Early retirement and opportunity cost, by Harry Sit

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surfhb
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Re: Early retirement and opportunity cost, by Harry Sit

Post by surfhb »

TheTimeLord wrote:
mak1277 wrote:
TheTimeLord wrote:
texasdiver wrote:Most of us here could probably find a second job. I see employers around here advertising for swing and graveyard shift work. I could probably give up my relaxing evenings with the family and my weekends and squeeze in another 40 hours of work per week. People do it.

So is there an "opportunity cost" if I decide not to work 80-100 hours per week? Gee, if I did I could be throwing away a new BMW every year too!

I'm not sure how this is any different from the opportunity cost of early retirement. Do you work to live or live to work?
Do the people planning for early retirement not get vacation and weekends off? I would think if you haven't maxed those opportunities out and a huge chunk more of free time isn't going to really add that much beyond extra time to lie around.
I'm planning to retire early. I get weekends and vacations and I absolutely max them out whenever I can. Over the past year, I've even started doing more chores (groceries, haircuts, home projects) after work on weekdays so that I don't have to do them on weekends.

It's that whole concept that makes me want to retire early...I want never ending weekends to do what I want, when I want to. For me, it's spending time outside, and you wouldn't believe how many times there are beautiful days during the work week when I'm trapped inside and then it rains all weekend.

It irks me when people assume that wannabe early retirees aren't living life to the fullest already and we're somehow just waiting to retire to do the things we want to do.
I think some do and some don't. My real point which doesn't come across is I think it is critical to have something to be retiring to, instead of just retiring from something. But, if it makes someone as happy to sitting on a porch swing and watching kids little ague games as someone else is exploring the world then great. It is their life, go for what you want. Sometimes I feel there is a lot of pressure here to agree that early retirement is the answer for everyone, and of course there is no one answer.
Of course.

Its good to see more and more folks jumping on the early retirement bandwagon. A couple making 80K a year each should have little trouble amassing a 7 figure net worth in 10-15 years time. You just need to make small tweaks in your thinking and behaviors: ie: not buying new cars, healthy food cooked at home (no eating out so much), budget travel, ect. Giving up those things which are nice but don't necessarily make life more enjoyable....now that's opportunity cost!

Anyway, terrible article and not thought provoking at all. Opportunity cost is lost income? LOL
Rodc
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Re: Early retirement and opportunity cost, by Harry Sit

Post by Rodc »

TheTimeLord wrote:
Dutch wrote:I apologize if the point has already been made, but:

Once you have enough to retire, the whole concept of opportunity cost does not apply anymore. We are talking time vs. time.

Your lifetime is finite. Working longer does not net your more time.
Interesting instead of time vs. time I see the discussion as quality vs. quantity. Enough is only a concept versus a certain level not an absolute. At 50 you can reach the point where you have enough for the retirement you planned but then decide if I work 5 more years instead of having a timeshare on the beach I can have a house or instead visiting the beach in Destin you could do Tahiti or Hawaii.

Where "enough" comes in I think is in not letting this sort of "I could do more" become a death spiral of never ending work because you keep moving the goal line of "enough". It is like avoiding letting a salesmen (in this case yourself) keep up selling you something you do not need.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by Ron Scott »

I support people who work. I think work in general is a healthy, worthwhile activity.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by tfb »

Artsdoctor wrote:I think I may have figured why this thread has created such a lively discussion. It's a Rorschach test.
I think it has to do with people making assumptions, which may or may not be correct. With the same income from work, are we talking about a 55-year-old single person with $5 million or are we talking about a 35-year-old couple with $1 million? Both can be considered as candidates for early retirement. People with more money and less time say it's foolish to sacrifice time for more money. People with less money and more time want to expand the possibilities for their still abundant time.

Many mentioned "enough." If you retired or you are planning to retire when you had/have "enough" why was 80% of enough a few years before not enough? Someone else would've retired with that much money at that age and laughed at you for not knowing what is enough. What about when you had 50% of enough? At that point you faced the same time-money opportunity cost tradeoff and you obviously chose money over time. Then why is it not valid for someone else to consider the opportunity cost?

This is absolutely not news.
Harry Sit, taking a break from the forums.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by Slacker »

tfb wrote:I think it has to do with people making assumptions, which may or may not be correct. With the same income from work, are we talking about a 55-year-old single person with $5 million or are we talking about a 35-year-old couple with $1 million? Both can be considered as candidates for early retirement. People with more money and less time say it's foolish to sacrifice time for more money. People with less money and more time want to expand the possibilities for their still abundant time.

Many mentioned "enough." If you retired or you are planning to retire when you had/have "enough" why was 80% of enough a few years before not enough? Someone else would've retired with that much money at that age and laughed at you for not knowing what is enough. What about when you had 50% of enough? At that point you faced the same time-money opportunity cost tradeoff and you obviously chose money over time. Then why is it not valid for someone else to consider the opportunity cost?

