The_Surprising_Benefits_Of_Early_Retirement
00:00:00.000 | Hello, everybody.
00:00:00.720 | It's Sam from Financial Samurai.
00:00:02.880 | And it's year end 2019.
00:00:05.480 | And I've just been doing a lot of reflecting,
00:00:07.800 | lots and lots of reflecting, because I'm planning
00:00:09.880 | on changing things up in 2020.
00:00:12.440 | And so in this episode, I just want
00:00:13.900 | to talk about the surprising benefits of early retirement
00:00:17.080 | I never anticipated.
00:00:18.800 | So to recap, I left my full-time job in investment banking
00:00:22.680 | in 2012.
00:00:24.120 | And I have in return.
00:00:25.500 | And it's actually been a challenge
00:00:27.480 | to stay unemployed for this long.
00:00:30.800 | In the beginning, I was fraught with doubt.
00:00:33.520 | Like, well, is this the right thing
00:00:35.360 | to do at the age of 34, going into my prime earning years?
00:00:40.340 | It just didn't make sense the first year.
00:00:42.600 | But like everything, whatever you do,
00:00:45.200 | you're going to get used to your new situation.
00:00:48.240 | And you're going to figure out ways to adapt.
00:00:50.160 | So I had about $80,000 in gross passive income
00:00:54.000 | coming from dividend stocks, CDs, savings, and mostly
00:00:58.280 | rental property.
00:00:59.680 | And I thought that was good enough.
00:01:01.200 | But as I got older, I realized I needed to make more,
00:01:04.720 | because my lifestyle increased.
00:01:08.640 | My wife stopped working also at the age of 34.
00:01:12.280 | And that's just the normal human condition.
00:01:14.240 | As you get older, you just want to do more things, like travel
00:01:18.240 | and maybe start a family and take
00:01:20.360 | care of your elders and people that you care about.
00:01:24.040 | And I know over the years, a lot of people
00:01:25.920 | have been on the fence about whether to truncate
00:01:28.180 | their careers and cut their main source of income.
00:01:31.000 | And it's a really, really scary thing.
00:01:34.040 | And I also want to say that no matter how much you plan,
00:01:37.040 | you can't anticipate everything.
00:01:39.320 | Hence the reason for this podcast
00:01:41.620 | on the unanticipated benefits of early retirement.
00:01:44.720 | So I want to go through five of the main ones.
00:01:47.200 | And I think as you listen to these benefits,
00:01:49.320 | it really might push you over the edge,
00:01:50.940 | because I'm reviewing that and I'm thinking to myself,
00:01:53.400 | I would retire right now if I had a job just because
00:01:57.320 | of this one benefit alone.
00:01:59.440 | The first one is you might slow your aging.
00:02:02.040 | What's interesting is when you're working,
00:02:04.400 | you're going to college, you're working 60 hours a week,
00:02:07.680 | you start feeling some stress.
00:02:10.720 | Let's be frank.
00:02:11.480 | We all experience some amount of stress.
00:02:13.880 | But you don't really realize how much stress and chronic pain
00:02:18.480 | you develop while you're working until you're no longer working.
00:02:22.720 | So when I was 33, I started sprouting my first gray hair.
00:02:26.720 | And I thought, hmm, finally the dam has broken,
00:02:29.440 | because my dad's-- he started going gray and losing his hair
00:02:32.680 | in his 30s as well.
00:02:34.480 | And I was thinking to myself, well, OK, that's it.
00:02:36.760 | I was finally losing my youth after years
00:02:38.800 | of getting beaten down by the finance industry.
00:02:41.400 | Then one morning, a year-- about a year after I retired,
00:02:44.760 | I was looking at myself in the mirror,
00:02:46.560 | and I noticed, hmm, no more gray hairs.
00:02:49.120 | I looked.
00:02:50.080 | I asked my wife to inspect me like a monkey,
00:02:52.680 | and she couldn't find anything on the top of my head either.
00:02:55.880 | So I'm 42 now, and I still don't have any gray hairs.
00:02:58.960 | And my hairline has also stopped receding.
00:03:00.960 | And I know this clearly, because I
00:03:02.360 | have this scar on the top left of my forehead
00:03:06.480 | that seems to get more and more prominent, or it seemed to.
