Early Retirementby Philip Greenspun in February 2006
This article addresses the joys, challenges, and some practical aspects of retiring young. The author retired in 2001, at the age of 37 (same age as Rossini when he retired).
Why hasn't he accomplished all of those things? "Because I'm chained to this desk 50 hours per week at this horrible [insurance|programming|government|administrative|whatever] job.
So he has no doubt that he would get all these things done if he didn't have to work? "Absolutely none. If I didn't have the job, I would be out there living the dream."
Suppose that the guy cashes in his investments and does retire. What do we find? He is waking up at 9:30 am, surfing the Web, sorting out the cable TV bill, watching DVDs, talking about going to the gym, eating Doritos, and maybe accomplishing one of his stated goals.
Retirement forces you to stop thinking that it is your job that holds you back. For most people the depressing truth is that they aren't that organized, disciplined, or motivated.
This article is written primarily for Americans. We have "pursuit of happiness" written right into our Declaration of Independence. A working person, however, does not expect to be happy all the time. Every job has unpleasant elements and drudgery. The working person imagines that if he didn't have to work, he would be happy 24/7. It would be like going to Disneyland every day.
Suppose that you are retired. At this point, your one job is the pursuit of happiness. If you are not happy, therefore you are a failure at your job and in your life. But how can you be happy 24/7? Perhaps if you moved into a hotel in Orlando and went to Disneyworld every day you would be pretty happy. But if you retain the responsibilities of home- and car-ownership, much of your life will continue to be mundane, boring, or unpleasant. Will you wear a big smile on your face as you change the lightbulbs in the hall? Will you be delighted paying bills or begging the plumber to come over and fix the shower? Will you be ecstatic when it comes time to get your car inspected?
The idle rich in the old days were truly idle. They had servants, and butlers to supervise those servants. Unless you are retiring today with $50 million or more, however, you probably aren't rich enough to live in a cocoon. You still end up running the same errands that you ran when you were a wage slave, but now they stick out more. The errands aren't keeping you from attending a boring meeting at work; they're keeping you from a fun horse-riding or helicopter-flying lesson.
If you've got a spouse and kids, you're all set. You'll spend enough of your day talking to other people. If you're single, however, be aware that you will need to create a social life. This can be tough in many parts of the country and with your existing friends. Your friends who have jobs aren't available during the day and, most of the time, will be too tired in the evening to get together.
The author has been personally fortunate in several respects. First, his preretirement apartment is located in near Harvard Square in Cambridge, Massachusetts. This neighborhood is full of interesting people, such as graduate students, with flexible schedules. Second, several years before retiring he adopted a Samoyed puppy. Walking around town and into shops with a Samoyed is a guaranteed way to start a casual conversation. It might be limited to "What kind of dog is he? What's his name? How old?" but it seems to be sufficient to stave off the feeling of solitary confinement. Third, the author took up flying as a hobby and general aviation seems to involve a lot of middle-aged guys goofing off and hanging around. (see this separate page on "Aviation for Retired Guys (and Gals)")
One strategy that might be effective is to spend every Sunday night planning activities for the week. As your friends get older, it becomes more difficult to arrange dinner parties and other get-togethers. They just don't have the energy or inclination to hang out like they did in college or just after.
An ideal retirement trip might be one in which you learn some new skills and have built-in interaction with people. The author enjoyed a 10-day trip to Panama, for example, in which he took helicopter lessons on most of the days. There was some sightseeing, of course, but not the same old "Where else have you been in Central America" sorts of conversations that pure tourists have. The organized tour that appalled you during your working life might be just right now that you're retired. You'll be sightseeing but also getting to know some potentially interesting new people.
Remember that travel can be hard work, especially if you're doing the planning yourself. Some experienced travelers plan a day or two each week in which they "take a day off" from traveling. They don't move to a new city. They don't sightsee. They might do laundry or other errands.
[Photo at right from Tourists as Subjects.]