This is absolutely not news.
Sounds like a one-sided equation that only considers money as "opportunity cost" and fails to consider time as an "opportunity cost" as many posters have suggested should be added back in to that equation (or maybe as a separate equation to be evaluated in a parametric fashion with money as one value and time as the other and find the crossing points that suit you based on your goals, earnings, savings rate, etc).

"Why was 80% of enough not enough?"
That seems like an odd question to ask if someone has a well defined goal and knows what is "enough" in dollar & time terms than it is obvious that 80% falls short. I suppose you are trying to debate why did someone set a specific goal and label that as "enough" and not select a lower goal? That is a very personal question with widely varying answers in my estimation outside of the minimal calculation of actual expenses and risk/return scenarios for withdrawal rates, estimated returns, and ability to ride out down years, etc.

" People with less money and more time want to expand the possibilities for their still abundant time."
This looks like a false assertion to generalize to all cases. Obviously, the couple who retired at 35 were not concerned with having less money (in your hypothetical) and the real 30yr old couple also felt the same way. The people who retired at 55 may have agreed with this assertion, but not the ones who retire in their 30s or 40s.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by tfb »

Slacker wrote:Sounds like a one-sided equation that only considers money as "opportunity cost" and fails to consider time as an "opportunity cost" as many posters have suggested should be added back in to that equation (or maybe as a separate equation to be evaluated in a parametric fashion with money as one value and time as the other and find the crossing points that suit you based on your goals, earnings, savings rate, etc).
Opportunity cost is by definition against something else, in this case gaining more time, which is well understood as desirable. The opportunity cost of doing A is not doing B. The opportunity cost of doing B is not doing A. That's what "mutually exclusive" means. The two sentences are equivalent. Saying one is enough. It automatically implies the other. It's not placing one choice as superior to the other.
Slacker wrote:"Why was 80% of enough not enough?"
That seems like an odd question to ask if someone has a well defined goal and knows what is "enough" in dollar & time terms than it is obvious that 80% falls short. I suppose you are trying to debate why did someone set a specific goal and label that as "enough" and not select a lower goal? That is a very personal question with widely varying answers in my estimation outside of the minimal calculation of actual expenses and risk/return scenarios for withdrawal rates, estimated returns, and ability to ride out down years, etc.
I'm questioning whether "enough" can be precisely calculated such that we get into a binary decision without regard to income from working (the opportunity cost):

enough ==> quit tomorrow
not enough ==> keep working

After setting the well defined goals as a set of age/wealth combos: $X @ 40, $Y @ 50, $Z @ 60, etc., if you find yourself short of the goals at each point, no matter how little you are making and expect to make, you would keep the same goals and keep going? What happened to the irreplaceable time argument?

You keep going only after you evaluate the opportunity cost. The flip side is also true. You consider the opportunity cost when you decide whether you quit.
Harry Sit, taking a break from the forums.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by Rodc »

I'm questioning whether "enough" can be precisely calculated such that we get into a binary decision without regard to income from working (the opportunity cost):
Of course not.

There are very few cases in life where we can precisely calculate an answer to any of life's big questions. Is this the precise one best person to marry? Is this the precise best time to have a child? Is this the precise best house to buy or job to accept?

Indeed "calculation" is not even the best way to make life's big important decisions - emotions are important. Now a calculation is often one of the useful inputs, even if only to keep emotions from driving us off a cliff and even if such calculation will never be precise, or more to the point, will never be accurate (people make precise and inaccurate calculations all the time).
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by TheTimeLord »

surfhb wrote:
TheTimeLord wrote:
mak1277 wrote:
TheTimeLord wrote:
texasdiver wrote:Most of us here could probably find a second job. I see employers around here advertising for swing and graveyard shift work. I could probably give up my relaxing evenings with the family and my weekends and squeeze in another 40 hours of work per week. People do it.

So is there an "opportunity cost" if I decide not to work 80-100 hours per week? Gee, if I did I could be throwing away a new BMW every year too!

I'm not sure how this is any different from the opportunity cost of early retirement. Do you work to live or live to work?
Do the people planning for early retirement not get vacation and weekends off? I would think if you haven't maxed those opportunities out and a huge chunk more of free time isn't going to really add that much beyond extra time to lie around.
I'm planning to retire early. I get weekends and vacations and I absolutely max them out whenever I can. Over the past year, I've even started doing more chores (groceries, haircuts, home projects) after work on weekdays so that I don't have to do them on weekends.

It's that whole concept that makes me want to retire early...I want never ending weekends to do what I want, when I want to. For me, it's spending time outside, and you wouldn't believe how many times there are beautiful days during the work week when I'm trapped inside and then it rains all weekend.

It irks me when people assume that wannabe early retirees aren't living life to the fullest already and we're somehow just waiting to retire to do the things we want to do.
I think some do and some don't. My real point which doesn't come across is I think it is critical to have something to be retiring to, instead of just retiring from something. But, if it makes someone as happy to sitting on a porch swing and watching kids little ague games as someone else is exploring the world then great. It is their life, go for what you want. Sometimes I feel there is a lot of pressure here to agree that early retirement is the answer for everyone, and of course there is no one answer.
Of course.

