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Early Retirement is an Impossible Dream for Most

safety piratesWe’re about four years into this blog, and at this point I finally have to admit I am a complete and total fraud.

I mean sure, saved enough to retire in just nine years and have had a great time running around like a free man in this subsequent decade. But that was an isolated incident, which is a useless model for the average American. Above-average incomes, an appreciating market for stocks and houses, an unusually cooperative girlfriend-turned-wife, and of course plenty of White Person Privilege* came into the picture. It was really luck and fate that got us here, rather than individual effort and choices.

Just look at the bleak picture that the average person faces today in comparison. A dying economy**. Stagnant wages since the 1970s. Sky-high healthcare costs that just keep on rising. Long, congested commutes that could become unaffordable overnight on the whim of any Saudi oil minister. Poor school systems that necessitate private school if you want to live anywhere even close to affordable. A massive load of student loan debt from the ever-increasing cost of university tuition. The list goes on and on.

If you need proof to go with all those negative statements, just look at the results. Americans are facing a retirement income crisis, with far too little in the average senior’s 401(k) plan to maintain their current standard of living, even when combined with expected payouts from Social Security. With budgets already stretched razor-thin, it is impossible to expect the average person to cut any further – either before, or after retirement. Did you get the memo? 73 is the new retirement age. Sorry, but that’s the way it is, nothing you can do about it.

The great experiment of the personal 401(k) plan, foisted upon us by the elites since the late 1980s  is a proven failure. The government and our employers should be providing for our retirement through guaranteed lifetime pensions, rather than forcing us to navigate the murky waters of personal finance alone. I feel I have misled you these past four years, functioning only as a pernicious savings scold and encouraging pointless individual effort, when instead we could have focused our collective efforts on reforming our system.

 

Oh, and April Fools, of course. 

 

I sure hope you didn’t believe those are really the views of Mr. Money Mustache.

Although I did my best to make the awful shit in those preceding paragraphs sound pretty mainstream, it was extremely painful to type it into my computer. My keyboard started to shoot sparks out of its orifices and it is now oozing pus and blood onto my desk. Thoughts like those are so pointless, self-defeating, and just plain wrong and it amazes me that people keep cranking them out.

The problem is not with the intentions of my detractors. These are public-spirited people who are genuinely trying to improve the world. Our difference of opinion lies only in which method we use to get the job done.

The writers who harp about “America’s Retirement Crisis” are really attempting to get the politicians to do something about it: increasing funding to the Social security system and throwing a leash on the some of the nastier elements of the financial industry, who set people up with high-fee 401k plans and then sit back and skim their profits for life. These are fine goals, as long as any rules are implemented in an open and scientific manner, without resorting to rhetoric and fear in the political battle to get them implemented. But as you have noticed, I prefer a different approach.

See, the problem occurs when you rob an individual of the belief that he is in control of his own situation. When you spread the social meme that the the system is stacked against us, and that the system needs to change in order to improve our lives. Whether or not the accusations contain a degree of truth does not matter – you train a legion of powerless people who can’t take care of themselves, you also end up with lazy voters who are easily manipulated by whichever politician will stoop the lowest to appeal to their cheapest emotions.

Just look at the excuses that go around unchallenged these days. We whine that the national savings rate is only 5% and that the average person in their 60s has only about $100,000 saved. But then nobody mentions that only one percent of trips are made on bicycle in this country, and the majority of travel and commuting is done in single-occupant vehicles bought with dealer financing.

We talk about healthcare expenses as if they are imposed upon us, despite the fact that most of the nation’s health spending is done to treat self-imposed diseases related to the biggest four factors: exercise, diet, stress and sleep. US residents spend over $20 billion dollars on soft drinks – a beverage so evil and toxic due to its sugar concentration that any figure above zero is astounding to me. The shit shouldn’t even exist, and yet we guzzle it by the tankerload! You can’t prevent the truly random and unpreventable, but you can lower your expected lifetime cost drastically.

