Apr 13, 2011 25 comments

What Does “Early Retirement” Mean Anyway?

By Mr. Money Mustache

I love the topic of “Early Retirement”, because that alone is the subject of so many books. But as a reader of this blog, you get full discussion of that topic for free.

For previous generations, perhaps our parents or grandparents living stereotypical middle-class lives, retirement used to mean reaching age 65, pre-purchasing an RV, or a golf membership, or a one-story house with no stairs, and a wheelchair. The lucky ones would retain enough health to get out and buy their own groceries, the less fortunate would be in an assisted living facility by the time they hit 70.

And can you blame them? If you work 9-5, five days per week, fifty weeks per year, for 45 years, it’s pretty easy to get into a funk and lose your physical fitness, your immune system, and your desire for any sort of change.

But No, junior Mustaches, you and I reject that old kind of retirement and put forth our own definition: Retirement is earning the privilege of being free to enjoy the balanced lifestyle of our dreams, without “working for a living” getting in the way too much. You don’t have to quit working altogether, you just have to feel secure enough to be choosy about your work, and your schedule.

My wife and I have have been “retired” for over five years now, and this is what it means to us: We quit our jobs as software engineers just about the time our first baby was due. But we didn’t quit working altogether. I started a little company to build custom houses (since building things was always my most cherished hobby), while she started some very flexible part-time work with another company. Overall, we took about a 100% pay cut (since my construction company ended up losing money while she continued to earn some), but smarter people could accomplish this drastic career switch even more easily.

The idea is that if you are earning quite a bit, but you trim your lifestyle down so you are only living on about 25% of that amount, then you are ready to retire when:

You’ve finished building your golden nest egg so you can give up the “75%” part of your salary you were saving.
Your savings (combined with some optional part-time work) will continue generate that other 25% for you reliably, forever.

So what do you do with all the free time? That’s up to you, of course. But here’s what we have found ourselves doing for the past five years:

Raising our little boy: sure, it is possible to raise kids with two careers, if you outsource most of the work to daycare or some sort of nanny. But we like to do it ourselves. A family breakfast together seven days a week, afternoons spent playing in the creek while the rest of the world works, time to read and learn together at all hours.. stuff like that.
Becoming bicycle heads: without fixed schedules to meet, and being around at home a lot, it’s easy to saunter around town by bicycle. We have 3 different types of bikes each, and use them to coast down to the restaurants, bounce up the rocky mountain trails, and slice through the country roads and curvy canyons available near our house in Colorado.
Taking impromptu trips: with no employers to ask for permission, we like to take two-month summer trips back to our homeland of Canada to let the two amazing sets of grandparents hang out with their grandson, and do lots of midweek camping or other outdoorsy trips. This is a big advantage in Colorado since the mountain highways are jammed up to the point of being unusable every weekend due to the ski resorts.
Trying new things: although we feel pretty busy, it is a healthy business that still allows us to read books at night, try new exercise classes during the day, and meet friends for Indian Buffet lunches downtown. Back in the full-time career days, it was an over-the-top feeling of busy where it would take three weeks before you would get time to change a light bulb or to empty the dishwasher.

It’s kind of obvious that there are lots of benefits to early retirement. That’s why most of you are reading this blog. But we’re not just dreaming here, and we’re not making wimpy attempts at ‘early’ like age 50 or 55. What I advocate is putting the pedal to the metal and getting there in 7-10 years.

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Kevin M May 27, 2011, 1:09 pm

You had me at “building things was always my most cherished hobby”. I feel the same way – office worker by day (CPA) but dreaming of ER and becoming a craftsman. My younger non-frugal ways are holding me back unfortunately.

Reply
- MMM May 27, 2011, 1:32 pm
  
  Hi Kevin,
  
  Awesome to hear that we have this in common!
  