Its good to see more and more folks jumping on the early retirement bandwagon. A couple making 80K a year each should have little trouble amassing a 7 figure net worth in 10-15 years time. You just need to make small tweaks in your thinking and behaviors: ie: not buying new cars, healthy food cooked at home (no eating out so much), budget travel, ect. Giving up those things which are nice but don't necessarily make life more enjoyable....now that's opportunity cost!

Anyway, terrible article and not thought provoking at all. Opportunity cost is lost income? LOL
My wife and I took a different approach. While we have lived below our means since the second year of our marriage we also made the decision to take amazing trips earlier in life, that is what is important to us. Figuring there would be either physical or fiscal risk in not being able to take these trips when where older we decided to do them during our worklife. As a result we were frequently 20-30 years younger than our travel companions. We quickly realized that every year we were taking a trip of someone else's lifetime. As a result in my 50's I have no large bucket list or many places I haven't been that I want to go. Sure it meant we probably needed to work 2-4 years longer than what is outlined above. But it also means I could die today at my desk with no regrets beyond not seeing my loved ones this evening.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
an_asker
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Re: Early retirement and opportunity cost, by Harry Sit

Post by an_asker »

Rodc wrote:
I do figure when vacationing that the empty house (except for the dog and cat sitter) which cost us $ 2000 for starters
See: sunk cost fallacy

I can't imagine ruining a vacation by worrying about such things as mentioned just above. That would really eat into the cost benefit analysis!
+1!!
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Re: Early retirement and opportunity cost, by Harry Sit

Post by an_asker »

Rodc wrote:
TheTimeLord wrote:
Dutch wrote:I apologize if the point has already been made, but:

Once you have enough to retire, the whole concept of opportunity cost does not apply anymore. We are talking time vs. time.

Your lifetime is finite. Working longer does not net your more time.
Interesting instead of time vs. time I see the discussion as quality vs. quantity. Enough is only a concept versus a certain level not an absolute. At 50 you can reach the point where you have enough for the retirement you planned but then decide if I work 5 more years instead of having a timeshare on the beach I can have a house or instead visiting the beach in Destin you could do Tahiti or Hawaii.

Where "enough" comes in I think is in not letting this sort of "I could do more" become a death spiral of never ending work because you keep moving the goal line of "enough". It is like avoiding letting a salesmen (in this case yourself) keep up selling you something you do not need.
+1!

Rodc, the more responses I see from you, the more I think that we have the same point of view on this thread. Along the lines of this thread, I recently [url=viewtopic.php?f=2&t=192468]'bought' myself an extra vacation day[/quote].
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Re: Early retirement and opportunity cost, by Harry Sit

Post by an_asker »

Rodc wrote:
I'm questioning whether "enough" can be precisely calculated such that we get into a binary decision without regard to income from working (the opportunity cost):
Of course not.

There are very few cases in life where we can precisely calculate an answer to any of life's big questions. Is this the precise one best person to marry? Is this the precise best time to have a child? Is this the precise best house to buy or job to accept?

Indeed "calculation" is not even the best way to make life's big important decisions - emotions are important. Now a calculation is often one of the useful inputs, even if only to keep emotions from driving us off a cliff and even if such calculation will never be precise, or more to the point, will never be accurate (people make precise and inaccurate calculations all the time).
I think the word that economists love to use is satisfice - a word that I did not see anywhere outside of economics textbooks, so much so that when I first saw the word, I thought that Samuelson had failed to spot a typo! :oops:
mak1277
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Re: Early retirement and opportunity cost, by Harry Sit

Post by mak1277 »

TheTimeLord wrote:
surfhb wrote:
TheTimeLord wrote:
mak1277 wrote:
TheTimeLord wrote:
Do the people planning for early retirement not get vacation and weekends off? I would think if you haven't maxed those opportunities out and a huge chunk more of free time isn't going to really add that much beyond extra time to lie around.
I'm planning to retire early. I get weekends and vacations and I absolutely max them out whenever I can. Over the past year, I've even started doing more chores (groceries, haircuts, home projects) after work on weekdays so that I don't have to do them on weekends.

It's that whole concept that makes me want to retire early...I want never ending weekends to do what I want, when I want to. For me, it's spending time outside, and you wouldn't believe how many times there are beautiful days during the work week when I'm trapped inside and then it rains all weekend.

It irks me when people assume that wannabe early retirees aren't living life to the fullest already and we're somehow just waiting to retire to do the things we want to do.
I think some do and some don't. My real point which doesn't come across is I think it is critical to have something to be retiring to, instead of just retiring from something. But, if it makes someone as happy to sitting on a porch swing and watching kids little ague games as someone else is exploring the world then great. It is their life, go for what you want. Sometimes I feel there is a lot of pressure here to agree that early retirement is the answer for everyone, and of course there is no one answer.
Of course.

Its good to see more and more folks jumping on the early retirement bandwagon. A couple making 80K a year each should have little trouble amassing a 7 figure net worth in 10-15 years time. You just need to make small tweaks in your thinking and behaviors: ie: not buying new cars, healthy food cooked at home (no eating out so much), budget travel, ect. Giving up those things which are nice but don't necessarily make life more enjoyable....now that's opportunity cost!

