There is a very small percentage of the population that belongs to the financial independence/ early retirement community. Some might call it a movement. I don’t know if such a movement exists outside of the United States, but I would expect it to be smaller.
While there is no set definition, we aren’t really talking about somebody retiring at the age of 60 instead of 65. There are some people in their 30’s who have claimed the mantle of early retirement.
But just as people in their 30’s and 40’s have claimed a status of early retirement, there are critics out there who say that many of these people aren’t actually retired. These critics have been referred to as the Internet Retirement Police (IRP).
Mr. Money Mustache is one of the most famous leaders of the early retirement community. His blog is very popular. He wrote a post back in 2013 about the Internet Retirement Police.
The post is somewhat sarcastic in its own right, as Mr. Money Mustache is mocking the very people who are mocking him or those within the early retirement community. He is basically saying that if you make any money from any kind of job or side business that the IRP will show up and say that you aren’t really retired.
I am not here to defend the entire IRP. There are always people out there who will be critical of anything. I am not trying to defend every criticism made against the early retirement community.
Still, I think that the IRP (maybe I am part of this group now) has some valid points that we can learn from. It seems reasonable to be skeptical of somebody who claims (and probably brags) about early retirement yet is still making a lot of money from current work.
Here we get to a definition of “retirement”. Mr. Money Mustaches states in his post: “Retired probably does not mean you sit at home watching TV, venturing out only for medication or a motorized-cart-aided round of golf.” On this, I agree that retirement doesn’t mean you have to sit around and basically do nothing.
Still, I think some people are too loose with the term.
Mr. Money Mustache mockingly states: “It’s a shame we don’t have a better name for all this stuff we’re doing as Mustachians. Retirement doesn’t sound right. Financial independence comes closer. Can we invent a new word for it? How about Removed?”
He continues: “News Flash: the perfect word has already been invented. Are you ready to hear it? Here it is: Retired.”
He continues: “It’s perfect just as it is. It’s just like ‘Financially Independent’, but it sounds more amazing and it uses 75% fewer syllables.”
The problem is – and this is where the IRP get it right – the term is simply not accurate in many cases.
Mr. Money Mustache then defines “retired” in his next paragraph: “‘Retired’ means you no longer have to work for money, and you are aware of this fact. You can then proceed to do whatever you want, as long as you do it consciously and of your own accord. If you meet this condition, and you feel retired, congratulations, you are.”
The problem is that it is not true for many people in their 30’s and 40’s who claim this status that they can afford to never work again. They have the ability to tell their boss to shove it because they have enough money and a low enough standard of living that they could afford to live off of savings for five or more years. But if someone is age 35 and ends up living to the age of 85, does he really have enough money to never earn another dollar (not counting the earnings from his investments) for another 50 years?
Many in the early retirement community advocate the 4% rule. Your annual expenses should equal 4% of your total savings/ investments for you to retire. Take what you spend in a year and multiply it by 25. This is your early retirement figure. If you spend $50,000 per year, then you need $1.25 million.
But we don’t really know this to be true. We have no idea what the economy will be like over the next several decades. What if the U.S. stock market ends up like the Japanese stock market of the last three decades? If you invested in the Japanese market in 1989, you are still down by about half nearly three decades later.
And what if we have severe price inflation? Are all of these early retirees invested heavily in gold and other inflation hedges? What if there is double-digit price inflation at the same time as a down stock market? Many people will be throwing their retirement plans out the window.
For Mr. Money Mustache, I really have no idea what his situation was when he “retired” and what it is now. I know that his blog gets a lot of traffic and that he is making well into six figures with it (one 2016 story put his earnings at about $400,000 per year). There is absolutely nothing wrong with this, and I think it is great that he can enjoy his life and do something he enjoys and is passionate about while also helping others. With that said, I just don’t really like the word “retired”.
I prefer the term “financial independence” or “financially independent”, so I am one of the people that he is speaking to in his post from several years ago. I don’t care if “financially independent” has more syllables because it is more accurate in most cases.
It is not about retiring in your 30’s or 40’s; it is about having freedom.
Mr. Money Mustache had the freedom to quit his cubicle job while in his 30’s and explore things he was passionate about. His blog took off, and he is better off for it. If his blog had gone nowhere, he probably would have found something else to do that he likes that could supplement his income. Again, there is absolutely nothing wrong with this, but I do have a point of contention with the word retirement.
I really have no idea how much he had when he first “retired”, but I have my doubts that Mr. Money Mustache could have gone 50 plus years living on just his savings and investment income up until that point.
I think being financially independent is a worthy goal, and there is much to learn from others who strive (or have already achieved) this status. Even if you could officially retire (never work for money again), I don’t know if it is a good goal anyway. Are you really going to sit around and do leisure activities for the rest of your life starting in your 30’s?
Most multi-millionaire/ billionaire businessmen continue to work in some capacity even though they could easily retire. They aren’t still in the game so that they can spend more money. Maybe it is a game to accumulate more money, but it probably isn’t for consumption.
I don’t really believe that early retirement should be a goal. If you have ambition, you are still going to want to achieve things. Your goal should be financial independence so that you can pursue things that you are passionate about.
You can call me part of the Internet Retirement Police if you want, but I am calling out those who call themselves ” permanently retired” who really are not able to never work for money again. If you only have 25 times your annual expenses saved up and you are going to live another 40 or 50 years, I don’t think you are officially retired. You don’t know what your rate of return will be. You don’t know what your expenses will be in the future. You don’t know what tax rates will be. You don’t know what inflation will be in the future.
We live in a great world where it is actually possible for a few people to officially retire at a very early age. It is even better where people can achieve financial independence and seek work that they enjoy. This was mostly not possible 100 years ago. It certainly was not possible 1,000 years ago unless you were royalty. Even then, it was mostly a miserable life.
In conclusion, I think definitions can matter. I see many in the early retirement/ financial independence movement as smart people. However, I don’t think most of them are actually permanently retired in their 30’s or 40’s. There is nothing wrong with this, but they shouldn’t mislead people into believing that they could go on never working for money again. That is why I prefer the term financial independence.