How to fail at Early Retirement

By Billy and Akaisha Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

First, let me say Billy and I don’t really use the word “fail.”

We believe every situation offers learning opportunities and calling that experience a failure just doesn’t jibe with who we are. In our lives, we want to move forward with the knowledge and wisdom we’ve gained : not benchmark it emotionally by calling it a failure.

We read Financial Samurai’s Sam Dogen’s  piece on how he claims to have failed at early retirement.

We have great respect for anyone who puts their personal life out there to the public as a source of education and benefit for others, and Sam has done that.

Sam retired at age 34 with 3 million dollars (US$): six times more than we had, 30 years ago. Now, at age 42, he claims that he “failed” at early retirement (even with $250k passive annual income: 5 times what the average retiree has, for the following reasons:

They had a child (with all the costs involved including education at kindergarten level at $2k month)

He underestimated how low interest rates would go (he’s invested in bonds, real estate and dividend-producing stocks)

Rising health insurance premiums for his healthy family (which continue to rise in order to subsidize those who are less healthy)

The bliss of early retirement didn’t last as long as he thought it would, or in other words, he now wants to do more than play tennis and sleep in. (This statement is bewildering to us.)

Options, Choices, Opportunities

We at Retire Early Lifestyle have always focused on providing our readers with options. There is no one-size-fits-all for anything, so why try to fit into a limited description of your retirement?

We don’t believe Sam has “failed” at early retirement; we think he is locked into his own personal version of “limited thinking.”

Eliminate your Stinkin’ Thinkin’

For the continuing education of our readers, let’s look at his reasons one at a time.

With $250,000 annual passive income, (the average retiree income in the US is $48,000 before taxes) Sam and his family could live in countless places in the US: or in the world for that matter. Sure, San Francisco is an internationally-known, cutting-edge, beautiful city. But it’s not the ONLY beautiful city, nor is it the only cutting-edge location in which to live.

Our readers know that the most expensive category of spending in a household budget is the cost of housing. Now in Sam’s case, he has his mortgage paid off, but he is still responsible for maintenance, insurance and property taxes, which can be sizeable in California. AND San Francisco is a tremendously expensive location.

Consider this: Sperling’s Best Places cost of living indices are based on a US average of 100. San Francisco’s cost of living comes in at over 269, so you can clearly see that this choice of a domicile places a lot of financial stress on anyone’s income. Even with Sam’s mortgage paid off, and even with $250k annual income.

We suggest to anyone wanting to learn from our experience that deciding on a retirement location is one of the basics of building a successful retirement. Saving on the cost of living and the cost of housing is a substantial factor in your financial independence planning.

The world is a big place, and even if you don’t want to leave the US, there are hundreds or perhaps thousands of choices of towns and cities that are filled with natural beauty, have leading-edge restaurants, and state-of-the-art music, museums, and events. And today with the internet available does it really matter where you are located?

Take advantage of our Relocation Page to consider possible places that will fit into your retirement budget.

Having Children changes everything

Yes, it does.

However, having a child does not necessarily limit one’s ability to retire early. We see families all over the world who have retired and who manage their family expenses without needing to go back to work. The Johnsrud Family employs several creative options to manage this, and in their case, chose to be stay-at-home parents of five children instead of going back to work. Not that it’s terrible to go back to work. It simply depends on your desires, priorities and values.

For instance, Chris Mamula of Can I Retire Yet? chose to relocate and Jeremy and Winnie of Go Curry Cracker are still traveling the world with GCC Junior.

The Denning Family (now with 6 children) are choosing to travel the world in order to give their children a world education and perspective. And of course, Mr. and Mrs. Money Mustache are raising their son without returning to their previous careers.

We’re not knocking Sam’s choice, only demonstrating that there are options available, should you be open to them. With a little rearranging of some mental furniture, you might still be able to have your financial independence, your children and your free time. What could be better than personally molding your child’s future rather than ship them off to a daycare center where strangers will be raising your child? A luxury that few have.

Changing interest rates

No one can predict the future.

Some people say the stock market is dangerous, but the bond markets are not guaranteed either. Sam found this out, when his bond investments began yielding less than he prepared for, affecting his annual income.

Even though Sam is not keen on taking more investment risks, he is already taking more risk than he realizes. His bond income is barely matching the national inflation rate of 2.1% and most surely lagging Bay area numbers of 3%. At his age of 42, we think he needs to have some growth equity holdings such as VTI, Vanguard Total Market Index, offsetting inflation and growing his portfolio. Then he could sell off shares at a favorable capital gains rate making up his lost income from his bond portfolio.

That dang healthcare situation

Truly, the cost of health care premiums, especially for a young couple with children, can be a conundrum.

However, there are still options available. If one spouse is working, then often that health care policy is an answer. There are also health-share ministries and medical tourism, or – again – one can move to a location where the cost of policies and medical procedures are not sky high.

Having a Health Savings account (in the U.S., official or private) is very helpful and choosing a high deductible will lower the monthly premium costs. Some doctors now take cash (which lowers the cost of procedures) and there are articles and websites online to help you locate one near you. Some doctors even offer affordable annual memberships called concierge medical services, which allow you so many doctor visits, x-rays, and common procedures for a fixed affordable price.

While frightening to some, there are viable alternatives such as medical tourism, and Going Naked. We have often mentioned the cheapest health insurance is a ticket to Bankgok, Thailand, a city world renowned for its top notch medical care.

Retired or dead?

Sam’s last reason for his seeming “failure” at early retirement simply makes no sense to us.

Perhaps calling one’s self financially independent instead of “retired” carries less emotional baggage with it. So many people feel that when they “retire” they never want to do another productive thing in their lives because it sounds too much like work or because someone from the “Retirement Police” will judge them.

Or they think they “shouldn’t” make any money selling their expertise or put their energy towards a volunteer project that continues to grow out of the original small idea.

We say there is no end to learning and no end to volunteering as there is need everywhere. Personal growth doesn’t need to stop, and who wants to do “nothing” and only sleep in when you have 40 or 50 years left of your life to live? 

Sure, “sleeping in late” can be delicious … but what are you going to do tomorrow? That’s a recipe for listlessness and dissatisfaction.

Becoming financially independent lets you choose what you want to do with your time, where you might want to live, and what you might want to create or invent. There is no rule that says you have to drink Margaritas all day on every beach in the world, or sleep in and only play tennis or golf.

Financial Independence is freedom personified. Create your own path of expression.

And, yes, choosing to live in San Francisco or another very expensive location is an option you may want to implement. We would simply suggest that you not call your choice of going back to work as your “failure at early retirement.”

Instead, take everything you have learned and all your wisdom into your next interpretation of you.

Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance, medical tourism and world travel. With the wealth of information they share on their award winning website RetireEarlyLifestyle.com, they have been helping people achieve their own retirement dreams since 1991. They wrote the popular books, The Adventurer’s Guide to Early Retirement and Your Retirement Dream IS Possible available on their website bookstore or on Amazon.com.