Anyway, terrible article and not thought provoking at all. Opportunity cost is lost income? LOL
My wife and I took a different approach. While we have lived below our means since the second year of our marriage we also made the decision to take amazing trips earlier in life, that is what is important to us. Figuring there would be either physical or fiscal risk in not being able to take these trips when where older we decided to do them during our worklife. As a result we were frequently 20-30 years younger than our travel companions. We quickly realized that every year we were taking a trip of someone else's lifetime. As a result in my 50's I have no large bucket list or many places I haven't been that I want to go. Sure it meant we probably needed to work 2-4 years longer than what is outlined above. But it also means I could die today at my desk with no regrets beyond not seeing my loved ones this evening.
Once again...(being frugal in hope of early retirement) is not mutually exclusive with (living a fulfilling life pre-retirement).

My wife and I are fortunate enough to do pretty much anything we want...including great trips. I, too, would have no regrets if I died at my desk today...but I'm still planning to retire before 45. Living a good, fulfilling, regret free life prior to my retirement doesn't mean I still wouldn't prefer being retired to working. Every time you post in these early retirement threads you make the same assertion...you can only retire early if you deny yourself a fulfilling life while working. And that's simply not necessary.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by an_asker »

mak1277 wrote:[...]Once again...(being frugal in hope of early retirement) is not mutually exclusive with (living a fulfilling life pre-retirement).

My wife and I are fortunate enough to do pretty much anything we want...including great trips. I, too, would have no regrets if I died at my desk today...but I'm still planning to retire before 45. Living a good, fulfilling, regret free life prior to my retirement doesn't mean I still wouldn't prefer being retired to working. Every time you post in these early retirement threads you make the same assertion...you can only retire early if you deny yourself a fulfilling life while working. And that's simply not necessary.
Depends on income. Surely a household with an annual household income of $100k will have a tougher time taking annual trips to, say, East Africa and Australia when compared to one with an annual household income north of $500k.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by TheTimeLord »

mak1277 wrote:
TheTimeLord wrote:
surfhb wrote:
TheTimeLord wrote:
mak1277 wrote:
I'm planning to retire early. I get weekends and vacations and I absolutely max them out whenever I can. Over the past year, I've even started doing more chores (groceries, haircuts, home projects) after work on weekdays so that I don't have to do them on weekends.

It's that whole concept that makes me want to retire early...I want never ending weekends to do what I want, when I want to. For me, it's spending time outside, and you wouldn't believe how many times there are beautiful days during the work week when I'm trapped inside and then it rains all weekend.

It irks me when people assume that wannabe early retirees aren't living life to the fullest already and we're somehow just waiting to retire to do the things we want to do.
I think some do and some don't. My real point which doesn't come across is I think it is critical to have something to be retiring to, instead of just retiring from something. But, if it makes someone as happy to sitting on a porch swing and watching kids little ague games as someone else is exploring the world then great. It is their life, go for what you want. Sometimes I feel there is a lot of pressure here to agree that early retirement is the answer for everyone, and of course there is no one answer.
Of course.

Its good to see more and more folks jumping on the early retirement bandwagon. A couple making 80K a year each should have little trouble amassing a 7 figure net worth in 10-15 years time. You just need to make small tweaks in your thinking and behaviors: ie: not buying new cars, healthy food cooked at home (no eating out so much), budget travel, ect. Giving up those things which are nice but don't necessarily make life more enjoyable....now that's opportunity cost!

Anyway, terrible article and not thought provoking at all. Opportunity cost is lost income? LOL
My wife and I took a different approach. While we have lived below our means since the second year of our marriage we also made the decision to take amazing trips earlier in life, that is what is important to us. Figuring there would be either physical or fiscal risk in not being able to take these trips when where older we decided to do them during our worklife. As a result we were frequently 20-30 years younger than our travel companions. We quickly realized that every year we were taking a trip of someone else's lifetime. As a result in my 50's I have no large bucket list or many places I haven't been that I want to go. Sure it meant we probably needed to work 2-4 years longer than what is outlined above. But it also means I could die today at my desk with no regrets beyond not seeing my loved ones this evening.
Once again...(being frugal in hope of early retirement) is not mutually exclusive with (living a fulfilling life pre-retirement).