How could anyone possibly complain about having money problems, while simultaneously paying tens or hundreds of dollars per month to have passive video entertainment and commercials streamed into their house? People are simultaneously robbing themselves of money and the necessary mental quiet time that is a prerequisite to getting ahead – building skills, meeting people, getting better jobs or starting better businesses.

The average person spends over 95% of what they earn and burns most of it on necessities that aren’t really necessary. We borrow money and drown in the interest payments. We spend most of our energy working directly against our own best interests. Somebody needs to call bullshit on this practice, because we’re not going to fix it just by raising everybody’s allowance in their retirement years.

Fig.1: America's "Retirement Crisis", Illustrated with Pen and Marker

Fig.1: America’s “Retirement Crisis”, Illustrated with Pen and Marker

No matter how much cash you pump into a sick culture like our own, you won’t solve our money problems. Because the problem is not a shortage of money – it’s a shortage of spirit. A lack of desire and fire in our bellies to embrace hardship and challenge, to get the most out of ourselves, rather than designing a lifestyle that allows us to exert ourselves the least.

So that is why I take this particular stand. I know from first-hand experience, picked up on my own unremarkable journey from minimum wage to early retirement, that taking control of your own time and effort and spending is everything. The same critic that called me a “savings scold” above admits that he hasn’t even started his first investment account. While there is a place for public policy in every great society, it seems unwise for those who have not yet mastered a field of study themselves, to make nationwide prescriptions on that very same field.

So let’s go with a hybrid approach in solving our retirement issue. Policymakers can make sure that the Social Security program survives, because not everyone is going to become a Mustachian, and we’re wealthy enough as a society that there is no need to handle people the death sentence just for poor financial skills. And sure, we should also cut down the worst thieves in the game – there is no honor in a rich person assembling a team of lawyers and marketing gurus to get poor people to sign up for a loan on a 92″ television.

But when it comes to talking and writing about personal finance to each other, let’s drop the sympathy game. We are in control of things, not our government masters or “the elites***”. We get to decide when or if to start our families, and where to settle. Our education and vocation is another choice, as is who we spend time with and how hard we work. So let us never talk about these things as if they get handed down to us from the outside world, because people are all too prone to believe it.

But most importantly of all, let’s stop talking about expenses and spending as if they’re out of our control and as if more is better. Even retiring with zero assets and Social Security alone is enough for a plentiful lifestyle (typically over $1500 per person per month) if you embrace the idea rather than fearing it. Living on a low wage (even minimum wage) and saving a good portion of our income is equally possible. Since there’s a good chance you earn more than minimum wage, plus will have retirement savings greater than zero, there is really nothing to worry about. So, with our new freedom from worrying about stuff, let’s return to work and actually get something done.

* OK, Mrs. Money Mustache is 50% derived from the country of India, so she only had half as much White Privilege. But that’s still better than nothing. Plus there’s Indian Privilege to account for as well – is that higher or lower than White? We need to factor this in to the amount of sympathy we demand.

Sure, privilege does exist, and it might make it easier or harder to inherit a company or win a senate seat. But it can’t control your choice to ride a bike, buy less shit, or read library books in your spare time and I argue that frugality is the most powerful factor in earning your independence. After all, most of my equally-privileged engineering coworkers are still stuck in the office to this day.

** Isn’t it funny how these doomer articles keep repeating those words even when it’s not true? The recession ended in 2010 and the country returned to setting all-time records within that same year. We’ve been breaking new ones ever since, and the unemployment rate at 5.2% is almost as low as you can get.

*** Actually, it is possible that some of the whinier reporters might now consider Mr. Money Mustache one of “the elites”. At what level do you lose your respectable credibility as a fellow underdog and become an out-of-touch elite. Do you need $100 million, $1 billion, or is simply having your mortgage paid off enough to put you out of touch with the common man’s plight?  