Let's start with a story. Back in ancient times, I worked at an open-source enterprise software company. We had about $20 million per year in revenue and, even after paying out $3 million in year-end bonuses to the programmers, we had at least $3 million left over in pure taxable profit. So we looked for opportunities to do some non-profit work. One of our customers was the MIT Sloan business school. They wanted an information system to coordinate all student-teacher and student-student interaction in their classes. Basically the system, dubbed "Sloan Space", covered all the IT needs of the school except for accounting. Sloan Space kept track of who was in a class, who was teaching a class, what the assignments were and when they were due, the submission and grading of assignments, private discussion forums for each class, and everything else that the Sloan staff decided that an online community of MBA students needed.
Sloan wasn't paying our company as much as other clients but we found the contract worthwhile partly because many of our employees had been MIT students and had a sentimental attachment to the place, but mostly because we thought that we could reuse the software and get other universities to adopt it. Our software was free and open-source but the richer organizations that used it would generally pay for support and extensions. Universities don't pay taxes and they sometimes cry "poor", but after years of claiming to lose money on every student they somehow end up with substantial assets. (Harvard, for example, has about $30 billion in its checking account; enough to buy at least five aircraft carriers, complete with fighter jets.)
Just as Sloan was preparing to launch their system to students we heard about a new tuition-free engineering college. They were about a year from taking in their first students. We liked what they were doing and contacted the president of the new school. We explained our contract with MIT Sloan and the fact that all of the software we'd built for Sloan was free and open-source and could be reused at their school. We offered to assign two full-time programmers, each with an MIT degree in computer science, to the project indefinitely. These two programmers would extend the MIT Sloan software to meet any requirements that the new school set forth. Basically we would handle all of their IT needs at no charge. All of our software was open-source and if we disappeared after a year they could hire the programmer of their choice to maintain and extend it. The president seemed delighted with this idea and turned us over to his head of IT to work out the details. That's where the project stopped. The head of IT already had a plan to hire programmers and build a big system from scratch, working in various Microsoft products (most of which were subsequently rewritten or discontinued)
Non-profit organizations exist to provide their staff with great jobs and the fun of making decisions and spending money. The folks who work at a non-profit organization are very interested in drawing a salary higher than their skills and working hours would command at a for-profit enterprise subject to competition. They are not especially interested in efficiency or accomplishment. If you've come from the commercial world, in which McDonald's must be ruthlessly efficient for fear of being destroyed by Burger King, working with or in the typical non-profit organization will likely drive you to insanity.
Once word gets around town that you are retired, non-profit orgs will start rattling your cage. Whatever your IQ, education, certifications, and skills might be, the assumption will be that you are past it, a doddering old fool incapable of doing more than writing a check. If you believe in their mission, however, it doesn't make sense to write them a check. Donating money to charity is great for busy people with jobs and the obscenely wealthy who are maintaining their social status with displays of spending surplus cash. As an early retiree, however, your comparative wealth is mostly in the time that you can choose to spare. If the non-profit organization can't come up with a way to use your brains, skills, and time, tell them to get their cash from the time-starved working rich and the multi-billionaires.
Most important, do not retire in the expectation that it will be easy to find rewarding non-profit volunteer work.
(If you aren't sufficiently discourage by the foregoing, read my ideas for new non-profit projects.)
Suppose that you say, for example, that you can't make firm travel plans because your little airplane doesn't have a turbine engine and deicing equipment and therefore you're very dependent on the weather. Folks will ask "Why don't you get a Gulfstream and blast through the clouds at 4,000 feet-per-minute with the same engines that power a Boeing 737?" It becomes a little awkward to admit that you're approximately $50 million short of the $50 million required to join Jack Welch in the flight levels (of course Mr. Welch, despite being retired, doesn't pay for his use of a GE business jet, the fuel, or the pilots; the public shareholders of GE do).
An answer that brings the conversation back down to earth is to remind your interlocutor of all the older folks he or she might know who are retired. They aren't rich, are they? They have enough money, one hopes, to live in a comfortable house and do the things that they most enjoy, not enough money to gratify every conceivable material desire.
Is an increased tax liability so bad? Not for the truly rich. These guys intend to give most of their wealth away to non-profit organizations. The federal government funds roads and airports that we all enjoy using. The feds pay for health care for the poor and the old. Our tax dollars pay for intrepid military personnel who go out and kill angry foreigners (in most cases) before they can arrive on U.S. soil and kill Americans here at home. For a non-profit organization of its size, the federal government is surprisingly efficient. Most federal employees work in big box-like office buildings, not in $300 million monuments to an architect's ego. George W. Bush gets paid only $400,000 per year, less than half of what a lot of university presidents earn.