My wife and I are fortunate enough to do pretty much anything we want...including great trips. I, too, would have no regrets if I died at my desk today...but I'm still planning to retire before 45. Living a good, fulfilling, regret free life prior to my retirement doesn't mean I still wouldn't prefer being retired to working. Every time you post in these early retirement threads you make the same assertion...you can only retire early if you deny yourself a fulfilling life while working. And that's simply not necessary.
Actually, I wasn't making that assertion I was simply replying to the previous post and the part highlighted in RED and pointing out my wife and I chose a different approach. We took this approach because we saw two possible risks factors to delaying these trips, fiscal (not enough money) and physical (poor health). As for having a fulfilling life while working, it does strike me as odd that someone who has a fulfilling life while working would be driven to retire early since work would seem to be part of that fulfillment. That said to each their own, but I just say focus on being financially independent and then do with that freedom what you want. Work, play, retire, donate, pursue a hobby or start a new business because if you are financially independent you are free to pursue what brings you fulfillment which is what counts. Bottom line for me and me alone I realize retiring extremely early would have been a disaster of epic proportions just as I am sure it is a revelation for many. So my core assertion is that early retirement is not the goal that should be preached but instead it should be financial independence. And if people chose to take that independence and retire great, if they keep working at the same job great or if they start a new career great. There are many roads to Dublin but financial independence is the vehicle that can travel everyone of them
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TheTimeLord
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Re: Early retirement and opportunity cost, by Harry Sit

Post by TheTimeLord »

an_asker wrote:
mak1277 wrote:[...]Once again...(being frugal in hope of early retirement) is not mutually exclusive with (living a fulfilling life pre-retirement).

My wife and I are fortunate enough to do pretty much anything we want...including great trips. I, too, would have no regrets if I died at my desk today...but I'm still planning to retire before 45. Living a good, fulfilling, regret free life prior to my retirement doesn't mean I still wouldn't prefer being retired to working. Every time you post in these early retirement threads you make the same assertion...you can only retire early if you deny yourself a fulfilling life while working. And that's simply not necessary.
Depends on income. Surely a household with an annual household income of $100k will have a tougher time taking annual trips to, say, East Africa and Australia when compared to one with an annual household income north of $500k.
I will tell you this, back when we were doing plenty of friends and neighbors asked us how we could afford it or expressed how they never could afford it, the reality is it was just a matter of priorities. Travel was our top priority, so we didn't redecorate the house every other year or get a new car every 4 years or whatever. We focused on what was important to us instead of keeping up with the Jones'. As a result we passed the Jones' and will lap them. While I am not Mr. Frugal I do buy what I like and it tends to be quality, we sleep on and use the bedroom furniture I bought 30+ years ago when I moved out of the dorms and into an apartment. But yes the mattress has been replaced a few times. For me buying what I want and be willing to wait until I could afford it has been a good strategy instead of wasting money on stop gap solutions.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by mak1277 »

TheTimeLord wrote: As for having a fulfilling life while working, it does strike me as odd that someone who has a fulfilling life while working would be driven to retire early since work would seem to be part of that fulfillment.
Work is exactly the thing that gets in the way of me doing the things I really want to do. Saying that my life is fulfilling is not the same thing as saying that my life is ideal, or exactly the way I wish it was. My fulfillment comes at night...on weekends...on vacation. Work exists (for me) solely to pay for the things I need (shelter, food, etc.) and to fund the things I enjoy doing. I actually have a great job, but it's not better than doing whatever I want to do. If I won Powerball, I wouldn't even bother to show up to resign, I'd send a letter, along with my laptop, and nobody at the office would ever see me again.
TheTimeLord wrote: That said to each their own, but I just say focus on being financially independent and then do with that freedom what you want. Work, play, retire, donate, pursue a hobby or start a new business because if you are financially independent you are free to pursue what brings you fulfillment which is what counts.
This I agree with wholeheartedly. I admit my point of view is not shared by all.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by jjface »

I'll take time over money any day. In the end everything could be looked at like this and make life miserable. There is always a higher paid job than you have right now too.
When I have what I need to sustain the lifestyle I want then that is it for me. I'd like to give back with volunteer work.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by HomerJ »

TheTimeLord wrote:I see the discussion as quality vs. quantity. Enough is only a concept versus a certain level not an absolute. At 50 you can reach the point where you have enough for the retirement you planned but then decide if I work 5 more years instead of having a timeshare on the beach I can have a house or instead visiting the beach in Destin you could do Tahiti or Hawaii.
Yes, this is correct. But then note you risk not getting to go to beach at all because you die at your desk trying to make more money so you can go to Tahiti instead of Destin.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by tfb »

jjface wrote:When I have what I need to sustain the lifestyle I want then that is it for me.
And when you don't? Should you settle with what you have and take time over money as you say you would any day?
Harry Sit, taking a break from the forums.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by TheTimeLord »

HomerJ wrote:
TheTimeLord wrote:I see the discussion as quality vs. quantity. Enough is only a concept versus a certain level not an absolute. At 50 you can reach the point where you have enough for the retirement you planned but then decide if I work 5 more years instead of having a timeshare on the beach I can have a house or instead visiting the beach in Destin you could do Tahiti or Hawaii.
Yes, this is correct. But then note you risk not getting to go to beach at all because you die at your desk trying to make more money so you can go to Tahiti instead of Destin.
Very true and this risk should be balance against the risk of living a disappointing lifestyle for 30+ years. But to be honest I find poor health to be a far greater risk than death since I expect to have no regrets in death.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by fsrph »

Slacker wrote:
Sounds like a one-sided equation that only considers money as "opportunity cost" and fails to consider time as an "opportunity cost" as many posters have suggested should be added back in to that equation....
I agree with this. If you retire early and walk away from hundreds of thousands or millions of dollars in salary you know the exact monetary cost. You now have freedom. You can pursue your interests. Can you put a monetary value on that? The choice to leave money on the table has been said to be a luxury lifestyle. I disagree with this assertion. I view the free time as a necessity . Otherwise I'd lose the chance to control all of my time.

