The Other Side: Reasons Why You Might Not Want To Retire at 40

Previously, I wrote about how you might consider retiring earlier if you have adequate flexibility to decrease your spending temporarily and/or earning additional money. If you have early good luck with market returns, you will gain many more years of freedom.

Now I’d like to present the other side of that argument. If you retire in your 40s or 50s, there are hopefully many years of fun times ahead of you. However, there is also a higher chance for events that significantly increase your expenses and decrease your ability to earn more money.

Let’s say you and your spouse/life partner are both 40 years old and have saved up $2 million and are pretty confident that you can live off of $60,000 to $80,000 per year. That’s may seem like a lot of money. However, here are some things that can throw a wrench into your plans.

Yourself

• You may become disabled and become unable to work. Your daily healthcare expenses may also rise significantly.
• Your spouse may have a health event or pass away prematurely, which will affect your household finances.
• You may be the subject of a liability lawsuit.
• There may be an expensive accident – Home fire, theft, fraud.

Many of these situations can be offset by proper insurance. Disability, life, homeowners, long-term car, and/or umbrella liability insurance.

Your spouse (Divorce)

A divorce can be devastating, both emotionally and financially. There are many articles about increasing divorce rates amongst those aged 40+ and 50+. Even if you split your assets equally into two parts, a couple can usually live more efficiently than two individual households. In addition, you may no longer be eligible for the full spousal portion of a pension, healthcare package, and/or Social Security.

Parents, Elderly Relatives and/or Siblings

• You may have a perfect financial situation, but your parents (or other close family members) may not.
• You can’t control your parents (or siblings) and their decisions. They may develop dementia, fall for fraud, have substance abuse issues, or simply be bad with money.
• Some people may be able to easily separate themselves from the responsibility of taking care of their relatives, but many will find it very difficult. Every person’s sense of familial duty is different.
• Fulfilling what you believe is your responsibility may require great deals of time, energy, and money.
• Your parents’ ongoing health issues may permanently change your life for decades. See NYT: At 75, Taking Care of Mom, 99: ‘We Did Not Think She Would Live This Long’

Children

• If you are in your 40s, your kid status is not set in stone. If you don’t have kids, you still might have some. If you already have some, you might have more. Even if you don’t want kids now, you might change your mind. I know of many friends who had at least one kid well into their 40s.
• Even though kids don’t necessarily need everything they seem to get these days, kids do require significant time, energy, and money.
• Your child may have special needs. Imagine a multiple of that time, energy, and money.
• Your child’s special needs may permanently change your life. It may not stop after 18 years.
• Your child’s special needs may not become apparent until they are 5 months old, 5 years old, or 15 years old.

I may be wrong, but my impression is that early retirees are more likely to be childless than the general population. Perhaps knowing that you have less people to be responsible for makes it easier to take the retirement leap. I strongly believe that you should only have kids if you want to have kids, not because your parents or society wants you to have them. I can’t imagine how I would get through a single day with my kids if I didn’t want to be a parent.

It may be my own personal situation coloring my view, but the 30s, 40s, and 50s feels like the “sandwich decades” where you are most likely to be responsible for both parents and children. Retiring very early may permanently impair your ability to earn any more money, which in turn may be a source of future regret. You can (and should) insure against certain things, but not everything.

My take. Retirement timing is a form of regret minimization. You want to minimize the regret of “I should have retired earlier and had more freedom time”, but also minimize the regret of “I wish I made more money so my limited freedom time is more enjoyable”. It’s hard to find that happy medium where you give yourself enough financial wiggle room while keeping an eye on your mortality.

I started down the path of “semi-retirement” in 2012 with the birth of our first child. “Semi-retirement” is a rather generous take on our reworking of the traditional one full-time working spouse and one full-time parent arrangement so that we were both 50/50. Since then, we have both had the urge to try to live solely off our investments, but we are also keenly aware of the large number of people that we are responsible for caring for. In the end, we’re still both working part-time as that seems to be the solution with most optionality for now.