Related Reading: Top 4 SUVs for Growing Families

  • Dom April 6, 2015, 3:52 am

    I think the difficulty with the concept of privilege is when it gets used as an excuse for lack of achievement within the bounds of possibility given the context. Of course, everybody’s circumstances of birth and upbringing are different, and some will have a harder task than others, but this is no reason not to try your best in your own individual circumstances. As others have mentioned, there is an element of learned helplessness here, and I think this is what MMM was getting at.

    Reply
    • Gerard April 6, 2015, 10:02 am

      This seems reasonable. And I would argue that we all have some of that learned helplessness (or maybe taught/reinforced helplessness). It’s not like the more successful among us are completely fired up and focussed while the less successful among us are total whiny jellyfish. We can all up our game.

      Reply
  • Dan Madruga April 6, 2015, 7:44 am

    Oh boy… Americans always make me laugh my ass off when they talk about frugality. I mean, defining frugality as not driving a pickup truck in a city, or not buying a brand new cell phone every year, or living with US$40,000/year (top engineers in my country don’t make that much). And I’m even more amused when I read articles saying that MMM is all about extremely frugality. No offense, but America is f*cked! You guys became so rich to the point you completely lost the sense of reality.

    Reply
    • Michael April 13, 2015, 5:11 pm

      Things cost more in the US, so 40K here, is not the same as 40K where you live. Family, values, it’s all different. It’s ignorance to even try to make that comparison. One example; it can be difficult to even find rent in some US cities for less than 1,000 per month. And name your country, all have their problems.

      The US, the whole world has very important issues that need to be addressed. Some people want the changes now, but most are lazy… it’s human nature. Sitting back in your high and mighty chair casting judgment on others benefits no one…. what’s the point?

      Reply
  • Money Saving April 7, 2015, 3:00 pm

    Good April Fools joke – you had me going there.

    Early retirement is easy if you have the spirit to set the wheels in motion. As you said, it really isn’t that complicated if you get focused and can tune out the noise. People look at me like I’m crazy when I tell them I’ll be FI in 3 more years. I usually just stop mentioning it because it is such a foreign concept to 99% of Americans out there.

    Reply
  • Jens April 7, 2015, 3:12 pm

    I really like the handmade America’s “Retirement Crisis” illustration. Great job.

    Reply
  • Vanessa April 7, 2015, 3:38 pm

    I agree that mainstream US holds different values than those shared in this post. This has to be my favorite post by far- very inspiring MMM. You hit on all the ways Americans could be not only financially wealthier but could actually improve their quality of lives too. Unfortunately, buying only organic whole foods (no processed junk), educating our children without relying on a “good” neighborhood school, and ditching cable make us very different from those around us. Would you consider writing a post on how to raise children with this different mindset? Even without daily peer pressure in school, my kids know we are different from the mainstream families on their sports teams and in our neighborhood. My oldest has the hardest time with this. At age 11, he’s often uncomfortable being the only kid without soda, fruit loops, and Cheetos in the pantry, not to mention the only tween without a smartphone (I kid you not). He does have a playstation and he loves it. He’s not into cable TV but my husband is. I convinced him to cancel it for a few years but it made its way back into our home. I remember talking to a mom who told me that when she quit her (good) job to stay home with her children they were so poor they couldn’t even afford cable. At that time, we were purposefully without cable. This mindset is tough to change, unless you have a purpose. For me, it has been the health of my family (whole foods only, ditch the junk, limit screen time, encourage outdoor play). Mrs. MM nailed it when she said it wasn’t hard to save so much because you were both sharing the same goal. We are at a point where my son doesn’t have friends who are living this way, because very few are. So in many ways it feels like deprivation. I’d love to read a post that addresses this and how you overcome this with your own son.

    Reply
  • Vera Kan April 7, 2015, 6:36 pm

    Hey MMM!
    You got written up at home! In the Globe and Mail, no less!
    http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/how-to-retire-at-age-30/article23778559/
    Of course, the usual complainypants are out in force in the comments section.