00:03:10.000 | And now it's just kind of there.
00:03:11.960 | And so retiring early, very well,
00:03:15.040 | might be one of the best ways to extend your life
00:03:17.720 | and allow you to look younger and happier.
00:03:20.480 | Now, of course, I really won't know
00:03:22.200 | whether having a less stressful life
00:03:23.920 | has helped increase my life expectancy
00:03:27.000 | until after I'm dead.
00:03:28.440 | But I'm telling you, folks, I think
00:03:30.120 | we internalize all our stresses that
00:03:33.120 | manifests itself in chronic pain,
00:03:36.120 | and then we just learn to suck it up and deal with it.
00:03:38.600 | And I don't think that's healthy or normal.
00:03:40.640 | We need a certain amount of stress,
00:03:42.840 | but not so much so that we're just not
00:03:45.960 | feeling good every single day.
00:03:47.960 | So please take note.
00:03:49.040 | Two, on the same lines of feeling healthier and maybe
00:03:52.440 | slowing your aging, your chronic physical pain might go away.
00:03:57.400 | While I was working, I experienced
00:03:59.160 | several chronic physical ailments--
00:04:02.000 | TMJ, which is tightness in your jaw, sciatica, and also
00:04:07.200 | lower back pain.
00:04:08.440 | And I've had this since I was in college,
00:04:10.920 | and it came here and there.
00:04:12.480 | And there was one point I just couldn't walk,
00:04:14.760 | or actually I couldn't sit in a chair
00:04:16.680 | for longer than five minutes.
00:04:18.440 | So I had to go buy one of those Aeron chairs that
00:04:20.480 | were like $800, and the firm wouldn't pay for it.
00:04:22.920 | But now they would if I just requested.
00:04:25.440 | But back then I was like, OK, I've got to do this myself.
00:04:28.400 | And I just couldn't drive either for longer than 10 minutes,
00:04:32.000 | because it was just so painful to sit down.
00:04:34.720 | I constantly grinded my teeth in my sleep,
00:04:37.800 | and I would wake up with a very, very sore jaw.
00:04:41.040 | And sometimes I would grind so loudly
00:04:42.600 | that I'd wake up my wife.
00:04:44.320 | Every time I would talk longer than five minutes,
00:04:46.920 | my jaw and my TMJ would flare up.
00:04:49.360 | And so the pain got so bad that I went to a dental specialist
00:04:53.000 | and paid him $760 out of pocket to drill some divots
00:04:56.640 | in the back of my molar.
00:04:58.120 | Think about that.
00:04:58.920 | This guy was just drilling divots,
00:05:00.720 | because I just had this hope, this dream,
00:05:03.720 | that my jaw could close more evenly so I can get some relief.
00:05:08.920 | And eventually I finally did get some relief
00:05:11.160 | in reading Dr. Sarno's Healing Back Pain.
00:05:14.120 | It'll be the best $9.99 you'll ever
00:05:16.760 | spend if you have any sort of chronic pain,
00:05:18.840 | whether it's tennis elbow, lower back pain, or whatever.
00:05:22.680 | The book talks about how our minds can manifest chronic pain
00:05:26.200 | to deal with the stress and anger in our daily lives.
00:05:29.620 | And I really believe in this book.
00:05:31.560 | It's the top book I just would give to everybody
00:05:34.880 | who has any type of pain.
00:05:36.600 | So then amazingly, about 10 months into retirement,
00:05:38.720 | I noticed my pain had completely gone away.
00:05:41.640 | So after 13 years of living and working through chronic pain,
00:05:44.720 | because I thought I had no choice,
00:05:46.960 | I was miraculously pain free.
00:05:49.680 | Now looking back, it's just so shocking how much I put up
00:05:53.080 | with this chronic pain in the pursuit of career progression,
00:05:56.360 | money, and so forth.
00:05:58.080 | So if you have pain right now, retiring early
00:06:00.840 | could be one of the best moves if you do it right
00:06:03.240 | and if you have enough investment income
00:06:05.160 | to cover your expenses.
00:06:06.800 | Three, your infertility issues may clear up.
00:06:10.160 | This is really, really amazing and important
00:06:13.640 | for those of you who are trying to have kids.