As I age I think it's easier to see the money /time tradeoff. At this point I'm not worried about the opportunity cost of retiring early but more concerned about the opportunities lost by not doing so.

Francis
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Re: Early retirement and opportunity cost, by Harry Sit

Post by kd2008 »

tfb wrote:
jjface wrote:When I have what I need to sustain the lifestyle I want then that is it for me.
And when you don't? Should you settle with what you have and take time over money as you say you would any day?
Harry, your article has been extremely thought provoking. Thank you for sharing it with us. Nearly everyone on this forum understands opportunity cost and anchoring bias. But some refuse to consider/apply them to early retirement/financial independence. It is so much better/easy to cocoon oneself in "freedom", "I own my time," "time over money" type of platitudes rather than confront the reality of the economic transaction underlying the decision to retire early. I agree that for me that transaction would be a hard one. I am not good at embracing economic uncertainty of the future by saying I have enough today to quit. For me the marginal opportunity cost of working still is worth more than having free time all the time. At most I would be willing to transact is about 3-4 weeks of more time off for loss of pay. I am hoping that this will change as I age and it will help me better navigate my own decisions.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by HomerJ »

tfb wrote:Many mentioned "enough." If you retired or you are planning to retire when you had/have "enough" why was 80% of enough a few years before not enough? Someone else would've retired with that much money at that age and laughed at you for not knowing what is enough.
Yes, "enough" is a very personal decision.

I refer again to the law of diminishing returns.

I could retire today with a very minimal lifestyle and 30 years of retirement (the last 5-10 years I may have health problems)
I could retire in 8 years with the ability to splurge a bit and 22 years of retirement (the last 5-10 years I may have health problems)
I could retire in 16 years with the ability to splurge a lot and 14 years of retirement (the last 5-10 years I may have health problems)

Which appears to be optimal? The answer may be different for different people.

Plus, throw in the fact that we don't really know we have 30 more years of life left. It might be 20 years, or 10 years, or 6 months.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by jjface »

tfb wrote:
jjface wrote:When I have what I need to sustain the lifestyle I want then that is it for me.
And when you don't? Should you settle with what you have and take time over money as you say you would any day?
That is a personal decision. I would.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by Wildebeest »

Rodc wrote:
Wildebeest wrote:
Rodc wrote:
I do figure when vacationing that the empty house (except for the dog and cat sitter) which cost us $ 2000 for starters
See: sunk cost fallacy

I can't imagine ruining a vacation by worrying about such things as mentioned just above. That would really eat into the cost benefit analysis!
Such an interesting comment.

I do not worry about "the sunk cost" of an empy house. I see it as an opportunity cost. A luxury opportunity cost.

Does it keep me me from enjoying vacations? I do not think so.

Does it make me think as to how spending money could make me happier? I think so.

I take Harry Sit's article to being "frugal" into perspective and he did it in a thought provoking way as the responses in the thread might point out.
It sounded like if you took a two week vacation you considered the $1000 in housing cost you were already committed to as part of the equation. That is a sunk cost fallacy. If you meant something else then perhaps not.
I do not understand how the sunk cost fallacy would apply here:

Definition of sunken cost fallacy by Cambridge On line dictionary:
the idea that a company or organization is more likely to continue with a project if they have already invested a lot of money, time, or effort in it, even when continuing is not the best thing to do: Economists would point out that the sunk cost fallacy is irrational, and could be described as "throwing good money after bad".

It adds to my enjoyment to consider the opportunity cost for my empty house while contemplating vacation:

https://www.gsb.stanford.edu/insights/b ... -its-taste


According to researchers at Stanford GSB and the California Institute of Technology, if a person is told he or she is tasting two different wines — and that one costs $5 and the other $45 when they are, in fact, the same wine — the part of the brain that experiences pleasure will become more active when the drinker thinks he or she is enjoying the more expensive vintage.

"What we document is that price is not just about inferences of quality, but it can actually affect real quality," said Baba Shiv, Sanwa Bank, Limited, Professor of Marketing who co-authored the paper. "So, in essence, [price] is changing people's experiences with a product and, therefore, the outcomes from consuming this product."
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Re: Early retirement and opportunity cost, by Harry Sit

Post by HueyLD »

IMO, early retirement decision is very personal and money is only one of many factors to consider.

It appears that many people retire early not by choice, but by destiny. For those who are lucky enough to have a choice, it comes down to factors other than money.