  Carpentry is a wonderful post-retirement “career” for me, since I go around my town and actually get paid for it one day a week or so. This lets me meet new people in my ‘hood, and the extra money adds yet more security and makes me feel good about the odd bit of frivolous spending. And yet it is totally at your own discretion: I don’t work on cold or rainy days, laugh at the idea of ever starting work before 9:30 am, and pause the little business for the frequent month-long family vacations. The best of all worlds :-)
  
  Reply
  - Raymondo September 22, 2013, 5:28 am
    
    I’m a fairly recent recruit to the MMM blog and am really enjoying what I’m reading! This sums it up nicely for me as I think the whole ‘early retirement’ thing is all about being able to make lifestyle choices. Although still a way off of this myself I have recently been able to get out of a corporate job I wasn’t happy in and into a role that is a far better fit for me personally but that doesn’t pay as well. If it hadn’t been for adopting frugal ways and a common sense approach to money over the last 10 years this would not have been possible (I’m 36 at present). Unknowingly I have been nurturing the makings of a nice hairy bogey on my upper lip but thanks to this blog I am finding out much more about the need to grow this into a full on handlebar style ‘tache over the coming times to make the inroads needed.
    
    Reply
Mike Key January 12, 2012, 2:59 pm

Awesome post and site!

I’ve never believed in retirement. It seems like a scam to take you out. When I look at the ages of some of the greatest minds in history or business leaders, we see them working well into their prime when others where busy getting ready for retirement.

Personally I think men are called to be at work doing something their whole lives.

Of course, that definition is what separates normal from everyone else. Working on your home, or a project is still technically work, but it’s just not the same as plugging away 9-5 at some job you hate.

My personal goal has been to build a number of small businesses that can fiance my lifestyle while building lasting wealth to leave to my children and allow me to work on projects of significance.

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- missj August 14, 2014, 10:36 pm
  
  I actually totally agree with you and I have a hunch that MMM and many others hoping to retire early don’t really just want to sit around and nap and watch TV but rather they just want to retire from the rat race. Finish serving their time as an indentured wage slave and work in a way that pleases them WHILE earning extra money.
  
  That’s my take anyways. My dad enjoys his work, granted he is the boss of dozens of employees which helps, but he plans to work until he cannot. He is 61 right now and could have retired 4 years ago but said he would be too bored. So he essentially “out sourced” the unpleasant parts of his job by hiring employees to do them and focuses on the parts of his job he likes and plays golf with clients and friends with his extra time. He makes less money than if he worked longer hours, but he doesn’t care. His work is his identity and his social network since he built it, he doesn’t want to give it up, but he doesn’t do it for the money anymore.
  
  For me, my job is fine. great really. But I’m there for the money and that’s about it. I don’t mind my job, I like my coworkers and my customers but I don’t ever feel like I am ready to come back after a vacation. Essentially, I trade my time for money. The dilemma is that time equals life and so I am essentially trading my life for money; and since you can’t take the money with you when you die….you want to trade as little of your life for money as possible…or at least I do!
  
  Reply
CG January 23, 2012, 8:46 am

Unless we can earn some more income, we’ll be with those in your “wimpy” category. I personally don’t consider it wimpy for my factory worker hubby to retire at 55, since we’re raising a family on his small single income. We’re also paying for some of his past choices, as many people are. The money put out for new cars or student loans early in life has a huge effect on how long you’ll have to work.
I don’t feel wimpy at all. My hubs will be able to retire years before our fathers did and a decade before his peers.
I’m a homemaker and mother of 3 so I never get to retire. :/
Being in a lower income bracket, there’s only so much we can cut before the issue becomes about earning more income. As I posted on another thread, our expenditures for 2011, including mortgage but not health insurance premiums, was $28.5K. And before anyone tells my hubby to get another job, I’d like to know your plan for getting workers to manufacture water filtration systems when they all leave for better paying jobs. “Somebody else will do it” ,when it comes to these jobs,is a wimpy thing to believe. I’m proud of what my husband does.

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- MMM January 23, 2012, 10:22 am
  
  You’re definitely not wimpy and it’s good to be proud!
  This is an early and simplistic post and that 7-10 years number was targeted more at people who happened to have high or double incomes as we did. In that context, I was suggesting it was wimpy to earn $100,000 or more per year, and still spend so much that you took 40+ years to reach financial independence.
  
