I was asked a question this week from someone aiming for a set financial number so that they can retire early and ride their bike. The good news is they've hit their magic number, so the next steps must be easy - bring on early retirement and lots of bike riding.
If only life was that simple! Instead, doubt starts to creep in - the question they asked:
Do I really have enough money to retire early?
As they said to me, every time a goal sits right in front of you, it can make you blink!
Of course, there can be various factors to consider as to whether a number is "enough". Are there dependents, what's the desired lifestyle, risk appetite and investment plans/strategy, etc? While I didn't dive into those details, I was able to say that my questioner's number would be more than enough to fund my lifestyle - and when I compare my early retirement spend to other FIRE blogs, I'm not even close to being a low cost early retiree.
So, what to do about those doubts? If I were revisiting my early retirement decision, I'd remind myself of these four things:
Our spending will reduce as we get older
My calculations erred on the side of caution because they assumed we'd continue to spend the same amount of money (inflation adjusted) each year. However, the reality is that our spend will decrease as we get older and do less things.
We could spend less if we had to
If we needed to reduce our spending, we could, and we'd still have a great life. I recently calculated that we could reduce our spend by 37% by cutting down on some, but not all, of our discretionary spend.
What if my investment pot did have a shortfall
What are we talking about here - maybe there's a 10% chance that I have a shortfall of 10%? Put another way, that would mean there's a small chance that I (only) might have to return to work a day a week or a few days a month. But before I did that, I should remember the aforementioned natural reduction in spending as we age and the ability to cut our costs (while still having a great life). In other words, the likelihood is that I could manage any shortfall without having to do any part time work.
We focus on the downsides, but what about the upsides
In our case, our calculations ignore that both Sally and I will be entitled to a state pension/social security when we are 67. That's a way off, but still it's a healthy insurance policy for our financial position. Maybe there are other things too, I'm not expecting an inheritance, and it's not a subject that one wants to think about, but for some it will be an injection to the investment pot some time down the line.
I completely understand a crisis of confidence about the "do I have enough money to retire early" question - I've been there with my own early retirement decision. It's not something to be reckless about but, at the same time, you don't want to get caught up in a series of "one more years" if that means foregoing the early retired life that you planned.
It is easy to blink when the decision time arrives. At that point, for sure, think about the money - it's important, but don't lose sight of why you wanted to get to FIRE in the first place, and of the actual early retirement life that you wanted to lead.
For me, this week's early retirement life was:
Monday
The Tour de France rest day was in our town. Sally and I went for a walk to spot the team busses and the pros out on their bikes and I got bike envy watching the mechanics working on the bikes. Calmed myself with coffee and cake at a cafe.
Tuesday
More Tour de France stuff: the carnival of promotional vehicles, the presentation of riders and then the start of the stage. The weather is super-hot, perfect for the afternoon barbecue that we had with friends.
Wednesday
Beautiful sunshine, so we decided to go away for a few days in the campervan.
Thursday
Still away in the campervan, and still enjoying the gorgeous weather. My cheap "campervan/picnic bike" served me well and I got over the col to visit Lac du Bourget near Aix-les-Bains.
Friday
Back from our campervan trip, writing this post, and about to head out for a run.
I'm confident that our finances are sufficient to support our current lifestyle. I'm also confident that if money got a little tighter, we could cut costs without cutting our quality of life. I also have the added comfort that when we're 67, we'll start to receive our state pension/social security payments.
Could our financial position be more bullet proof? I'm sure it could.
Would I want to trade last weeks early retirement life for working more years to make our financial situation more bullet proof? No way, I enjoy my early retirement life too much for that.