Thursday, December 26, 2013

Early Retirement

If you have a high paying job the key to retiring earlier rather than later is to avoid developing expensive tastes.  This wins in two ways, you can save more of your income and you will need less savings to maintain your accustomed standard of living in retirement.  Of course there is no free lunch, by retiring early you are reducing your lifetime earnings and hence your potential lifetime consumption.  But past a certain point there are diminishing returns to additional spending and you may sensibly prefer the additional leisure time early retirement makes possible.  Of course you may also prefer to keep working (especially if you like your job) but people with good incomes should realize they have a choice and not just default to spending whatever they make.

This is a point the "Mr. Money Mustache" blog (which I recently added to my blog list) makes with which I agree.  Although in my view the blog has a tendency to go overboard veering towards "what doesn't kill you makes you stronger" territory which discussing biking in lousy weather and the like.

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