  Reply
olga July 2, 2012, 9:35 am

It just hit me: there is one more reason to retire early. Generosity. I mean they keep saying that there are just not enough jobs for everybody. (At least here in Europe they do.) If you retire early you give the opportunity to have a job to somebody else.

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- Mr. Money Mustache July 2, 2012, 1:27 pm
  
  Olga – I like your idea of generosity, but just for fun you might want to look up the term “lump of labor fallacy”.
  
  The general understanding of modern economics is that there is not a fixed number of jobs which get used up when people take them, and freed when people vacate them. Rather, working in general tends to create more commerce between humans, which causes economic growth and more jobs. It may not be true across all job levels and industries, but it’s a good rule in general.
  
  There are some exceptions, however, such as jobs that are defined by society (often by government) in a fixed quantity. Presidents and prime ministers would be one example, and possibly teachers and police officers – at least in the short run.
  
  Luckily, you can help compensate for the destruction of jobs you cause if you leave a highly productive job: MMM readers will tend to invest more than average, and capital investment creates jobs even more quickly than plain old hard work.
  
  Reply
  - Gerard August 17, 2012, 6:28 am
    
    I tried reading up on it, MMM, and there’s a lot of work that says that the fallacy is itself a fallacy. Job availability is somewhat variable, depending obviously on the state of the economy, among other things, but it looks like there’s a limit to the variability. The idea that we can create endless jobs seems to come mostly from GDP-obsessed economists, politicians, and business leaders who object to overtime laws.
    In more relevant terms, if you retire early, you probably are creating a work opportunity for someone else, while if you work 80-hour weeks to get to FI, you’re probably removing an opportunity from someone. (I’m not sure how this would relate to post-retirement work… if you’re doing work that would otherwise not get done, because it’s too labour-intensive or there’s nobody with the skills willing to do it locally, it seems like you wouldn’t be taking work from anyone.)
    
    Reply
    - Mr. Money Mustache August 17, 2012, 11:03 am
      
      Good points, Gerard.. I think we might at least be able to agree that it depends on the job we’re talking about.
      
      First of all, we definitely can’t create Endless Jobs, unless each job consumes zero of the Earth’s resources, which is impossible because even the underlying person consumes resources.
      
      But we have already proven that we can create Quite a Few jobs, and it has been happening for many centuries now. What creates these jobs, if it’s not the presence of other people working?
      
      The really fine debate might be about WHICH jobs create others, and which are finite and are simply byproducts of these producer jobs. Jobs in which people create new inventions or products (engineer, scientist in a hot field with commercial applications, company founder) seem to be permanently in short supply. Only a certain percentage of people can do those jobs, and they are always nearly fully employed. Adding more of them would allow faster growth, as long as you didn’t saturate the market. So far, the economists seem to think we have the opposite problem of a permanent shortage.
      
      If you have any links to share on the falseness of the LOLF, I’d enjoy checking out that perspective as well. They just better not be too Karl Marx-inspired, like my “Labour Studies” professor back in university. The textbook for that course was called “The Alienation of Work”. In my opinion, it was just a huge tome of Complainypants Syndrome, dressed up with bullshitty academic language and footnotes. :-)
      
      Reply
Madeleine September 19, 2012, 1:50 pm

OK dumb question but if I am going to calculate living off 25% of my salary and saving the rest, is it 25% of my gross or my net? The difference is vast as taxman takes a ch-ch-CHUNK of my money. So I hope the calculation is based on NET. Please confirm!
Maddie from Ottawa

Reply
- Mr. Money Mustache September 19, 2012, 3:19 pm
  
  Yeah, I’d suggest using your net, since the math works out well that way. In an eventual early retirement situation, you’ll have a low enough taxable income that you pay almost no taxes.
  
  This later article gets into more on savings rate: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
  
  Reply
iwannabelieve April 27, 2014, 10:43 am

I really want to believe I could retire in 10 or 15 years (I’m 38). We have a mortgage, ~$100k in 401k, about $3k in cc debt, a $30k student loan, $1k in savings, and a car payment, 3 kids and an unhealthy budget system. 2 years ago we paid off about $20k in credit card debt, though, so I want to believe we could do it again and be in a better place in 5 years. Is it really possible, at my age, to dream of retiring… ever???