Can we tweak the $N bonus idea at all? What if a kid becomes a repulsive yuppie despite the lack of financial necessity? Won't his siblings become envious when Chad, Jr. gets a $3 million check from Chad, Sr. to supplement his $1 million/year earnings at J.P. Morgan? Perhaps there should be a sliding scale for the bonus where the first $100,000/year is muliplied by 4, the next $100,000 by 3, the next $100,000 by 2, and the rest of the kid's income is not subject to a parental bonus. Or there could be a lifetime cap of $10-20 million per kid (no Gulfstream for Johnny :-( ).
How about tweaking the tax liability? Perhaps the money could go first into an irrevocable trust, but only paid out by the trustee as a multiple of income. I'm not sure if this escapes gift/estate tax.
[Note: I drafted this idea at the request of a late 40s rich, but not retired, friend. He ended up implementing it for his teenage children.]
Whatever you do, make sure that you read Real World Divorce before settling in a state and exposing yourself to its family law system. Moving one mile over a border could mean the difference between losing half of your savings after a one-day marriage and losing none, or the difference between being a parent after a divorce and being an every-other-weekend aunt or uncle, or the difference between paying $100,000 per year in child support or $13,000.
If you're retired, however, nobody tells you how to organize your life. If you have goals that you'd like to accomplish and your time management skills are poor, you might end up disappointed in yourself.
In researching this article, I ordered all of the popular books on time management from Amazon.com, but didn't like any of them well enough to recommend. Here are some reasonably good ideas from the books and from my friends:
Some good news for early retirees:
Concrete steps toward more happiness:
Unless you think the government is doing such a great job building a new and better Iraq that you want to pitch in even more, you may wish to consider ways of avoiding estate tax. Only the first $2 million of an estate is currently exempt from taxes, scheduled to rise to $3.5 million 2009, be unlimited in 2010, and come back down to $1 million in 2011. Some states collect their own estate taxes (see http://www.retirementliving.com/RLtaxes.html for a list). The total tax burden on an estate can be more than 50 percent.
The standard tools that rich families use to preserve their wealth down through the centuries include the following:
Very interesting. Most of my happiness comes from accomplishing goals (creating software products is very satisfying) or from interacting with my spouse, children, extended family and co-workers. I can imagine doing all these things in my free time if retired. I do build software on my own 'just for the heck of it'. And incidentally, thanks for all the free software engineering stuff, I can't read enough (even on my own time). W
-- W Chadwick, December 13, 2006
Phil, this is a great article and one that hits the heart. I left a certain famous search company after 5 years of employment with a lot of wealth and haven't been working since. I think there needs to be more written on this subject of 'now what?!' and basically support for some of us young (im 36) retirees who have lost a bit of ambition and direction after leaving the rat race. Anyway, after reading your article, i dont feel as guilty anymore splurging on a thing or two (namely justifying buying another car), but more importanly to focus on new things and not lose confidence that you'll have the motivation to be working hard again one day. I also never knew that being wealthy has its stigmas...ie alienation from certain friends and certain family, etc. You really have to be creative in this situation. Keep the ideas and updates on this subject coming...
-- A Guy, December 19, 2006
I really like your list of how rich families preserve their wealth down to many generations; especially the suggestion on buying a huge life insurance policy and getting monthly annuity payments from it, set for life! According to this site, it is also not advised to take out a lump sum distribution from a 401k because:
*Starting from 2006, the highest one time lump sum payment that a 401k retirement saver (between 62 to 65) can receive is $175,000. This limit is lowered for younger people.
* Starting from 2008, the assumptions (such as interest rate, life expectancy & rates of return on investment) that we used will change from the 30 year Treasury bond rate to the corporate bond interest rates. Since corporate bonds have higher risk than treasury bonds, their interest rates and yields are consequently higher. Therefore, the lump sum payments that you receive will be even lower. The only disadvantage of getting monthly annuity payments for the rest of your life is if the life insurance corporation goes bankrupt, you could lose your monthly payments. However, the Pension Benefit Guaranty Corporation (PBGC) will step in and compensate you for the lost annuity payments (usually much lower). But all in all, the life insurance policy suggestion is the best to preserve wealth down to many generations!
