Why the risks of early retirement are overrated

Why the risks of early retirement are overratedWhy the risks of early retirement are overratedTheres no doubt that quitting your full-timesource of incomein your 30s, and expecting to live not 20, 30, or even 40 more yearstry, 60 or 70, without a dedicated income for more than half of your life, is a risk.But for fruchtwein of us, its a calculated risk.Follow Ladders on FlipboardFollow Ladders magazines on Flipboard covering Happiness, Productivity, Job Satisfaction, Neuroscience, and moreCalculated risks are referred to as calculated for a reason. And no, Im not talking about math. Im talking about you. Youre the only equation that matters.Early retirement isnt just financial. Its organic. The likelihood of living the next 50 or 60 years without a consistent source of income or ever having to worry about money is real, and its all in your head. Its amind game.All that organic chemistry that collectively makes up every tiny bit of YOU is the primary driving force behind early retirem ent, and the risks of quitting the rat race early arentdeep-seededin math. Not in the stock market. Not real estate.They are seated within you.Theres more than one way to think about the risks of early retirementI dont know about you, but Ive heard too many stories that go something like thisMy dad retired at 65. Three weeks after retirement, he went in for a routine checkup and the doctors found a baseball-sized growth on his kidneys. He was dead in three months.Frankly, Im sick of those stories. I hate them. Every one.People ignore the proven and statistical risks that come from jobs especially stressful ones. AsABC reports A growing body of research stands testament to this fact lack of sleep has been shown to tax the hearts of the stressed executive and the stressed day worker alike.Layoffs, the report continues, can take their psychic and physiologic toll in the executive suite and on the production line the burden on those left behind, who work more overtime to shoulder a heav ier workload, can be life-shortening and living in fear of losing a job, or staying put in a hostile workplace, also boosts the risk of an earlier cardiac death.I hate the risk ofnot retiring earlymore than the opposite. To work the vast majority of our life and then retire during the portion of our life where weremore likely to get sickis a dreadful thought. To develop krebs. Suffer from mobility-inhibiting aches and pains. Its painful to even think about.Consider this graph fromCancer.gov.The wide majority who develop cancer are above the age of 50.The highest incidents of cancer occur between 65 and 74 which, coincidently, happens to coincide closely with the age that we can draw social security without penalty 62. Does anyone else see a problem with this?This flat freaks me the hell out.To me, itsway more risky to retire during the period when were fruchtwein likely to develop a health problemthan it is much earlier in life.At what point do we begin to consider the risks of NOT retiring early and weigh those against the risks of quitting the rat race early?Risk is a two-way street, my friends.Ive been asked before What if you develop a debilitating disease and need expensive healthcare? Youll never be able to afford it.My response is simple Okay, but what if I dont?The risks of early retirementThis post isnt meant to diminish the risks of early retirement. Risks of early retirement exist. Popular arguments for risks includeHeavy index-entdeckung investors are setting themselves up for failure upon the next market crashTheTrinity 4% Ruleis based on old and antiquated dataEarly retirees dont have a diversified asset class, which makes single points of failure likelyRetiring during a bull market is easy, but its not quite as easy once the bull is replaced with a furry little bearFrankly, none of these arguments are necessarily wrong. Yes, heavy-index fund investors do stand to lose money when the market tanks. And yes, the next bear market will test many of u s who retired in the last couple years.But, let me be clear about the Trinity 4% rule I hate the term rule.Contrary to popular critique, the 4% safe withdrawal rate is not some one-size-fits-all approach that people come hell or high water mustblindly and stubbornly adhere to for the duration of their retirements.Doing so would mean that we humans are purely robots, programmed to aimlessly march forward using the same infantile cognitive powers that wehave always had, unable to think for ourselves, make our own choices and adjust to the times.Instead,a large majority of us are using the 4% ruleas a guideline.Meaning, we choose a number that we believe to be a reasonably safe withdrawal rate and start into our retirements by withdrawing from our investmentsthatamount of money.But, as well-known personal finance and early retiree blogger Mr. Money Mustachewrites(and one who happens tobelieve in the 4% principle), there are no guarantees in life and we shouldalways adjust our