Ron on Early Retirement banner
 

Some people love their jobs and will never retire. The other 98% of us (ok, I made up this number) dream of seeing the workplace in the rear view mirror as we speed into Retirement Land.  I was one of those.  It is ten years later.  This essay is about what I have learned and I hope it is helpful.

Only a small percentage of employers pay retiree health insurance premiums these days.  Many don’t even allow retirees to stay in the employee group (luckily ours did). So retiring before Medicare age leaves a gap that must be filled.  For me it cost around $6000 a year to pay for my old employer-provided health insurance---that’s $60,000 if one retires at 55 and does not have some other coverage (such as a spouse’s insurance).  A friend who also did early retirement just went on Medicare and had been paying $10,000 a year for her policy.  This is probably the biggest cost to be funded by the early retiree.  If you are one who hates “Obamacare,” think about this:  those health exchanges will make early retirement cheaper than it used to be for you. 
 
While it might cost little or nothing,  planning retirement activities is important.  Early retirees sometimes find they have new-found time flexibility, but their pals (and perhaps their spouse as well) are still in harness out there, and not available.   Sometimes the best activity if one can find a way to do it is to reduce one’s work level rather than just quitting cold turkey.  At my workplace they called that phased retirement.  But surveys suggest about half of early retirees actually switch to a different line of paid endeavor—perhaps starting a business based on a hobby, or consulting part time somewhere.  The old retirement where one got the gold watch on Friday and woke up bored already on Monday is not the best idea for most people.  We might wish to run from the dysfunctional workplace, but what are we running to?

Paying the bills still has to happen in retirement.  An interesting website is http://www.caniretireyet.com/ and it tackles this and related issues.  There is the suggestion that to estimate retirement costs take those more-or-less regular monthly costs and multiply each by 300.  That gives an estimate, not adjusted for future inflation, on what you’ll need in a 25 year retirement to cover that.  If my electric bill averages $150 a month, and I retire at 55, I’ll need $45,000 just for that---and if I live to age 80 the lights go out if I’ve run out of cash.  Add in $15,000 for broadband and $18,000 for cable TV and, well, we get the idea.  And we haven’t yet got to food, clothing, shelter and taxes. 

And the early retiree especially has to think about longevity. If I live to 85, which the current stats say is more likely yes than no, I will have been retired 30 years. It took me 22 years to get from kindergarten to the PhD, and I spent a bit under 30 years working full time.  So spending savings in early retirement could threaten one’s ability to fund an old old age----and each day more and more people wake up to find they are 80 or 90something.  Most financial planners today run plan scenarios out to the mid-90s.
So what have I learned from early retirement?  First, it has been wonderful.  I have a high capacity to entertain myself with reading, a bit of work, music and other pursuits, so boredom never happens.  Our part-time, at-home work has allowed us to keep our mitts off the retirement savings. And it helped fund the health insurance costs, which dropped precipitously for me in June when I entered Medicare Land. 

We have to plan for retirement, but we really have to plan for early retirement.  I did not even retiring until we paid off our mortgage, and freed up a big chunk of monthly cash.  But the insurance, taxes and utilities kept rumbling on.   The health insurance my employer kindly paid for stopped when I left the building.  The cars get older and sooner or later need replacing, as do things like furnaces and roofs and kitchen appliances.

If you can retire early and want to, I wish you the best.  Crunch the numbers, and think hard about it, both in the present and what spending now might do to future cash accumulations.  Don’t make what you are running to worse than what you are running from.