-- James Bartela, February 1, 2007
Dismissing all non-profits because they exist for the benefit of the employees is just a little cynical. When I stopped working in the corporate world (MSFT) I started working for a non-profit to educate myself and figure out if I wanted to do it long term, and have discovered a wealth of viable causes, and committed people who really are contributing to making the world (sometimes one individual at a time) a better place for the rest of us to live. Sometimes it takes a group of people with different skills to create change, whether it be locally by clearing the trails in a local park, or building a house for others, or globally, thru education and information. However, when it comes to volunteering, be prepared to be clear about what you are offering and be willing to show up in a committed way, showing up once or twice for a couple hours probably won't be beneficial to anyone. (altho at YES! magazine, we have successfully used a seminar format to pick the brains of people, in a consulting format).
-- Audrey Watson, March 5, 2007
From 2001-2004 I was a CEO of a public software company and after a major turnaround, we sold it, and I made enough to "comfortably" retire in my 40's.
Since then, I have had both the same joys and frustrations that you mention in your article. I have enjoyed working out more, reading, traveling all over the world, time with friends and family.
Yet, like most ambitious people, I keep asking myself, "Is there somethhing more?" "Am I really done with my career?" etc.
Retiring in your 30's, 40's, 50's or 60's, we will all have to come face to face with the reality that we are all so much more than our jobs, careers, status symbols captured and enjoyed.
I don't have my final answer. I am still struggling through, "Get another CEO Gig" or "Fully pursue all my other passions in life".
-- Craig Brennan, March 16, 2007
I'm getting ready to retire fairly early- 53- not through having made a killing in the stock market or working 60-80 hours a week or being in a fabulous Internet startup, but by simply living below my means, maxing out my 403bk contributions, and adding to a seperate brokerage account when I could.
I found a good broker/money manager who has actively managed my account and averaged about 12%/year after expenses. Over the last few years he's guided me in moving from higher volitility investment to lower volitility, as well as some tax sheltered investments, and I'm in a position now where I can count on keeping up the same income level I had pre-retirement, along with the growth necessary for inflation, as well as keeping a cushion against the inevitible recessions.
There are three kinds of "money managers" out there. Most are salemen for insurance companies who will stuff you into low-yield annuities and pcoket large commissions. A lot are drones who will sell you what they're told to sell by their employers. But there is a small subset who make their money and their reputation doing wealth preservation for reirees and people who have inherited wealth. If you can find one who's interested in taking on someone who doesn't yet have a fortune, that can be a good way to go.
-- Michael Edelman, May 2, 2007
If you do want to volunteer your time; organise a conference! Find something you're passionate about (free software, gardening...) and see if there's a related grass-roots conference in your area (for example the "Yet Another Perl Conference"s, the various "Open Source Developers' Conference"s etc). If so, volunteer to help with the next conference; if not, create one. It's a great way to spend time with people, encourage the growth of your field of interest and increase your personal fame within it. It also comes with a specific due date, so you can walk away at the end if you don't want to do it again.
-- Jacinta Richardson, November 1, 2007
Wonderful article Philip,
Here are some ideas (many similar to yours) that have worked for me to retire at 51.
 Move to a country where you are richer (I moved from the UK to the USA) Other suggestions would be: Tunisia or Morocco.
 Learn something new that's HARD. (I took flying lessons at 45 and I am now a private pilot) Other suggestions would be: play piano, learn chess, get an MA or Phd.
 Be creative. I draw and sculpt. Other suggestions would be: paint, garden, design stuff
 Realize that love and sex gets better the older you are. in your 20s your inexperienced, in your 30s your making babies and money, in your forties your getting divorced, but in your 50s your relaxed and enjoying life.
 Teach young people your skills and passions. You will both learn from each other.
 Keep buying popular music. Don't just listen to the hits of your youth but embrace current trends and you will not turn into an old foggie with a bad haircut and dreadful clothes. My hero whom did this perfectly was John Peel BBC DJ.
JUST HAVE FUN AND LIVE FOR EACH DAY.
