You may think I am going to come out against an early retirement. Well, I’m not, at least not the kind of early retirement I describe in my retirement stewardship manifesto:

…If you are fortunate enough to have an “early” retirement, it will simply mean that you have attained a level of financial freedom that will allow you to work with less or no pay, doing something that you truly love, perhaps in service to others…

I am aware that some will, for a variety of reasons, retire early. It is a relatively rare occurrence for reasons I will discuss, but it can happen. It may be due to job loss or health issues, but typically it is made possible by some degree of financial independence.

Perhaps you received a large inheritance or spent the first ten or twenty years of your adult life building a very successful business. Or, maybe you struck oil in your backyard while digging a post hole. But it’s more likely that you achieved it through hard work, frugality, and consistent saving.

From a stewardship perspective, when you retire is not as important as what you do after that. How you spend your time without the pressures of earning a living and use your time, talents, and treasures in service to God and others for the remainder of your life.

Good stewardship means that even if you retire early from your income-generating career, you will continue to work (i.e., engage in productive activity that enriches the lives of others) in some capacity as long as you are able. What kind of work would be an individual decision, but Christians should remain involved in their Church and Gospel ministry at a minimum:

They still bear fruit in old age; they are ever full of sap and green…Psalm 92:14 (ESV)

When was the last time someone told you that you were “full of sap?”

I also want to point out that an early retirement may afford extra time for pursuing leisure and hobbies. That is not a bad thing in itself, God gives us these gifts to enjoy, we just have to be careful to maintain the right balance in our lives, just as we did when we were working for a living.

Can you retire early?

You may be thinking, hey, why are you discussing early retirement – I just want to be able to retire by 65?  Well, take comfort, you’re in the majority.

Most people aren’t planning an early retirement. A survey of almost 5,100 working people by Willis Towers Watson found that most are planning to retire after age 65 (46 percent) than before it (30 percent). About 11 percent intend to retire between 62 and 64. Only 2 percent hope to retire before age 55. I suspect that the number of people who retire before age 40 (extreme early retirement) is less than 1 percent.

But most do dream about it. So, can it become a reality? Is early retirement attainable to anyone who wants it bad enough? What about extreme early retirement (by that I mean between age 25 and 45)?

Early retirement in middle-age is not impossible, but it would require very aggressive saving and controlled spending from an early age. Saving the 10% to 15% that is commonly recommended to retire at age 65 may not cut it unless your income is pretty big. An article on the blog ESI money titled, “How to Retire Early“, which was written by someone who actually did it, does a great job describing what is involved.

If you retire at age 55 and don’t work again, you’re going to need to fund up to four decades in retirement. You’ll need a lot more savings than someone with a 20 or 30-year horizon. But how much more?

If you work until the traditional retirement age of 65, some finance professionals say you’ll need about ten times your annual income saved. For someone earning $100,000 a year, that’s $1.0 million (taking Social Security benefits into account).

But if you want to retire at age 55 and replace 75% of your income, you’ll need 18 times your annual income or $1.8 million, which is 80 percent more. That assumes a 4% annual withdrawal rate, adjusted for inflation.

To have $1.8 Mil at age 55 would require savings of $1,850 per month starting at age 25 earning 6% annually and saving consistently for 30 years! Most people in their 20s and 30s would have a tough time saving that much month after month unless they are spending less than half their income.

Plus, there’s a double whammy here. Not only do your savings have to last a lot longer, but once you stop saving and start drawing them down, they won’t grow as fast and may even start to shrink, depending on your withdrawal rate and investment returns.

That would all seem to suggest, for the vast majority of us, that “early retirement” is just a myth. It is out of reach unless we are very aggressive in limiting our spending and in saving for retirement from a very young age.

That is where the ERE movement would differ. It would contend that a large sum of, say, high-six or low-seven figures, is not necessary. If you come out of college making $50,000 and save 85% of it earning 6% per year, they would say that you could have $300,000 by the time you are 30. Because you have been living on 20% of your income, you can live in retirement by withdrawing no more than 3.5% per year ($10,500), assuming you earn a return of more that that plus inflation.

In other words, live like you’re still in college for the rest of your life! That’s not very realistic as the path of extreme frugality and savings is fraught with difficulties.

It is feasible, but there are problems

First, most just won’t be all that interested or able to make extreme sacrifices. It’s too big a goal that will just bring frustration and disappointment in the end. The slow path to retirement – living within your means, avoiding debt, and saving 10% to 15% of their income – seems more doable to most.

