Crunching numbers and considering some family dynamics, I came up with a roughly five-year plan to retire quite comfortably with a healthy margin of safety.
I enacted that “five-year plan” four years later in the summer of 2019. It seemed like the right time for a variety of reasons.
I didn’t want to retire as soon as I realized that I could; I would have regretted that. Conversely, if I had worked a decade longer than necessary, like this guy did, I’d regrettably still be working in a job that never felt like a true calling to me.
When is the best time to retire?
First, you must satisfy some pre-requisites:
• Financial Independence achieved via saving at least 25x anticipated annual expenses or
• Passive plus active income will cover your expenses
• Career aspirations fulfilled (or willfully abandoned)
• A plan to retire To something.
If you can check those boxes, I would say you are ready to consider an early retirement. It’s time to do some soul searching and decide if and when you’ll be truly ready to retire. For me, it was all about minimizing the Likelihood of Regret.
What is the Likelihood of Regret?
There are two distinct likelihoods of regret that must be considered.
- The likelihood you’ll regret retiring too soon.
- The likelihood you’ll regret working too long.
Let’s consider each of these independently.
Why might you regret retiring too soon?
You could have earned more money.
More money would allow you to have a lower withdrawal rate, allowing you to sleep better at night. Sure, a 4% withdrawal rate works looking backward, but our lives are looking ahead to an uncertain future. A 3% withdrawal rate might make you more comfortable with an early retirement.
More money would allow you to undergo some lifestyle inflation. You may not enjoy the finer things in life right now, but people change. Even you. Even me. My desires are different than they were ten years ago, and I imagine they won’t be the same ten years from now. Or twenty. Or forty.
More money could be used to benefit others. Just imagine how much good could be done with the income from just one more year. How cool would it be to donate $200,000 to a favorite cause? You could use it to start your donor advised fund, if you haven’t already.
You may be wearing some golden handcuffs.
I wasn’t fully vested in my employer’s profit sharing and match money until the fall of 2018, which is one reason I worked beyond that date. If I had left sooner, I’d have left a five-figure sum on the table. Those were my golden handcuffs.
Golden handcuffs can come in many forms.
Pensions or pension increases. Provided healthcare when retiring after a certain age. Bonus payments tied to length-of-service or project completion. Golden handcuffs as financial incentives can be psychologically powerful, even for the financially independent.
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Life might not change that much anyway.
Circumstances may make retiring in the near term less enticing. For example, our boys were in a public gifted and talented “school within a school” that went through 4th grade. With our younger son accelerated one grade, they were only one grade apart.
If I had retired when they were in 1st and 2nd grade, we would have wanted them to continue the program, and we would have been married to that school schedule.
Early retirement for me is all about freedom. Many of the things I’ve got in mind for this early retirement are incompatible with the public school schedule, and we’re now better able to do them while worldschooling.
Why might you regret working too long?
There is a time opportunity cost.
Unless you absolutely love your job, and would do it for free, you are working in lieu of occupying your days and perhaps nights with something you’d rather be doing.
There is an obvious opportunity cost in terms of time when you’re working, unless there’s truly no place you’d rather be than at work.
You don’t want to experience full burnout.
I probably exhibited some mild burnout symptoms, but for the most part, I was reasonably content with my anesthesia job. But burnout is real and increasing, and I didn’t want to experience full-blown burnout personally.
That would have been bad for me, bad for my family, and bad for my patients. If you’ve got the means and are beginning to burn out, it’s best to retire sooner than later.
Life is short.
On the front lines, physicians see too many patients with devastating health problems that present far too soon. Raise your hand if you’ve lost a colleague, close friend, or family member well before full retirement age. We’ve got a room full of raised hands.
I plan on living a long, healthy life, but I certainly can’t guarantee it. The pandemic has emphasized this point in a way I never could have imagined.
Striking a Balance
In my analytical mind, I picture the Likelihoods of Regret as lines on a graph with a timeline along the X axis. The likelihood of regretting retiring too soon starts out high and decreases with time. The likelihood of regretting working too long starts low and increases with time.
At some point, those lines will intersect. That’s where the magic happens. That’s the best time to retire, at the nadir on the Likelihood of Regret scale.
Identifying the nadir is the tricky part. Clearly, many factors go into what those lines will look like for you, and those lines won’t be static. Family matters and career disturbances may cause sudden shifts in one or both lines.
My lines certainly shifted as I honed in on my final retirement date of August 2019, and my point of intersecting lines moved a bit to the left.
- A resident reached out, wanting to work in our small group starting in the summer of 2019.
- We sold our oversized former home, eliminating our final debt.
- I started to realize income from a side gig.
- I was able to practice retirement a few weeks at a time with a sweet, part-time schedule. I realized I was ready for this life-altering change.
Factors That Alter Your Ideal Retirement Date
The further out your hypothetical retirement date is, the more likely it is to jump around, and there are a number of factors that could move the dial in either direction.
Things that could move it to the right (retire later):
- A prolonged market downturn
- Economic Inflation, particularly if your investments are not protective against it
- Personal inflation, a.k.a. Lifestyle Inflation requiring a larger nest egg
- A big salary cut, making it more difficult to reach financial goals
Things that could move it to the left (retire sooner):
- A terrible diagnosis with a poor prognosis (for yourself or a family member)
- Excellent market returns
- A sudden windfall (inheritance, lotto, 100-bagger investment)
- New or increased work-related stress
- A big salary cut, making work not worth the effort
Whether you’re looking at an early or standard retirement, I hope you’re able to minimize the likelihood of regretting working too long or of leaving too soon.
It helps to have this mental framework, and I recommend writing out a list of pros and cons of retiring either earlier or later than you currently anticipate.
What would your lines look like, and where would they intersect? What factors would cause a seismic shift? Are you more likely to regret retiring too soon or working too long?