Simon Holland Wisconsin USA
-- Simon Holland, June 28, 2008
Thanks for the "food for thought" . I have lived within my means and worked a goverment job -for 23 years paying union and pension dues. My pension will be (well under the recommended 70 percent of my $70,000 per year gross income) at 53 percent , wih no debt.
The human brain needs refreshing , new stimulation to be healthy; dong the same old job decade -after-decade tends to rot the brain and dry up the soul. My employer seems ill equipted to provide a renewing, refreshing, stimulating workplace. I am getting out asap at 53 years old, whatever the world brings it will have to be better than the stale, unmotivated, retired-on-your-feet condition of many long term goverment employees.
-- Peter James, October 28, 2008
Great information. Sadly, I now know that I will have no more motivation in retirement, than I do now (which is little). I do still look forward to no longer going to a job I no longer like, even a little bit. My last day is 12-22-2008 @ age 50.
I will take many of your suggestions to heart.
-- Anita Alexander, November 11, 2008
While I am not ready for retirement yet, I found much of use in this article. I was inspired to start a Gratitude Journal on my blog. Feel free to join in on my Thankful Thursdays, starting on 1/15/09. http://www.akalranch.com/2009/01/thankful-thursday/
-- Simrat Khalsa, January 13, 2009
I too have not found any good time management material until recently. There is one lecture I found that is actually useful and goes beyond anything else I've seen. It is the Time Management lecture given by Randy Pausch the 'Last Lecture' guy who died of pancreatic cancer recently. The time management lecture was not his last lecture, but a separate one he gave. It is sad to think how critical time management was for a person who was dying, but I think he was using these time management skills all the time. Here is a link to that lecture: http://www.cs.virginia.edu/~robins/Randy/
-- Jelly Bean, March 28, 2009
I retired at 32. I'm now 56. Of all the "things" that I've done, or junk I've bought and disposed of over the years, the most rewarding thing in my life has been my Buddhist practice. And it hasn't been a walk in the park.
-- Kevin Jenkins, December 10, 2010
I have to disagree with much of what you say about non-profits, or at least state that it does not apply to the ones I'm familiar with. For the record, I've worked in the corporate world, a government agency, and am currently working in a non-profit.
"Non-profit organizations exist to provide their staff with great jobs and the fun of making decisions and spending money."
Wow, that totally does not apply to the non-profits I know. Maybe if you're talking about some cushy art museum, but certainly not your run-of-the-mill non-profit or charity that actually *does* something. My observation is that the non-profits with the biggest budgets seem to be those with the suckiest missions. The non-profits and charities that actually do something good for people always seem to be the most desperately under-funded. Probably because rich people like to give money to organizations in comfortable parts of town that they don't feel awkward visiting.
"They are not especially interested in efficiency or accomplishment. If you've come from the commercial world, in which McDonald's must be ruthlessly efficient for fear of being destroyed by Burger King, working with or in the typical non-profit organization will likely drive you to insanity."
Again this is totally false. I work every bit as hard as I did at my corporate jobs, and many of my colleagues work even harder. With fewer resources and support. Sure I've known some slackers at my non-profit, but those people have all been laid off by now. We have to be ruthlessly efficient because we have lots of work to do and very few resources to do it with. Fewer all the time, because donors don't like to give money for operating expenses (see below) and we always seem to be losing people but the job never gets scaled back. We're always scrambling to find ways to squeeze a little more out of the resources we do have.
Regarding accomplishment, non-profits exist to accomplish things, in particular things that are not profitable. Non-profits *have* to accomplish things so that they can point to them when they ask for more money to continue their mission. Most people I know who work at non-profits would just go get a cushy corporate job if they didn't care about the things their organization was trying to accomplish. Maybe the problem is with the particular non-profits you've been exposed to.
"If you believe in their mission, however, it doesn't make sense to write them a check."
Oh my gosh this is so false! Non-profits *desperately* need people to write checks to them, especially for operating expenses! When people *do* write big checks, these donations often come with restrictions or are attached to some project that will have the donor's own name emblazoned on it in large letters. This is often a building project (see your comments about Harvard). Donors love to have buildings or pieces of buildings with their names on them, or one-off projects that prominently say "Sponsored by DONOR", but they don't seem to care about paying the utilities or replacing old equipment or paying the staff.
