Not free to be poor
Nobody wants to be poor. It's a dangerous and constrained position to be in. But there are people out there (me, for instance) who are relatively happy to live at a fairly low standard of living. Choosing to live at a low standard of living means you don't need to earn as much money--which opens up a huge range of possibilities that ordinary people don't have. The way society is organized now, though, that's not a safe option.
The classic early retirement strategy is simple to describe: Earn a good salary, live frugally, save (and invest) the difference. If you want to retire very early, you need a pretty big gap between what you earn and what you spend. You also need to know how little you can afford to live on. To those ends, living frugally is a double-win: It frees up money to save and invest, plus it also acts as a "proof of concept" for your standard of living in retirement.
(When you're unhappy with your job, it's easy to look at your spending and think to yourself, "You know, if I didn't have to go to work every day, I wouldn't need to spend so much on X" (where X can be just about anything from booze to vacations to video games). While there's some truth to that, most people are smart enough to know that the thing to do is to cut your budget first. It would suck to retire early and then discover that you're miserable without your X, whether it's a country club membership or a daily frufru coffee drink.)
As I say, simple to describe. It's even pretty simple to do, as long as you're willing to live below your means. The problem, especially for Americans, is that it isn't safe.
Suppose you do this. Suppose you get a small, cheap apartment that's within walking distance of most of the places you need to go. You quit driving much, parking (or even selling) your car. You shop your closet for clothing, let your wardrobe dwindle, and only buy versatile, classic items that are made to last. You eat a frugal diet with lots of in-season veggies and little or no meat. You forgo new gadgets and toys, and you seek out cheap entertainment such as free concerts, museums, and libraries.
Suppose, through such means, you get your expenses down to the point that you can fund your lifestyle entirely from your investment return. (Short of that, maybe your investment return can fund a large enough portion of your living expenses that you can choose any sort of work that appeals to you, even if the pay is very low.)
Are you now free to retire? No. At least, not if you live in the United States. You have too many huge contingent expenses.
A few of these can be dealt with through careful planning. You can estimate how much you'll need to buy a new car every so often. You can estimate how much you're going to have to spend to put your kids through college. You can estimate what you'll need to cover an occasional new roof, furnace, air conditioner, window, door, hot water heater, and so on (generally not an issue if you rent). But even if you have savings to cover these items, there are some contingent expenses that are simply unknowable. In particular, you might get sick or injured, and find yourself bankrupted by medical bills.
Huge contingent expenses are exactly what insurance is for, and it works pretty well for protecting you against the loss of your home in a fire or of your car in a collision. But, at least in the United States, it doesn't work worth crap for health insurance.
Health insurance in the US is not only expensive, it's also uncertain. Even if you can afford it, if you've ever been seriously ill, there's a pretty good chance that no one will sell it to you at any price.
There are other contingencies that the potential early retiree needs to worry about--investment losses, for example, or soaring prices for basic necessities like food--but they're relatively straightforward to deal with. Having more than than the absolute minimum to cover your frugal lifestyle is wise. A well-diversified investment portfolio that includes some foreign stocks, some bonds, maybe some real estate and precious metals can be expected to hold up pretty well. A fraction of your retirement income should be in the form of an annuity (such as a pension), and a fraction should be inflation-protected (such as TIPS or I-Bonds). A willingness to do some sort of paid work (to only semi-retire, as it were) adds to your options as well.
Sadly, none of these really solves the problem of medical insurance. (Well, bumping your investment portfolio up by a few million dollars would be a partial solution, in the sense that most health insurance has a maximum payout of a few million dollars anyway, so with enough cash, you could just carry that risk yourself. But that's just a further example of the fundamental problem that there's no ceiling on your potential liability.)
I think everyone suffers as a result of the way we do health care in the United States. How many people are working at jobs they don't like, or staying married to people they don't love, simply to keep their health insurance? What if those people were unleashed to follow their bliss? Everyone would be better off--them, their children, the people they're (unhappily) working for, the people they're (unhappily) married to, the people who could appreciate whatever they might be creating, if they weren't stuck in some job they no longer enjoy.
I'm looking forward to the day when society is organized such that I can pick a standard of living, arrange to earn that much money, and feel confident that ordinary bad luck won't ruin my life. I want to be free to be poor.
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