Reconsidering Early Retirement: Financial Independence vs. Reality

Reasons to Rethink Retiring Early and What It Means for Your Savings

Retiring in your 30s or 40s may be an attractive idea, but the sacrifices and uncertainties that come with it can significantly impact your financial future. As advocates of the FIRE movement aim to achieve early retirement through aggressive saving, there are important drawbacks to consider.

It takes a lot of sacrifice

The average worker estimates they'll need $1.8 million for retirement, according to a recent Schwab survey -- and that's for typical workers, many of whom retire in their 60s. FIRE followers aim to retire much earlier than this, and that means they'll need to save a lot more. It's not easy to pull off. It requires saving a large percentage of your income -- sometimes 50% or more.

• Some workers take on side hustles to bring in extra money.
• They may also reduce their current spending to the bare minimum to free up more cash for saving, which means forgoing a lot of enjoyable activities right now.

Longer retirements bring greater uncertainty

Unplanned expenses, like medical bills, insurance claims, and broken appliances can happen in any retirement. But you're more likely to encounter them when you're retired for longer.

1. You may be able to weather a few of these unexpected costs by budgeting for them in your retirement plan.
2. But if you find yourself facing a serious medical issue, for example, your current savings may not be enough to cover that and all the money you'll need for living expenses for the rest of your life.

You'll get less from Social Security

The Social Security Administration bases your benefit on your income from your 35 highest-earning years. FIRE followers hope to retire before they've been in the workforce for that long. But when you've worked fewer than 35 years, you'll have zero-income years factored into your benefit calculation.

If you feel prepared to take on these challenges, then it may still be OK to try to retire early. But if any of them give you pause, you may want to delay retirement a little longer. It may not be ideal, but there are upsides to it too. You'll be able to save a little less aggressively and enjoy your time more today.