The problem is that these ego-boosting building projects are unsustainable. The place I work is saddled with debt because we did a large building project ten years ago. It has donors' names all over it, but it's dragging us down. If those donors had given us unencumbered funds, or put money in our endowment, we'd be in a lot better shape.
I don't know how to sum this up, other than to say I've worked every bit as hard at my nonprofit job as at my corporate ones because I'm passionate about the organization I work for and its mission. Also because I know my work contributes to something I believe in rather than lining the pockets of some rich guy who will get to retire early while I'll probably be slaving away until I die. Sorry about that last comment, but reading about rich people who get to retire early brings out my inner socialist.
-- geoffrey jost, April 26, 2011
I enjoyed reading your column and I like some of your ideas. I would think in this difficult economic climate, it is a challenge for retirees to manage their lifestyle into their 80's. As a young retiree at 50 years old, my family and friends looked at me with surprise as they expect me to work at least up to 60 years old. Since I have lost my drive to work in the corporate world, I decided to volunteer in non profit organizations, read avidly, blog actively, join a bible study group, travel overseas once or twice a year and spend the rest of my time reviewing my investments. I have developed my own benchmark for happiness which I reviewed on a yearly basis and improve on areas where I have been lacking. Although I could say I am doing quite well so far, my greatest challenge is to manage my time, money and talents wisely. I pray that with God's grace, I will become more creative in developing new hobbies and even more discerning in my investments and my business ventures.
-- Sandy Ling, May 20, 2011
I'm preparing myself (physically & mentally) to leave the corporate world and become full time homemaker. I browsed the internet looking for some valuable 'advice' on how to face reality with early retirement and your article came up among others on google page. I am quitting my job as a CEO of a small investment mgt. company at age 43 (am serving 3 months resignation notice fr 6/3/2011) after the job responsibilities became too taxing & stressful for me to endure. Also, the job has taken away my ability to perform my other duties as wife and mother to 4 children well. Nevertheless, the prospect of being left with no 'office work' to do from 9-5 after 21 years is still quite unimaginable for me...after reading your article; it helps to put certain perspectives in place. 1st, I have to get my priorities right!. Family first, personal second. I welcome more advice and words of wisdom - maybe from those who retired early & still have school-going children to manage themselves
-- Junaida A.Jalal, July 4, 2011
This article really goes in depth on many areas effecting early retirees but one area I think could possibly be added is to learn self-sufficent skills. I personally think anyone retiring without a huge retirement fund should learn how to repair and/or build a home, fix their cars, grow their own food, start a business, etc.
These skills have come in handy for my early retirement and saved me a nice bit of money. Since your probably going to have much more time during retirement you can spend some of it upgrading or learning some very practical and money saving skills.
-- John Alfered, April 30, 2012
An interesting post you've written.
I think it's a bit disrespectful to say that non-profit workers are under-skilled and over-eager for pay. I worked in an non-profit and I know that I was working harder than most of the people I know in the private sector and getting paid less. There were constant demands on my time and I had to be able to deal with a wide variety of people and changing circumstances on a regular basis. Working in education or with the under-served is never easy. When I worked in the corporate world, I enjoyed endless air-conditioning (yes, these silly things can be an issue), a computer that ALWAYS worked, free coffee, and other perks. I don't want to seem inane by stating these small perks, but what I'm getting at is that life in the corporate world is just easier because it's more comfortable on many levels. Not having to walk 20- 30 minutes to your job site from the parking lot (which you had to pay for) with a load of materials, is very nice. In short, in the non-profit world, I had a world of goals and objectives to reach, but had fewer resources to reach them with. :)
I'm sorry that your relationship with non-profits has been negative. I can't say that mine was entirely positive. Being underpaid for endless amounts of work is never a fun experience. But put that aside, it was the lack of coherence, follow through, and transparency on the part of some of the management that was difficult to deal with.
-- madina da, August 16, 2012
charitable foundations and organizations that are supposed to work for the public benefit, but in fact provide jobs and luxurious vacations ("board meetings") for members of your family for decades to come; the Enron executives were into these. Supposedly it is illegal and the family foundation ought to recruit employees on the open market, but in practice people are able to say "the only person we could find to review grant applications at our family foundation was our cousin Margaret at $100,000 per year" (reduce estate taxes by 100 percent)
-- madina da, August 16, 2012