00:06:16.360 | I think something like 20% of couples trying to have kids
00:06:20.280 | go through some type of spontaneous abortion
00:06:22.760 | or more serious abortion later down the road.
00:06:25.840 | And I think it's just not talked about enough.
00:06:28.200 | And it's really difficult for some couples to have kids.
00:06:31.880 | They say for the average couple,
00:06:33.680 | it takes about seven to eight months or seven to eight tries
00:06:37.520 | before successfully conceiving.
00:06:39.080 | And it's not just about conceiving,
00:06:40.640 | it's about carrying the embryo to term
00:06:44.120 | after 39 to 41 weeks.
00:06:46.800 | And some folks fail during that process as well.
00:06:49.840 | So it's not easy or it's not as easy as you think
00:06:52.840 | to have kids, especially if you're in your 30s
00:06:55.680 | and definitely in your 40s.
00:06:57.760 | So both my wife and I worked in finance,
00:07:00.020 | a highly stressful industry that required
00:07:01.760 | 60 plus hours of work weeks.
00:07:04.200 | Although the money was good, we were constantly tired.
00:07:07.720 | The idea of children was not top of mind
00:07:10.080 | because we didn't feel like we had any energy left to spare.
00:07:14.040 | And at the end of the day,
00:07:15.200 | if you can't take care of yourself,
00:07:16.880 | how are you expected to take care of kids?
00:07:19.320 | And this is kind of the mantra that we've been living with
00:07:21.400 | for years and years and years.
00:07:23.600 | And living in New York City and San Francisco,
00:07:25.840 | it's just so expensive.
00:07:27.520 | So we were just focused on trying to make as much money
00:07:30.160 | as possible in order to leave work for good.
00:07:33.120 | And it wasn't until after my wife turned 32 in 2012
00:07:36.720 | that we began to contemplate seriously having children.
00:07:40.160 | We had always been told that it's best to have children
00:07:42.560 | before age 35 to minimize health risks
00:07:45.200 | and maximize the chances of success.
00:07:47.840 | And if you click over to the post,
00:07:49.360 | you'll see this interesting chart that shows
00:07:51.480 | fertility rates really plummeting after the age of 39
00:07:55.520 | and spontaneous abortions really skyrocketing
00:07:58.200 | after the age of 39 as well.
00:08:00.480 | So we tried sporadically for one year
00:08:02.640 | while she was still working with no luck.
00:08:04.800 | Then we tried more purposefully the next year,
00:08:06.840 | still with no luck.
00:08:08.400 | She had been pretty stressed at work
00:08:09.800 | because she had just gotten passed over for a promotion
00:08:12.520 | she thoroughly thought she deserved.
00:08:15.040 | And I had never seen her so mad about her job before.
00:08:17.440 | So she was stressed and she was angry.
00:08:19.880 | So this is when I finally convinced her
00:08:21.560 | to finally plan her exit strategy by negotiating a severance.
00:08:25.240 | And when she did, it was like the skies had parted.
00:08:28.680 | She was so happy and she was so relieved.
00:08:33.240 | And about a year after her retirement,
00:08:35.560 | we finally successfully conceived
00:08:38.000 | and gave birth to a baby boy.
00:08:39.880 | So how much did early retirement help us conceive?
00:08:44.600 | I would say it was more than 50%
00:08:46.680 | because it allowed us to spend more time
00:08:48.760 | on our mental health and physical health.
00:08:50.920 | It allowed us to be less stressed.
00:08:52.680 | It allowed us to relax more, to have more time to plan.
00:08:56.600 | So I would say absolutely retiring early for both of us
00:08:59.840 | helped us clear up our infertility issues
00:09:03.400 | and have a family.
00:09:05.440 | Four, you might actually become wealthier.
00:09:07.880 | Ha, surprise.
00:09:09.200 | Depending on what part of the cycle you retire in,
00:09:11.680 | there is a decent chance
00:09:12.800 | you could become wealthier in retirement.
00:09:15.480 | Now, I absolutely recommend folks retire
00:09:17.920 | during a bear market instead of a bull market
00:09:20.720 | because when you're in a bear market,
00:09:22.560 | if you can retire,
00:09:23.640 | that means you can live off what you got right now
00:09:26.400 | after all that hammering.
00:09:28.040 | Generally speaking,
00:09:29.040 | there should be mostly upside in your investments
00:09:32.240 | and things will be much, much easier.
