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The 10 Most Important Lessons After Retiring Early 10 Years Ago

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In February 2012, I decided to negotiate a severance to break free and retire early. By mid-June 2012, right before my 35th birthday, I had received a severance check and the last of my three months of WARN Act pay.

These past 10 years have flown by. Although I missed out on likely millions of dollars in compensation, I gained back the most important asset of all: time.

For those of you thinking about retiring early, taking a long sabbatical, or doing something completely new, this article is for you. At the end of the day, money is not the end goal. Being able to use money to live the life you want is.

10 Lessons Learned After 10 Years Of Early Retirement

I’ve been writing about achieving financial independence since July 2009 when I launched Financial Samurai. Since then, the financial independence movement (FIRE) has become more mainstream. The pandemic has certainly encouraged more people to think about what they want to do with their one and only lives.

To me, being financially independent means having enough passive income to cover at least your basic living expenses. Your passive income can come from stock dividends, rental income, bond income, private equity distributions, and even royalty income.

The truth is, I haven’t considered myself a retiree since 2013. After spending a year traveling to 20 countries with my wife, I got bored. Instead, I wanted to do something more productive with my time.

Therefore, I consulted with a couple of private fintech firms for several years, including Personal Capital. Plus, I’ve been publishing on Financial Samurai regularly every week since 2009. And most recently, I spent between 2020 to 2022 writing a personal finance book to help people achieve financial freedom sooner, rather than later.

In other words, I’m not retired one bit. Instead, I channeled my free time to doing what I want. Here are 10 lessons learned after 10 years of early retirement.

1) Only you will know how much you need to retire early. 

Some say having an investable net worth equal to 25X your expenses means you are financially independent. I say using a net worth equal to 20X your gross annual income is a better method. By the time you hit a 10X gross income multiple, you should really start feeling the joys of financial independence.

By using a multiple of gross income, you can’t “cheat” your way to financial independence by cutting costs. Instead, as your income grows, you’re forced to keep saving and investing more.

The thing is, it really doesn’t matter what anybody thinks about your financial situation. All that matters is whether you have the ability to do what you want or not. If you think you’re financially independent but can’t leave your soul-sucking job or failing marriage, then maybe you are not yet financially independent.

2) Your financial needs will likely go up over time. 

Whatever you think you will need to retire early likely won’t stay static forever. For most, financial requirements will likely increase. The reasons include inflation, ever-rising healthcare expenses, more desires due to more free time, family, and medical mishaps.

When I left work in 2012, I was happy with $80,000 a year in passive income. My next goal was to generate $150,000 in passive income by the time my wife joined me in early retirement in 2015. We made a pact that if things worked out with me fake retiring at age 34, she could also retire from work three years later at age 34.

However, after we had our first child in 2017, my desire to earn more passive income increased to $200,000+. If we wanted to raise a child in an expensive city like San Francisco, we needed to earn more to pay for rising healthcare and preschool tuition expenses.

Now with a second child and inflation running at 40-year highs, we are forced to generate more income or invest more just to run in place. So long as we are invested, our passive income should keep up with inflation. However, there will be bear markets that will set us back.

Current Estimated Passive Income

Our current goal is to consistently generate at least $300,000 in passive income to live a relatively middle-class lifestyle in San Francisco or Honolulu with two young children.

We don’t need to make $300,000+ a year, especially given investments are taxed at a lower rate. However, when it comes to money, having stretch goals is better than coming up too short.

Be open to generating passive retirement income once your day job is done. If you can do something you enjoy that brings in extra income, you dramatically increase your chances of living a comfortable retirement life.

3) You will become more dynamic overall. 

Because your financial needs and desires will change over time, you should also be flexible with your safe withdrawal rate. The best safe withdrawal rate is a dynamic safe withdrawal rate that changes with the times.

Contrary to what academics might say, there is no one fixed safe withdrawal rate to go by. The “4% Rule” was created in the 1990s when the risk-free rate of return was between 5% – 6%. As a practitioner who let go of a day job’s security in 2012, being flexible is key.

It’s fine and dandy to pontificate about retirement planning while you are gainfully employed with a nice pension waiting for you. It’s another thing once you’ve walked away from a steady paycheck like I have for the past 10 years.

Worried about inflation eating into your savings? Use our Retirement Planner to model different scenarios based on inflation.

4) You will eventually take your freedom for granted.

Habituation is the main reason why achieving financial freedom won’t solve all your problems. Even though it feels amazing to do what you want whenever you want, you will gradually begin to stop appreciating your freedom.

Just like how eating too much cake isn’t good for your body, having too much freedom may not be good for your soul. The path of least resistance is to do nothing. Therefore, having some structure and commitments in your daily life is important.

5) You will likely have a recurring desire to return to work.

The younger you retire, the more you will second-guess your decision. If you don’t retire to something purposeful, the greater your desire to return to work will be. After years at the office, you may miss the camaraderie and working on a mission.

Make sure you retire to something, not from something. Have an awesome activity waiting for you once you negotiate a severance.

Since 2012, I’ve battled the urge to return to work at least three times. The first was within the first six months after I left my job. I was worried I had made a grave mistake.

The second time was in 2018 a year after my son was born. I felt I needed to start earning again to better take care of my family. Paying $2,000+ a month in unsubsidized health insurance and $2,500 a month in preschool tuition is a lot!

Further, I also thought going back to work might feel like a nice vacation! Being a stay-at-home parent is the hardest job in the world. It tests your patience every single day. Working 60 hours a week in investment banking is like a walk in the park compared to caring for a 0 – 3-year-old.