Then there’s the whole problem of expected returns. Earning 3.5% per year plus inflation can be a challenging year in and year out. While it’s true that the stock market has exceeded that over the last 30 or 40 years, averaging around 10%, there is no guarantee that it will in continue the future.

In fact, the Social Security Administration’s Office of the Actuary (OACT) has used a 7.0 percent real return for stocks (based on a long-term historical average) throughout its 75-year projection period. But since that’s an average, there are be periods of lower or even negative returns.

Another area of concern is healthcare. That may not be much of a concern if you are a very young early retiree, but it will increasingly be as you age. According to the American Medical Association (AMA), health care costs have outpaced inflation every year since 2005 except 2008. And in some years, including 2016, the disparity has been very significant.

Escalating healthcare costs are therefore a very real threat to early retirees as they could consume a disproportionately large percentage of their savings over time.

The final problem is that it could be difficult if you change your mind and un-early retire later on.

If you retire at age 32 and spend the next eight years doing whatever, what if you want to return to work? Maybe your financial situation has changed, or maybe you just miss working. You might find it difficult to get re-hired as a 40-year old who’s skills have presumably gotten rusty.

Plus, a prospective employer may question your level of motivation for staying in the game long term. They may opt for someone whom they think is more motivated and without a significant gap in their work history.

Should you aspire to an early retirement?

You may dream about it, but is early retirement something that a Christian should desire and plan for? Is it good stewardship, or can it be?

As you may already know, the Bible has little to say about retirement, per se’ (certainly not our contemporary understanding of it). And it says virtually nothing about what we would call “early” retirement. (Early retirement in Bible times was probably the same as an early death.) But here’s what some others have to say about it.

In the excellent book, God and Money, Harvard MBA graduate and co-author, John Cortines, wrote that at one time early retirement was one of his most “high prized objectives” and he hoped to achieve it by the time he was in his mid-forties.

But later he wrote that, while saving for retirement is wise, being overly aggressive may put too much focus on personal comfort over our “mandate to share the Gospel and the love of Christ with the world.” He and co-author Gregory Baumer opted instead for the slow-and-steady approach to retirement with a saving limit that allows for maximum generosity along the way and a reasonable retirement when they get there.

A popular Christian personal finance blogger, Bob Lotich, wrote about how his view of retirement has changed. He too had a goal of “early retirement,” but has come to see that fulfilling God’s plan for his life is more important. He acknowledges that that will look different for each person in later life.

Jaime Munson, the author of Money: God or Gift, wrote that saving for retirement is not a bad thing as long is your goal in retirement is to continue to worship God and serve others as long as you are able, and not just comfort and ease.

Finally, Randy Alcorn, in his article titled, “Should Christians Save for Retirement,” says that Christians should question whether our level of retirement saving is thoughtful planning and foresight as scripture commands, or something else.

Each of these authors describes thinking that is different than the retirement (and “early” retirement) typically depicted in popular culture – something more aligned with Biblical stewardship principles and a purposeful Christian life.

Some things to ask yourself

So, if you’ve been dreaming of an early retirement, here are some things to consider:

Is it even feasible? Do you have the will, or the resources, to retire early? Most average income earners do not. In fact, many of us will have difficulty saving enough to retire by our normal retirement age.

Why retire early, anyway? What is motivating you? Do you dislike your career and just want the freedom to do what you want? If that’s the case, then why not make the change sooner than later and spend the rest of your life doing something you enjoy, without having to “retire” to do it? It may require taking some risk and making sacrifices – you will have to decide whether its worth it or not.

What about giving? Most articles about early retirement don’t talk a lot about generous giving – they focus on aggressive saving. If you save 25% to 75% of your income, it’s unlikely that you will have much left to give after you have also paid your bills. And if you can retire early, you will probably have to hold on tight to everything to make it lasts a long as you do.

How will you spend your time in early retirement? How will you fulfill the innate need to be productive and to contribute to the well-being of others? For most, I think there is a zero chance that a lifestyle of nothing but leisure and recreation will result in any measure of happiness or fulfillment. That’s why so many so-called early retirees start second careers, launch new business ventures, and get back to work one way or another, for pay or not.

Do you need to retire early to have the life you want? Why not just skip the whole “early retirement” thing and move straight to the new career/job/venture that’s motivating you in the first place? So often, happiness in life is the journey, not the destination. Retirement itself is not likely to make you “happy.” It has more to do with how you live your life leading up to, and during, retirement.

What if I already retired early? If you were fortunate enough to retire early, then use it to serve God and others in whatever ways he has called you to. As John Piper might say, “don’t waste your [early] retirement.”


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