Last year I spoke with a mentor and mentioned that I was putting money into my IRA and saving for retirement.
He said that it was great that I was saving, but that rather than planning for a retirement in 50 years it was probably better to figure out how to retire early in 5 – 15.
Instead of focusing on long-term investing and slow growth he said it was best to learn out how to retire early by building a business that provided rapid growth in the relatively short term, even if it was ‘riskier’ and meant more late nights working.
I generally agree with his advice, and here’s why.
1. More Than One Chance
Taking the slow-n-steady approach takes 40+ years. You’ll only live long enough to try it once. If you don’t plan correctly, like so many retirement aged individuals hurt by the 2008 crash, you may be left with nothing.
Aiming for an early retirement allows for failure. If you ‘screw up’ your business you’re still young and you can try again. You’re more likely to screw up but that’s a better option than only knowing you’ve screwed up when it’s too late to try again.
2. It’s More Fun
I don’t know about you, but I love making ‘exponential’ risks. Small risks like a $2,000 investment that can lead to exponential results, say $50/day profit with 0 time input for the next decade. When you make a good decision, you know that it was worth all the ‘risk’ you took going in.
3. You’ll Enjoy Your Wealth A Lot Longer
Retiring at 65 allows you to enjoy your wealth for 20 years or so. At retirement age you won’t be able to do a lot of activities that your younger self would have enjoyed.
Retiring at 35 is completely different. You can still go on all the white-water kayaking trips and all the hang-gliding adventures you’re dreaming about. You may still be single!
4. You Can Change Course
Slowly building up a nest egg requires stability. It’s difficult to job-hop if your interests change after 15 years in a particular field. If you’re just saving enough for a distant retirement, you’ll need to seriously consider if you can afford to change course without disrupting your financial plan.
If you’ve built something worth millions by the time you’re 35, it’s very easy to change course. You can sell your company, liquidate your real estate holdings or cash out on your investments and fly to Rio de Janeiro. You can then re-invest that liquid capital somewhere that excites you.
In Boston, I rode the office elevator with some very unhappy, very trapped people. One man wearily muttered “Just 20 more years and I can retire.” and it made me throw up in my mouth.
5. You Don’t Know How Much You’ll Need
"How much money do I need to retire?" The short answer is that nobody knows.
You can religiously put money away every month, but if you underestimate the costs of living you'll only find out at retirement age. Lifespans are increasing, and you don’t know if your retirement is going to last 15 years or 40!
Even if you save what you ‘think’ will be enough for retirement, you may realize at 50 that it’s not adequate or that it only pays for a sub-standard lifestyle. If an unexpected emergency at retirement age slashes your savings in half, you're in trouble.
If you learn how to retire early (Say, at 35) you’ll avoid this gamble entirely.
Yes, It’s More Work, But Isn’t It Worth It?
Unless you get very lucky, retiring early takes a lot of effort. It takes more late nights, more self-management, more self-education and a willingness to make sacrifices and put skin in a risky game.
But making the decision to learn how to retire early is still better than accepting the slow-n-steady approach. There are too many risks and very little upside to taking the slow approach.
Just like deciding to go to the gym, you may not want to commit to the sweat beforehand, but you’re always glad you went when you’re finished.
Once you hit retirement at 30, 35, 40, or even 45, you’ll be glad you made the sacrifices.