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- Mr. Money Mustache April 27, 2014, 11:17 am
  
  Of course it is possible! Besides continuing your reading here, you will want to start thinking in terms of income, spending, and saving rate.
  
  Your current debts don’t matter – those will be dispatched shortly once you fix your cashflow problem. To this, you need to understand exactly what you are spending every month, and minimize that so it is less than half of your take-home pay.
  
  Reply
CestMoi May 16, 2014, 9:55 am

I’m looking forward to a “wimpy”, early-50s retirement myself. For a contentedly single woman who works in a creative field (relatively low salaries and rare pensions), lives in one of the most expensive areas of the country, has weathered being laid off several times (for years at a time), and built up her nest egg from scratch without receiving or expecting any financial support or help from parents, relatives, or any of the men in her life, I’d say that’s pretty good. I think financial management and investing should be taught in schools; and I wish I had started hardcore saving even earlier! I love your blog, by the way.

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- missj August 14, 2014, 10:47 pm
  
  yes, CestMoi, I’d say you’ve done quite well for yourself indeed!
  
  For my generation and slightly younger it seems to be quite an achievement just to be able to say: no financial support from parents or relatives.
  
  I myself cannot say that as i did receive $13,000 from my parents for college and $7,000 from them for my wedding but everything else I’ve ever earned or saved since I was 18 has come from me and I’m quite proud of that. Never have needed or taken a loan from friends or family but have given several. Never have had to couch surf or borrow cars but have been able to offer spare bedrooms and spare cars on many occasions.
  
  it feels good to be “relatively” independent compared to typical young adults even if I still do have some debt (mortgage and car)
  
  well done to you and to me! :-)
  
  Reply
- Daniel December 1, 2015, 8:38 pm
  
  CestMoi, as someone who is also a single income earner and working in the creative/entertainment field I have to agree that if we can manage to retire by 50 we are doing better than average for single income households. I think you really do need double incomes to quickly get enough equity to retire early. I also got a late start in my career. didn’t graduate until age 26.
  
  Reply
Douglass Holmes February 12, 2015, 3:22 pm

I realize that I am commenting on a post that is almost four years old, but this is precious:
“You don’t have to quit working altogether, you just have to feel secure enough to be choosy about your work, and your schedule.”
I troll the blogs looking for precious gems like this.

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lily November 2, 2015, 4:10 pm

I’m glad I found your blog! I’ve been a PhD student for the past 4 years, which has meant that I’ve been getting an income of $25k a year to attend classes, read books, write, and do research. And a lot of time leftover for frugal fun! Now that my fellowship is ending in a year, I’ve been totally sad about the prospective of giving up this wonderful lifestyle for the drudgery of the workforce. Yet, given the frugality I was raised on (my parents are both self-employed people who believed in the lower income, lower expense philosophy, they always put family time over work, and they knew how to stretch dollars for sure), I’ve found that $25k has been plenty for me to live happily — I live in one of the most expensive cities in the US, no less — and I’ve even saved a considerable amount of money in that time. Sometimes I feel guilty for not wanting to work in the field I got a PhD in, but I’m grateful to my experience as a PhD student for showing me how enjoyable life can be, and I’m grateful to your blog for encouraging me to prioritize my happiness and freedom afterwards!

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Daniel December 1, 2015, 8:32 pm

I’m only making 52K per year here in Canada and my wife is making very little and spending most time taking care of our son. I’m already 36 with not much upward earning potential in my career in media entertainment. I live quite frugally. .no car, never eat out, investments, rent out rooms in my home etc. .Only debt is a mortgage on my townhome. But I still think having the double incomes is really what makes retirement in your 30’s and early 40’s possible. I guess I need to at least double whatever timelength you and your partner took to reach early retirement. which means living very frugally until I’m at least 50. Not too thrilling a future to look forward too. I guess I should have married a career minded lady. . though my wife is thrifty like myself. I know early retirment is possible on double incomes. . I’m sure you’ve read “Millionaire Teacher” about a Canadian teacher and his wife (also a teacher ) who became millionaire in their 30’s through thrifty living. I’ve yet to see an example of a median income single income household retiring early. I hope someone can prove me wrong!