expendi tures based on economic conditions.In other words, critics of the 4% rule are missing the point that many early retirees grasp We arent blindly following any rule, here. Early retirement isnt about rules.In fact, its precisely the damn opposite.We dont follow the rules.We march to the beat of our own drums and do so on our own free will. The risks inherent in the 4%foundation, along with those of heavy index-fund investing or asset classes are only as serious as the innate willingness of the early retiree to morph and adjust to the changing times.The fact is we humans can endure a LOTwhen we need to.Early retirees arent robots we adjust to risk and meet them head onOn paper, it might seem that early retirees are accepting too much risk. But what the paper misses is the motivation and determination of those people and families to do whatever it takes to make it work.What were missing here is the very nature of most early retirees.We arent your average Joe or Jane. We are typically cr eative and determined. Most of us retired early because we possess a vision for our future thats light years better than the default behavior of working into our 60s andhoping we have some productive years left.Most retirees are Gumby-like humans, capable of moving, twisting and contorting to position themselves to accurately confront economic conditions.If a retirees portfolio losses 30% of its value as many did during the housing market crash of 2008,most adjust their spending habits and lifestyle like good little human beings capable of making sound adjustments.Picture this youre standing in the middle of the road and theresa fully-loaded semi-tractor trailer barreling in your direction. The tractor-trailer, in this case, is analogous to a looming recession. Or some kind of catastrophy that we can see coming.At first, youre enjoying your position in the middle of the road and stay put. After all, its entirely possible that the trailer will turn and instead head down a side stree t before it hits you.It is also possible that the trailer will simply stop, stare you dead in the face but not actually approach your position. Maybe itll suffer a flat tire and be forced to the side of the road. Who knows the trailer may not hit you.But eventually, that trailer gets closer to you. 250 yards. 150 yards. 50 yards.Okay, this thing isnt stopping.What happens at this point? Naturally, we move our asses off the road and let the trailer pass us by, suffering dust einatmen as it passes and maybe a thrown pebble or two.We dont, on the other hand, stand there like idiots and let this thing plow into us.We adjust like brain-powered human beings, and our financial situation is no different, especially after retirement when the paychecks stop floating in.We take our initial position and enjoy it. We notice an oncoming threatand we move if it gets close. If we havent seen a threatin 6 months, we might lay down and spread out a bit.Being flexible is our calculated hedge against risk.The risks that can bite us in the assAt the beginning of this post, I said that early retirement is a risk. I still believe it is. But, I believe its a calculated risk. For many of us, its a risk worth taking because, though one of the endless what ifs of life could happen, theres also a sure thingIf we dont retire early, we WILL be deckenfries in an office during the most productive years of our life, retiring only when were most likely to develop health problems that can significantly affect our quality of life.Sorry, but its not worth it to me. That risk is too great, and based on the numbers, its darn near impossible to avoid.There are risks that we cannot possibly avoid, such asDeveloping a rapid health problem that requires expensive hospitalizationA week-long 50% drop in the stock marketA lawsuit that wipes you out of your savingsA car accident that leaves you saddled with medical bills foreverFrankly, the risks are endless.But, heres what I believe Those risks are inher ent with every one of us regardless of whether we hold full-time jobs or not.I wont live my life based on the what ifs. I refuse.If something happens, I deal with it when it happens. But, Ill always have years of freedom to look back on. All those mornings that I got up without a care in the world and the whole day in front of me to do with as I please.Those memories cant be taken from me (okay, except for Alzheimers).Im risking the what ifs in retirement because I cant stomach the risks of spending the rest of my life doing a job that I dont enjoy. Thats not what life is about.You only live once. I dont want toworkit. I want to live it.This article first appeared on Think Save Retire.You might also enjoyNew neuroscience reveals 4 rituals that will make you happyStrangers know your social class in the first seven words you say, study finds10 lessons from Benjamin Franklins daily schedule that will double your productivityThe worst mistakes you can make in an interview, according to 12 CEOs10 habits of mentally strong people