Finally, the most recent time I fought my desire to go back to work was a year into the pandemic. So many friends were happily not working while working from home. Therefore, I figured if I could get paid to go to the beach or play tennis midday, sign me up!

6) Your time becomes more valuable, not less.

You would think having more time would make you less appreciative of time. After all, increased supply generally leads to a decline in prices. Instead, the opposite happens once you become financially independent.

Because you can do whatever you want, you’re no longer forced to do things you absolutely don’t want to do. Therefore, every minute that is wasted has a greater opportunity cost.

For example, while I was working, my business flights were often delayed. But given I was flying during work hours, I didn’t mind because I was still getting paid. My only choice was to continue waiting.

However, today, if my flight is delayed, I am much more agitated because I could have spent that time playing with my daughter, writing on Financial Samurai, playing tennis, or napping.

7) You get to speak your mind more freely.

When you are no longer working because you need the money, you can share your thoughts more freely. You are also better able to speak up for yourself without fear of retribution.

Think about all the times at work you held your tongue because you didn’t want to jeopardize your promotion or raise. Even though you totally disagreed with your boss’s philosophy, you pretended to agree. Ugh.

One of the biggest benefits of FIRE is being able to be who you are without as much fear of persecution. The more freely you are able to speak your mind, the greater peace of mind you will have.

8) You will get lost for an unknown period of time. 

Given our work is a big part of who we are, once you leave your job, you will lose a part of your identity. The longer you work, the harder the transition to retirement or fake retirement will be. The negatives of early retirement can be debilitating during the initial transition.

If you are truly retired, you might start feeling useless to society. And if you start feeling useless, the chances of feeling depressed go up. Do not underestimate having goals, status, and an identity from work.

Thankfully, once you retire, you will inevitably find something to do that’s meaningful to you and useful to others. This is the only way to find yourself again once. For me, this hole was filled by writing a personal finance book and connecting with others online.

9) Legacy becomes a more important focus.

When work no longer takes a lot of your time, you start thinking about what else is there in life. Of course, if you have children, you will want to spend more time with them and teach them your ways. But you’re always thinking what else given you have more time to do what you want.

Early retirement or fake retirement leaves you more time to be left alone with your thoughts. And your thoughts will ultimately lead to what type of legacy you’d like to leave.

For some, it may be endowing a scholarship at their alma mater. For others, it might be distributing funds from a revocable trust to a charity they really care about. For me it’s publishing on Financial Samurai three times a week, writing a free newsletter once a week, and publishing my book

The one thing that kept me going once lockdowns began in March 2020 was knowing that one day, my children would get to bring my book to show-and-tell to share what their daddy does.

10) Live for yourself, not for others.

So often, we worry about what other people think of our decisions. Retiring early or leading a more unconventional life may indeed attract some criticism. We call these people the Internet Retirement Police. They can’t help but judge you for how you are living your life.

But the reality is, so long as you aren’t hurting anybody, everyday people don’t care how you live your life. Most are too busy worrying about their own problems. Ironically, the only people who get agitated about how you describe your situation are those who want what you have!

In the end, you are only letting yourself down if you don’t pursue the life you want. And certainly, nobody on their deathbed wishes they spent more of their precious time earning more money.

Your Time Will Go By Quicker Than You Think

The first year of a 90-year lifespan equals 1 / 90. The forty-sixth year of a 90-year lifespan equals 1 / 45. In other words, time really does accelerate the older you get. Each year you live becomes more valuable because you have less time.

As a result, consider saving and investing aggressively while you can. Work hard while you still have the energy. This way, by the time you’re fed up with work, you will have more options to do what you want. The “sacrifices” you make today are no sacrifices at all if they buy you more time.

Maybe you won’t retire completely. Instead, you might downshift to a lower-paying job that’s more meaningful. Or you might be able to take years off from work to take care of your children. You might even start that next great business.

Think In Probabilities, Not Absolutes

Whatever you decide to do, adopt my 70 / 30 decision-making philosophy. It is at the core of my book. The decision-making philosophy states that if you believe with at least 70% probability you will be making the right decision, go for it! While at the same time, you have the humility knowing that 30% of the time you will make the wrong decision, but will learn from your mistakes.

Over a lifetime, having greater than a 2:1 win:loss ratio will make you wealthier than you can imagine. Further, you will also live a more fulfilling life as you minimize the opportunities that pass you by.

Personal Capital compensated Financial Samurai (“Author”) for providing the content contained in this article. Author is not a client of Personal Capital Advisors Corporation. Compensation not to exceed $500. Additionally, in a separate referral arrangement between Author and Personal Capital Corporation (“PCC”), Author is paid between $70 and $150 for each person who uses Author’s webpage (https://www.financialsamurai.com) to register with Personal Capital and links at least $100,000 in investable assets to Personal Capital’s Free Financial Dashboard. As a result of these arrangements, Author may financially benefit from referring potential clients to Personal Capital and/or be incentivized to present blog content that is favorable to PCC. No fees or other amounts will be charged to investors by Author or Personal Capital as a result of the Referral Arrangement. Investors that are referred to PCC and subsequently subscribe for investment advisory services provided by PCC’s affiliated adviser, Personal Capital Advisors Corporation (“PCAC”) will not pay increased management fees or other similar compensation to Author, PCC or PCAC as a result of this arrangement. PCC and PCAC do not endorse or adopt any content on a third party site that may be linked to from this page. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

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