00:09:33.800 | Now, if you retire in a bull market,
00:09:35.640 | which we're in right now,
00:09:37.400 | the 11th year of a bull market,
00:09:39.440 | it might be a little bit dicier.
00:09:40.680 | If you're expecting things to continue going
00:09:43.320 | the way they are,
00:09:44.520 | I think you're gonna be in for a rude surprise
00:09:46.560 | because when you're in a bull market,
00:09:49.040 | hmm, I would say the chances of downside
00:09:51.280 | are much greater, right?
00:09:52.360 | Just complete logical sense.
00:09:55.600 | But let's say you're not counting particularly on luck
00:09:58.400 | to get you wealthier in retirement.
00:10:00.320 | You just have a lot of free time to do what you want.
00:10:02.560 | So during our free time,
00:10:04.160 | I decided to write a severance negotiation book
00:10:07.320 | and that book generates about $50,000 a year
00:10:10.840 | in passive income.
00:10:12.200 | Now, $50,000 is great
00:10:13.640 | because that is about $2 million in capital
00:10:16.600 | you need to accumulate at a 4% rate of return.
00:10:19.400 | So right then and there,
00:10:20.480 | I feel that I've created a couple million dollars in wealth
00:10:23.640 | because I retired,
00:10:24.880 | because I did something that I thought was useful,
00:10:26.800 | helpful, and that I enjoyed.
00:10:29.160 | With the extra 12 to 14 hours a day,
00:10:31.640 | I spent two to three hours a day
00:10:33.280 | writing on Financial Samurai.
00:10:34.880 | And as a result,
00:10:35.720 | Financial Samurai now also generates enough online income
00:10:38.840 | where I can treat my family guilt-free
00:10:40.680 | to Filet-O-Fish at McDonald's.
00:10:42.520 | And I know that's kind of silly,
00:10:44.520 | but I'm telling you,
00:10:45.360 | in the past, I couldn't get beyond the dollar menu
00:10:48.280 | because it's a dollar for a cheeseburger,
00:10:49.880 | a dollar for whatever special it is that day.
00:10:52.720 | I'm not gonna spend four and a half times
00:10:54.440 | to get a Filet-O-Fish,
00:10:55.560 | but I love Filet-O-Fish,
00:10:56.680 | so I would treat myself maybe once a month,
00:10:58.600 | once a quarter, or something like that.
00:11:00.880 | But now it's like, okay,
00:11:02.520 | I'm gonna ball out, get in there,
00:11:04.520 | get two Filet-O-Fish, maybe some fries,
00:11:07.400 | okay, $1 menu fries,
00:11:09.120 | and then leave paying about 10 bucks.
00:11:11.920 | So we fully expected our net worth to stay flat
00:11:14.440 | or even decline after we both left our jobs,
00:11:17.240 | but it's grown.
00:11:18.880 | A lot of it is luck,
00:11:19.760 | but a lot of it is also
00:11:21.600 | because we are doing things that we like to do.
00:11:24.200 | All right, finally,
00:11:25.320 | here's something I did not anticipate.
00:11:27.800 | You may appreciate full-time work again.
00:11:30.760 | It's been almost eight years since I had a full-time job.
00:11:34.400 | And man, I tell you,
00:11:36.000 | I'm longing to kind of get back in that grind,
00:11:38.560 | to be a part of a team,
00:11:39.720 | to create something cool,
00:11:40.960 | to make some money,
00:11:42.040 | to get some health benefits.
00:11:43.840 | During the last weekend of my employment,
00:11:47.200 | I ran into a huge roadblock,
00:11:49.200 | and you will run into this huge roadblock as well
00:11:52.320 | if you don't listen very carefully right now.
00:11:54.720 | When you're leaving,
00:11:55.600 | it's customary to clean up your files
00:11:57.920 | and to send old things back,
00:12:00.880 | whether it's in your personal email
00:12:02.400 | or you just carry a box, whatnot.
00:12:04.520 | Well, I made a mistake of emailing
00:12:06.520 | a confidential client file
00:12:08.680 | back to my personal email address.
00:12:11.080 | And guess what?
00:12:12.000 | HR tracks everything during transition
00:12:14.720 | because HR wants to protect the company instead of you.