After one has enough to live the lifestyle of choice, some choose to continue working because:

(1) They love their jobs too much to retire,
(2) They love money too much to acknowledge that they have enough,
(3) They have no idea what they might do in retirement,
(4) They think that they might live forever, etc.
Last edited by HueyLD on Fri Jun 03, 2016 1:33 pm, edited 1 time in total.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by EddyB »

kd2008 wrote:
tfb wrote:
jjface wrote:When I have what I need to sustain the lifestyle I want then that is it for me.
And when you don't? Should you settle with what you have and take time over money as you say you would any day?
But some refuse to consider/apply them to early retirement/financial independence. It is so much better/easy to cocoon oneself in "freedom", "I own my time," "time over money" type of platitudes rather than confront the reality of the economic transaction underlying the decision to retire early.
Or they're just expressing an internal calculation about values for which we have no real way to make person-to-person comparisons. While money is a convenient reference, it's not the "utility" that is actually so useful in making personal microeconomic analyses.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by Rodc »

HomerJ wrote:
tfb wrote:Many mentioned "enough." If you retired or you are planning to retire when you had/have "enough" why was 80% of enough a few years before not enough? Someone else would've retired with that much money at that age and laughed at you for not knowing what is enough.
Yes, "enough" is a very personal decision.

I refer again to the law of diminishing returns.

I could retire today with a very minimal lifestyle and 30 years of retirement (the last 5-10 years I may have health problems)
I could retire in 8 years with the ability to splurge a bit and 22 years of retirement (the last 5-10 years I may have health problems)
I could retire in 16 years with the ability to splurge a lot and 14 years of retirement (the last 5-10 years I may have health problems)

Which appears to be optimal? The answer may be different for different people.

Plus, throw in the fact that we don't really know we have 30 more years of life left. It might be 20 years, or 10 years, or 6 months.
One could, if they wish compute some sort of "opportunity cost", but I think it is better to look more directly at what your choices really are. In a theoretical sense you should get the same answer either way, but complicating things often leads to worse outcomes in the real world.

The above is how I approach the issue. Very concrete. What is known and what is uncertain is laid out and you make your best guess at a good decision. I sketch out what our life would be like if we retired today, with some notional uncertainty, in 3 years, in 6 years. In a year or two I will expand to laying out 0, 1, 2, 3, 4, 5 year scenarios.

In the end we may make a cold rational decision (to the extend anyone really can) or something at work or in health or whatever might suddenly tip the balance.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by btenny »

I am one of the guys that retired early at 52. I did not plan on it way in advance but I had been saving and investing a lot for a long time. I had enough $$$. I had many reasons to want to stop working. When my company offered a parachute to all senior people I took it. Many of my co-workers did not. They were surprised I retired or could afford to retire.

I absolutely made this $$$$ tradeoff of time versus work. I downsized my lifestyle to retire early. I knew I wanted to do other stuff and I also knew I did not need a expensive lifestyle to live in retirement. I did not need the new expensive car I was driving. I did not need the big expensive house I lived in with the kids grown. I did not need the yard guys. I did not need the house keeper. I did some math and decided I had enough so I quit.

There is no question I gave up $500K to $1M to retire early. I gave up a great paycheck and a ton of seniority so I was not worried about keeping my job. I could have stayed in my big house and not downsized ever. If I stayed I could take big travel vacations to Europe or Hawaii every year. BUT if I waited I would be older and maybe more physically limited. But I would have a ton more $$$$.

I lost my older brother at 52. I lost my parents in their late 60s. I could be like my neighbor. His wife was getting a hearth transplant. I could have been like my boss. He died at his desk. Or like my friend. He got lung cancer and had to retire. Others retired but had health issues. I had health issues. But since I retired early I got to do lots of stuff that others dream about. I skied 150 days several years. I hiked a ton. I ice climbed a big mountain. I traveled to almost every state and spent time really looking at the sights. I went to the Olympics. I got to know and enjoy time with my wife again.

Retiring early was the best decision I ever made.

Good Luck.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by an_asker »

HomerJ wrote:[...]Yes, "enough" is a very personal decision.

I refer again to the law of diminishing returns.

I could retire today with a very minimal lifestyle and 30 years of retirement (the last 5-10 years I may have health problems)
I could retire in 8 years with the ability to splurge a bit and 22 years of retirement (the last 5-10 years I may have health problems)
I could retire in 16 years with the ability to splurge a lot and 14 years of retirement (the last 5-10 years I may have health problems)

Which appears to be optimal? The answer may be different for different people.

Plus, throw in the fact that we don't really know we have 30 more years of life left. It might be 20 years, or 10 years, or 6 months.
I would look at it slightly differently. "Enough" implies a certain lifestyle from that point on. With that in mind, let me rephrase ...
I could retire today with $x if I can maintain a certain lifestyle for the rest of my life (each person will have different expectations of what this is).
I could retire in 8 years with $y if I can maintain a certain lifestyle for the rest of my life.
I could retire in 16 years with $z if I can maintain a certain lifestyle for the rest of my life.
Needless to say, $x > $y > $z. Somewhere in the next 16 years, say A years from today, if money saved up crosses the money required from that point on, the person would have "enough."
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Re: Early retirement and opportunity cost, by Harry Sit

Post by an_asker »

Wildebeest wrote:[...]According to researchers at Stanford GSB and the California Institute of Technology, if a person is told he or she is tasting two different wines — and that one costs $5 and the other $45 when they are, in fact, the same wine — the part of the brain that experiences pleasure will become more active when the drinker thinks he or she is enjoying the more expensive vintage.