    Reply
    • Doug April 10, 2015, 8:53 am

      I also saw that article in the Globe and Mail, good work spreading the word MMM!

      Reply
    • Eldred April 10, 2015, 1:50 pm

      I loved this comment:”2 tanks of gas in a year means he rarely travels farther than his bike will take him.”
      I wanted to yell at the guy, “That’s the whole POINT, Stupid!”

      Reply
  • Frank April 10, 2015, 9:49 pm

    But wait.. I saw just today that my Wife and I will need $91k each to live in that nursing home which we will OBVIOUSLY need.. thats $4.55M at a 4% SWR.. arrrgh.. Oh wait a minute I just retired at $1.5M and I got 27 years till I’m 80 years old.. assume I make 9% and live off 4%.. that leaves 5%… $1.5M at 5% for 27 years equals $5.6M… Oh sorry Pete you were right.. I can stay retired..(as long as the nursing home prices don’t go up much more..:)..)

    Reply
    • Michduck April 13, 2015, 6:55 pm

      I feel you are channelling my husband here. I love it when common sense statistics and calculations overcome those stats used in the illusion of authority, shame many people don’t …..think.

      Reply
  • Michael April 13, 2015, 4:08 pm

    Right on! Wasteful spending is huge in Western counties. And unhealthy living is at the top of the list: “100 million people are driven into poverty each year by health care costs” -> Super Juice Me. The vast majority don’t even know what good health feels like, because the average person’s diet is appalling from birth. If you are interested in taking command of your health, you might be interested in (arguably) the best nutritional site available: http://nutritionfacts.org/
    Check out “Uprooting the Leading Causes of Death”
    And how about one of the favorite pass-times for twenty year olds… the bar. You’re better off going into the bathroom and flushing your money down the toilet! You wake up with a hangover, embarrassed, the next day is wasted, empty wallet and fried brain cells.

    Super Juice Me, an amazing film, can be watched for free here:
    http://articles.mercola.com/sites/articles/archive/2015/04/11/health-benefits-juicing.aspx?e_cid=20150411Z1_DNL_NB_art_1&utm_source=dnl&utm_medium=email&utm_content=art1&utm_campaign=20150411Z1_DNL_NB&et_cid=DM71678&et_rid=911842644

    Reply
  • Chris April 14, 2015, 10:52 am

    I stumbled upon your blog recently, and have spent more hours than are prudent reading, somewhat in fascination. Most of it is pretty uncontroversial, and hard to argue with. “Don’t waste money.” “Avoid debt.” “Happiness from things is fleeting.” Etc. The idea of working towards financial independence is noble and not unique.

    I think what interests me, and where I think you receive pushback, is your endgame, which is that you don’t have an endgame, you have a lifestyle. And I find your passion for your lifestyle admirable. But just as I find vegans’ passions admirable, or soccer fans’ passions admirable, I can find yours admirable without feeling any desire for it. Just as I can sit and watch a soccer game and feel zero passion, or sit in front of a plate of lima beans, and feel zero desire, I look at your lifestyle and don’t find the appeal. And that’s okay. Doesn’t make you wrong, doesn’t make me wrong.

    I will tell you, the biggest objection I have to your lifestyle is your aversion to work, or employment. And I think this is where it comes off the rails for a lot of people. I genuinely like, maybe even love, my job. I find it challenging, interesting, fulfilling, and meaningful. (You’ll die (and hate me) when I tell you what it is at the bottom of this post.) I work with a lot of interesting, talented people, and many/most of them feel the same way. We work long hours. It’s stressful, which is stimulating in the way you find riding your bike when it’s 10 degrees outside stimulating. I can honestly say there are very few things I would rather be doing, long term, than work. Sure, I like to take a break and go on vacation, blow off an afternoon and play golf, and I enjoy my weekends at home with my family. But when I think of my long-term financial goals, ‘stopping work as soon as possible’ is not one of them. Sure, I want to BE ABLE TO not work, but retirement itself is not a real particular desire of mine. There are simply not enough things I want to do at home that would be more interesting than what I do at work.