00:12:19.520 | Think about this, please.
00:12:20.760 | Know this.
00:12:21.800 | Human Resources, the department,
00:12:24.360 | is out there to protect the company
00:12:26.000 | from lawsuits and everything.
00:12:28.240 | And you are secondary, folks.
00:12:30.200 | Given you are secondary,
00:12:31.400 | don't divulge your deepest, darkest secrets
00:12:33.720 | and your frustrations and your fears to your HR manager
00:12:36.680 | because the HR manager will inevitably tell your boss
00:12:39.800 | or your boss's boss and put you at risk,
00:12:42.120 | and they're gonna start a file on you.
00:12:43.760 | So please be careful on who you trust,
00:12:46.720 | especially in HR.
00:12:48.440 | But if you can skillfully befriend your HR head
00:12:52.320 | or someone high up in the HR department,
00:12:54.880 | do so because that will help you during your exit period.
00:12:59.880 | So I thought my severance package was doomed
00:13:02.960 | because I had sent this private file
00:13:05.080 | to my personal email address and it was flagged by HR.
00:13:07.480 | And they said, "Sam, we're gonna have to get back to you
00:13:09.920 | on your severance package
00:13:11.040 | because you violated one of our terms of agreement."
00:13:14.320 | And I thought to myself, "Oh my goodness,
00:13:16.280 | I cannot believe I screwed myself."
00:13:18.280 | 'Cause that was a Friday.
00:13:19.440 | And I was just like, "Oh my gosh, please, please,
00:13:22.400 | please let me not screw myself."
00:13:24.200 | And I looked at what file I had sent
00:13:25.880 | and it was a five-year-old file.
00:13:27.560 | And so I was thinking to myself,
00:13:28.400 | "Well, at least it was a five-year-old file."
00:13:30.200 | It was like client contact information and stuff like that.
00:13:33.440 | And I just kept on telling them,
00:13:34.440 | "Look, I did this not on purpose.
00:13:37.000 | I don't plan to stay in the industry
00:13:38.760 | or bring this information to a competitor.
00:13:41.200 | Please, folks, this was a honest mistake.
00:13:43.800 | Please forgive me."
00:13:44.640 | And they said, "Look, we'll get back to you."
00:13:46.760 | So as you can imagine, I mean,
00:13:48.200 | this severance package was worth over a half a million
00:13:50.680 | dollars because it paid out all my deferred compensation
00:13:54.120 | in terms of stock and it gave me a severance
00:13:57.120 | and all this stuff, right?
00:13:58.200 | So over the weekend,
00:13:59.080 | I went to the Hastings School of Law Community Fair
00:14:02.440 | where their law students and law professors
00:14:04.440 | helped address any legal concerns
00:14:07.000 | and questions residents had for free.
00:14:09.000 | It was their way of providing community service.
00:14:11.120 | And it was awesome because it was just different types
00:14:14.040 | of legal issues, helping different types of people.
00:14:17.080 | And my wife and I, we stood in line for two hours
00:14:19.480 | and I kept on telling myself while I was in line,
00:14:22.160 | "If I can get through this and get my severance package,
00:14:26.400 | I promise I will never, ever go back
00:14:28.720 | to corporate America again.
00:14:29.800 | I swear, I swore it."
00:14:32.120 | And right now, eight years later, I'm thinking to myself,
00:14:34.360 | "God, I wanna get back to corporate America
00:14:36.320 | because I need to feel alive again
00:14:38.640 | and I need to make some money and provide for my family."
00:14:41.840 | And so it's really interesting that once you've tasted
00:14:46.000 | the sweet nectar of financial freedom,
00:14:48.160 | you think you never wanna return to work again,
00:14:51.560 | but things change because financial targets
00:14:53.640 | are always moving.
00:14:54.920 | And here's the other thing.
00:14:56.520 | Once you've had that long of a break,
00:14:58.920 | you just get accustomed to it.
00:15:00.280 | It's just like everything.
00:15:01.320 | Think about back when you were in school
00:15:03.040 | and you had a two or three month summer vacation.
00:15:05.600 | I don't know about you, but after three months,
00:15:07.200 | I was dying to go back to school,
00:15:08.920 | even though there was homework
00:15:10.240 | and stressful exams and so forth.
