Don’t get me wrong, early retirement is great …
… not for everybody, mind you.
Many go back to ‘work’ because post-retirement life can become pretty boring, if you haven’t properly planned your time and your money.
I don’t include in ‘work’ anything where you are earning money because you want to, except where the commitment / stress / boredom rises to sustained uncomfortable levels and you feel that you can’t just walk away, in which case it’s probably ‘work’ just the same.
No, the real problem is that people don’t know when ‘retirement’ really begins:
They think it begins when they receive the huge card signed by 50 people they have hated for 40+ hours a week, or when the gold watch that they expected to receive turns into a Parker pen (in a nice box!), or when they get a nice speech from the boss who says: “Gee, we’ll really miss you, Bob” when your name’s John.
But, it really begins much, much later.
Ashton Fourie puts it best when he says:
This reminds me of a conversation I had with a friend after we sold our first business.
His comment then was, that having a pile of money, is not useful, because expenses continue to be a regular occurence. So we realized that one can only really “retire” when you have enough secure, passive income. Many people make the mistake to think you can retire on a pile of money.
Until you’ve figured out how to turn the pile of money into secure, long term passive income, you’re going to have to keep “working” – even if that “work” is the process of moving that money into income generating, secure, instruments.
This is really a very important observation and realization!
I remember being insanely jealous [AJC: slight exaggeration] of my friends who cashed out while I was still trying to earn a quid. Now, I am insanely jealous [AJC: this one is probably a huge exaggeration for dramatic effect] of those who still have a job or a business because they can spend pretty much whatever that want, knowing that next week the magic pot of honey will be refilled.
You see, it really is all about cashflow …
… when you have a pile of cash, you can only deplete it. Sooner of later it has to run out, no matter how much you started with, right?
Just ask [Insert big spending celebrity who’s financially crashed at least once in their lives: Elton John; MC Hammer; Willie Nelson; etc; etc] 😉
So, think about the early days of your retirement as a “transition phase” while you busily reassign your financial jackpot into income-producing investments then think about how much income those investments produce (after tax, various buffers for contingency, and reinvestment to keep up with inflation) and retire on that!