05 Jun 2017

Should You Attempt Early Retirement as a Mental Health Professional?

Should You Attempt Early Retirement as a Mental Health Professional?

It seems like almost every day there's a new story popping up about a person that figured out a way to retire years ahead of schedule! While it's definitely not a mainstream idea yet (and probably won't be anytime soon), the thought of early retirement is becoming increasingly more popular in our culture.

The financial details and strategies for each case of early retirement vary greatly. Some early retirees are ultra-frugal, while others hit massive paydays early in their careers and just so happened to invest right at the beginning of the most recent economic recovery.

The two most important factors that any mental health professional should consider before attempting early retirement are:

  1. Does early retirement even make sense for you?
  2. How can you make it happen?

This article deals with the first question (the second will be answered in a later article).

What does early retirement actually look like?

Until recently, retirement was most often thought of as the total absence of work around the age of 65. The idea was that you work hard for the majority of your life, stash away money into retirement accounts, and then leave your career to play golf (or do nothing at all) once your nest egg becomes large enough to sustain you to the end of life.

Unfortunately, the great recession in 2008 put a wrench in millions of Americans' retirement plans. Investment portfolio values plummeted, jobs were lost, and retirement simply became out of reach for many people (at least temporarily until the economy began to recover).

Younger generations have reacted to the realization that retirement may not fully be under their control by attempting to achieve it even sooner. With that also came a shift in how millennials and Gen Xers actually view retirement itself.

Rather than the complete absence of work while maintaining a high-quality lifestyle, early retirement enthusiasts have adopted a far more "minimalist" lifestyle, along with aggressively investing to create a large nest egg at an early age. It's very common for early retirees to continue working in some capacity, but typically through smaller income streams like part-time jobs or very small side hustles.

Why would you want to retire early?

If you are considering a path toward early retirement, you need to evaluate a few things first. While early retirement sounds incredible on face value, it's not for everyone. There is an immense level of sacrifice that has to take place to actually achieve early retirement.

Here are some traits that might make you a good candidate for retiring early:

1) Time is your main focus

Almost every early retiree that I've come across cites "time" as the number one reason they chose the path toward early retirement. Whether they want to spend more time with their family every day, or do more traveling/relaxing earlier in life, it all comes back to wanting more control over their available time in life.

2) You don't need to be "fancy"

One of the main components of early retirement is avoiding the consumerism that is the backbone of American culture. Many early retirees opt to drive older cars, do maintenance work of all types on their own, and live as far below their means as possible.

There are different extremes of course, but it's not uncommon to find stories of early retirees that live in an airstream trailer full time, or ride a bicycle instead of owning a car. The reality is that you need as much of your money available for saving and investing as possible to actually retire early, and the easiest way to create that situation is to spend less.

3) Pursuit of your passions is more important than your income level

Hopefully, you entered the mental health profession because it is your absolute passion in life to help others! The reality of any career, however, is that sometimes your degrees don't end up equating to your passion.

Many early retirees experience burnout earlier than normal in their careers and decide to pursue passion projects instead. If you are more interested in following your passions instead of maximizing your earning potential, early retirement may be for you.

What could go wrong with retiring early?

As a personal finance blogger, this is an aspect of early retirement that is never discussed enough (in my opinion). Of course retiring early sounds like a great lifestyle, but there is inherent risk there that many early retirement enthusiasts either don't account for or leave out altogether when discussing their strategy.

Here are a few potential drawbacks of leaving a career too soon:

1) You run out of money!

The elephant in the room for early retirement is that you completely gut your ability to earn good money when you leave your job. Many of the nest eggs that early retirees are relying on are $1,000,000 or less! A million dollars may sound like a ton of money, but when you are hoping to stretch that amount for 30 plus years, it may not cut it.

What happens if you or a family member becomes sick and has astronomical medical bills? What if the market completely tanks and your investment accounts drop substantially, or dividends you rely on to live are cut?

2) You change your mind

Careers take time to build, and there is no getting around that fact. If you leave in year 10 of a potentially 30-year career, what kind of opportunities down the road are now unavailable to you?

You may be able to get a similar job again if you leave for early retirement and then change your mind, but there's no recouping the same opportunities that you had when you left.

3) You want to start or grow your family

Kids are expensive. According to Time, the average child now costs $233,610 to raise from birth to 17 years old on average. If your plan is to retire when you reach a million dollars, a child in the future could cost almost a quarter of your nest egg.

That's not to say that there aren't early retirees that have children, but anticipating the costs of children moving forward is an essential element to leaving a career early.

Early retirement is possible, but you need to be skeptical

Any time that you see a story about early retirement from one of the major news outlets, you need to understand that those stories tend to create a lot of buzz (and revenue in the form of clicks and shares for the media outlet).

The issue is that the stories are typically told in a way that leaves out the struggles and pitfalls of early retirement. Understand that retiring early is certainly possible and will become more popular in the coming years, but it's not as easy as it may seem.

-- Bobby Hoyt is a former high school teacher who paid off $40,000 of student loan debt in a year and a half. He now runs the personal finance site MillennialMoneyMan.com full-time, and has been seen on CNBC, Forbes, Business Insider, Reuters, Marketwatch, and many other major publications.

The opinions and advice expressed in this article are those of the author and do not necessarily reflect those held by the American Psychology Association (APA).

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