I think one of the biggest subjects that comes up when discussing retirement is early retirement. Early retirement is the dream for many, particularly those who are sick of their jobs and/or have severe health problems that affect their ability to work. Every time there is a big bull market, the inevitable stories appear of some lucky guy who sold the right stock and made millions, allowing him to retire in his thirties.
From what I’ve read about early retirement, it is possible, but it requires an intense period of saving and living frugally. It also requires a good deal of luck. The next step is that you then move to a developing country, with a low cost of living and are able to continue to live an acceptable lifestyle.
I’m really skeptical about early retirement and moving overseas. First of all it requires you to save substantial sums of money and then invest it in assets that are capable of very high returns. That usually means risky investments. Risky investments have a habit of falling fast in value. I’m of the opinion that the only safe way to invest is to make use of passively managed index funds, and to use anything else is either too risky or won’t work as advertised.
The other factor is that most people who retire young are not actually retired. They still work to some extent in retirement. I don’t really consider this retirement because the work they do is necessary for them to earn enough money to live. If that income falls for some reason, the early retiree is in trouble.
Early retirees usually don’t make contributions to their pension, and thus are missing out on virtually guaranteed income later in life when they’ll need it most. And most early retirees will be forced to live frugally for the entire lives.
Early retirement means having a very long time horizon ahead of you. Anything can happen during that period. A normal retiree has a short time horizon as he or she is older and can see the end of their life. A young person has no idea whether they’ll become ill in the future, have to support a family member, or overcome some other expensive difficulty. That means more risk, and more danger. In short it’s a choice I don’t recommend.
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