    Because I do not have that desire, I spend differently as well. I can “buy time” in certain ways. You enjoy riding your bike to get groceries. I look at buying groceries as something to be done quickly, so dragging it out via riding a bike is not desirable to me (I can drive to the store in 5 minutes and bike there in 45.) I pay someone to clean my house (gasp) because by doing so, I can free that time up for other pursuits (I did have a good chuckle at the person who commented that by not paying someone to clean her house she was free to walk around and enjoy it more.) Like mowing the lawn, which is something I do enjoy, so I do it myself. Between my wife and I, we even own THREE cars, including a moderately expensive sports car I bought ten years ago and I can honestly say my enjoyment for owning and driving it has not diminished one iota since; I daresay I’m more passionate about that car than you are about your bike :).

    And even with all of this, without getting too deep into personal matters, my net worth is not materially different from yours. You’ve done it mostly on the expense side, and I’ve done it by growing my paycheck (which funds my investments) through my passion for my work. Point is, you often look at people like me, who on the surface look like “mindless consumers” and say we “don’t get it” but what we don’t “get” is the passion for YOUR lifestyle. I have plenty of passion for my own. But because my priorities are different than yours, and my goals are different from yours, my life and my spending are different from yours. However, I’m not dismissive of your lifestyle as you are of mine. I don’t claim mine is right or yours is wrong, I just state that I don’t desire to live like you do, and it isn’t a matter of “not getting it.” I hope you don’t find that insulting, because it isn’t intended to be. I just thought I’d provide a little perspective on why you are somewhat easily dismissed; when your lifestyle is built around getting from A to Z, providing the best roadmap assumes we all want to get to Z. If I’m not going to Z, you can’t assume I’m an idiot for not using your map.

    Oh, and my profession? I’m in oil and gas finance. Told you that you’d hate me :)

    Reply
    • Mr. Money Mustache April 15, 2015, 6:29 pm

      I have no objections to your philosophy, Chris, as it sounds like you have thought it out well. I also have a few good, wise friends who own (or have owned) oil companies. There are only a few corrections on the details:

      I too love work, and preferably hard work – it is absolutely my favorite thing to do with my time.

      I also buy time, whenever there is a chance to do so without sacrificing helpful effort and learning. And luxury products if they will add to my life.

      The biggest thing that sets us apart might be in our feelings about resource consumption: I weigh every potential purchase against an estimate of how much ecological damage it does to the planet. So with all other factors being equal, I’ll lean strongly towards a 1500 square foot house rather than a 15,000 square foot one, fly in Economy class to consume less fuel than Business, etc.

      Reply
  • Kyra April 14, 2015, 5:15 pm

    Hey mmm, I saw this the other day and was laughing my ass off. It reminds me of you so much! http://www.gocomics.com/calvinandhobbes/1994/03/20

    Reply
  • Shweta August 3, 2019, 12:37 pm

    Hey MMM,
    I am 32 and I am ready to retire and start a family (and pursue some of my humble entrepreneurial dreams in a few years after that). The problem is, I don’t have enough corpus as per the 4% rule. I have about AUD 500k in personal savings, split between stocks and low fees funds. Plus my partner (who has additional AUD 300k in savings) is working and happily so – bringing home just enough to pay for our rents (we don’t own a house) and our moderately frugal life. Currently we save all of my salary. Can I really retire with that or i better wait until i hit $ 1 million personally? Everyday is a misery waiting for this golden number :(

    Reply
  • Greh February 6, 2023, 3:31 am

    Wow. This so perfectly encapsulates the essence of the North American “problem” that we have all faced. Wiser people see the light with help such as MMM. This stuff should be mandatory curriculum in secondary school.

    Reply

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