00:15:12.240 | I just wanted to see my friends
00:15:14.080 | and see what I could learn and play tennis
00:15:17.160 | and all that good stuff.
00:15:18.680 | And it wasn't like just staying at home
00:15:21.560 | and relaxing and watching TV and stuff was the best.
00:15:24.680 | It just got boring after a while.
00:15:26.800 | So I've been out for almost eight years
00:15:28.840 | and I'm looking for a change.
00:15:30.440 | And that's why in 2020 and beyond,
00:15:32.640 | I'm gonna have a different type of writing style
00:15:34.360 | and I think a different adventure to bring you guys on.
00:15:37.040 | And I think it's gonna be really, really fun.
00:15:38.560 | So I hope you guys stick with me and stick it out.
00:15:41.640 | In conclusion, I wanna say that retiring early is scary,
00:15:45.640 | but it is really great if you do it properly.
00:15:48.920 | I've seen too many people retire early
00:15:50.920 | only to feel extremely stressed
00:15:53.440 | because they underestimated how much they needed
00:15:55.640 | in retirement or they overestimated how much joy
00:15:58.800 | they'd experience with all their free time.
00:16:01.680 | You just never know until you do it.
00:16:04.080 | But I will say that you need enough assets
00:16:06.680 | to generate enough investment income
00:16:08.800 | to cover your desired life's living expenses
00:16:11.440 | plus an extra buffer.
00:16:12.400 | I think that extra buffer should be about 20%.
00:16:15.120 | So if living off $100,000 a year
00:16:17.000 | in gross investment income makes you happy,
00:16:19.360 | then it's probably best to generate
00:16:20.320 | about $120,000 a year in investment income.
00:16:23.520 | And to generate $120,000 a year in gross investment income
00:16:26.400 | requires $3 million of investments
00:16:28.920 | generating a 4% rate of return.
00:16:31.480 | So I know many, many folks who think,
00:16:33.440 | "Oh, I've retired, I'm good."
00:16:35.400 | But then they spend like 10 hours a day
00:16:37.200 | trying to figure out how to make more money
00:16:38.800 | to cover their desired lifestyle
00:16:41.400 | because they didn't plan properly.
00:16:43.760 | Don't be in such a rush to retire early
00:16:46.800 | because you hear other people retiring early.
00:16:49.600 | You need to really plan thoroughly.
00:16:51.960 | And please, please don't quit your job, folks.
00:16:54.880 | I'm trying to get this message out as best as I can.
00:16:57.280 | If you're gonna try to retire early and leave
00:17:00.120 | and not come back,
00:17:00.960 | you might as well try to negotiate a severance
00:17:03.280 | because there is no downside to trying to negotiate.
00:17:06.800 | The last thing you wanna do
00:17:07.920 | is sacrifice your working life to retire early
00:17:10.520 | and then sacrifice your retirement life
00:17:12.720 | by living in or near abject poverty.
00:17:15.120 | It makes no sense.
00:17:16.840 | Instead, it's a much better route
00:17:19.120 | to find a more enjoyable job and delay retirement.
00:17:22.560 | Live a little, you know, a little balance here and there.
00:17:25.520 | For me, it was not that balance, okay?
00:17:28.320 | I was like, "Go, go, go in my 20s and early 30s.
00:17:31.240 | "Get out and then like see what's up in the world.
00:17:34.960 | "Relax a little bit."
00:17:36.040 | Right on Financial Sam right now, it's like,
00:17:37.320 | "Okay, maybe things need some changing."
00:17:41.160 | So I hope these five unanticipated surprises
00:17:44.160 | about early retirement
00:17:45.360 | help you make a more informed decision.
00:17:48.560 | It's a great, great adventure.
00:17:51.200 | Treat life as an adventure.
00:17:53.120 | You're never gonna get everything right.
00:17:55.440 | Just do your best.
00:17:56.680 | Try to plan for the future.
00:17:58.440 | Expect some curveballs, twists and turns.
00:18:01.160 | But I think everything is gonna be all right.
00:18:03.000 | So I hope you guys have a great rest of the holiday.
00:18:05.480 | And I will definitely be in touch
00:18:07.720 | because I've got so much to talk about
00:18:09.400 | and write about in 2020.
00:18:11.240 | Thanks so much, folks.