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Carol Joos February 25, 2016, 5:56 pm

I like your definition of retirement–that is, feeling free to be picky about your work and your schedule. By that definition I’ve been retired for about 25 years now, though I’m still working at 77.
I skipped the part about having a high-paying job and saving up a lot of money. I’ve been self-employed for more than 40 years now, my own boss, had a couple of miniscule businesses that were almost full-time work (public stenographer, house painting, a custom cabinetmaking shop), but they were my choice, and allowed me to support myself and my daughters in less-than-oriental splendor, with some time left for my kids. I sold what I made; I didn’t sell my time; for me that is crucial.
I’ve supported myself as a craftsperson since 1992. I’m a woodturner, making salad bowls; I sold at craft shows for most of that time. I only work about half time now, no debts except for about $20K on the mortgage, some Social Security income, though not enough to quit working entirely.
I could actually say I’ve been retired for far longer than 25 years–because for all of that time, though I’ve never been able to afford vacations, I’ve never felt the lack. I haven’t need a vacation to recover from my work. In fact, I’m grateful for the continuing need to make money. It’s physically active work which I think helps to keep me healthy–and also keeps me from zoning out all day on books and the computer.
I’ve had some financial luck along the way–riding a rising real estate market in Brooklyn, a small inheritance from my father–and have not always been as wise about money as I could have been. I live on about $22,000 per year now, currently have no savings, and sometimes it’s a stretch to stay ahead of the game.
But I just wanted you to know that there are other patterns, that if you can handle a little uncertainty, there are ways to have greater control over your life. If you’re willing to make the trade.

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BLC February 13, 2019, 2:54 pm

I got stuck on the ” we were both Software Engineers…” While I believe my family lives frugally, we both have $57K/year income (which isn’t growing each year), we don’t buy a lot of new things (only when old things are irreparable), minimal debt ($1300 and getting smaller each month), some retirement contributions ($100/month), I still don’t exactly see how we’ll retire before 65. I’ll keep reading the blog, but it can seem hard to relate to as folks with a slow-growing income and at the middle-class range.
We’re planning on selling our big house (originally owned jointly with another couple to flip, but that didn’t work out…) and building a smaller one (more efficient, smaller footprint, more flexible layout for aging in place), but I recognize that we have a LOT of privilege in even owning our own home.

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Brendan March 14, 2019, 9:01 am

I’m just starting the savings part of things, but I’ve been practicing to frugality for awhile. $57k a year is $4,700/month. I’m not sure if you meant 2 people each earning that, but even for 1 person earning that it seems like there would be a good opportunity to save up a lot. housing/utils is hopefully not more than $1500, cooking food under $400, metroPCS phone $40/person(80total?), internet $50, that’s $2,070. at that rate you could save $2700 a month. If it was just $2500 that’s $30,000 saved per year. Using the networthify.com calculator that means you could retire in 15.7 years. I’m not sure how old you are now, but if you are any less than 50 that still gets you out early. Rice and beans and a cheap place to live for a few years pays off big time

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Natalie G September 14, 2022, 7:50 pm

I feel so fortunate to have found this blog. I have ALWAYS imagined working 2 days a week and having 5 off; and I have been able to do that for the past almost 15 years now. However, my hubs and I still couldn’t “retire,” since we don’t have the golden nest egg. So now, having been putting some time into seeing how to really build wealth, and having come across MMM, who is reiterating what I have often heard, but not wanted to put into practice, I am finally ready to take up the “work” of building wealth. My hubs is already Mr. Frugal, but he lives with me, Miss Spendy Pants, so we haven’t been able to make the progress to build our nest egg.

You may already talk about this, MMM, but if you have any tips for folks in their 50s who are just getting started with this, that would be great!

Natalie :)

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