"What we document is that price is not just about inferences of quality, but it can actually affect real quality," said Baba Shiv, Sanwa Bank, Limited, Professor of Marketing who co-authored the paper. "So, in essence, [price] is changing people's experiences with a product and, therefore, the outcomes from consuming this product."
I will turn this around. Yes, the researchers are obviously right, that this behavior will happen if their subjects are given both the wines for free.

Let them do the following change to their research. Let them give each subject $100 up front and then tell them that they need to taste two wines, paying $5 for wine A and $45 for wine B. Let's see what the reaction will be if they are given (blind) the same wine in both instances. I am willing to bet that many will appreciate the $5 wine more.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by Wildebeest »

an_asker wrote:
Wildebeest wrote:[...]According to researchers at Stanford GSB and the California Institute of Technology, if a person is told he or she is tasting two different wines — and that one costs $5 and the other $45 when they are, in fact, the same wine — the part of the brain that experiences pleasure will become more active when the drinker thinks he or she is enjoying the more expensive vintage.

"What we document is that price is not just about inferences of quality, but it can actually affect real quality," said Baba Shiv, Sanwa Bank, Limited, Professor of Marketing who co-authored the paper. "So, in essence, [price] is changing people's experiences with a product and, therefore, the outcomes from consuming this product."
I will turn this around. Yes, the researchers are obviously right, that this behavior will happen if their subjects are given both the wines for free.

Let them do the following change to their research. Let them give each subject $100 up front and then tell them that they need to taste two wines, paying $5 for wine A and $45 for wine B. Let's see what the reaction will be if they are given (blind) the same wine in both instances. I am willing to bet that many will appreciate the $5 wine more.

I am not a betting man unless I am sure the numbers favor me, but I doubt you are right.

I personally prefer to drink box wine. I do not like to drink wines over $10 a bottle or $30 a bottle in restaurants. I think I am in the minority. I expect that unless the subjects are selected from INTJ's, that the more one pays for wine, the better one likes it and the more one enjoys it.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by Rodc »

:sharebeer
an_asker wrote:
Rodc wrote:
TheTimeLord wrote:
Dutch wrote:I apologize if the point has already been made, but:

Once you have enough to retire, the whole concept of opportunity cost does not apply anymore. We are talking time vs. time.

Your lifetime is finite. Working longer does not net your more time.
Interesting instead of time vs. time I see the discussion as quality vs. quantity. Enough is only a concept versus a certain level not an absolute. At 50 you can reach the point where you have enough for the retirement you planned but then decide if I work 5 more years instead of having a timeshare on the beach I can have a house or instead visiting the beach in Destin you could do Tahiti or Hawaii.

Where "enough" comes in I think is in not letting this sort of "I could do more" become a death spiral of never ending work because you keep moving the goal line of "enough". It is like avoiding letting a salesmen (in this case yourself) keep up selling you something you do not need.
+1!

Rodc, the more responses I see from you, the more I think that we have the same point of view on this thread. Along the lines of this thread, I recently [url=viewtopic.php?f=2&t=192468]'bought' myself an extra vacation day
.[/quote]
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Re: Early retirement and opportunity cost, by Harry Sit

Post by halfnine »

TheTimeLord wrote:
surfhb wrote:
TheTimeLord wrote:
mak1277 wrote:
TheTimeLord wrote:
Do the people planning for early retirement not get vacation and weekends off? I would think if you haven't maxed those opportunities out and a huge chunk more of free time isn't going to really add that much beyond extra time to lie around.
I'm planning to retire early. I get weekends and vacations and I absolutely max them out whenever I can. Over the past year, I've even started doing more chores (groceries, haircuts, home projects) after work on weekdays so that I don't have to do them on weekends.

It's that whole concept that makes me want to retire early...I want never ending weekends to do what I want, when I want to. For me, it's spending time outside, and you wouldn't believe how many times there are beautiful days during the work week when I'm trapped inside and then it rains all weekend.

It irks me when people assume that wannabe early retirees aren't living life to the fullest already and we're somehow just waiting to retire to do the things we want to do.
I think some do and some don't. My real point which doesn't come across is I think it is critical to have something to be retiring to, instead of just retiring from something. But, if it makes someone as happy to sitting on a porch swing and watching kids little ague games as someone else is exploring the world then great. It is their life, go for what you want. Sometimes I feel there is a lot of pressure here to agree that early retirement is the answer for everyone, and of course there is no one answer.
Of course.

Its good to see more and more folks jumping on the early retirement bandwagon. A couple making 80K a year each should have little trouble amassing a 7 figure net worth in 10-15 years time. You just need to make small tweaks in your thinking and behaviors: ie: not buying new cars, healthy food cooked at home (no eating out so much), budget travel, ect. Giving up those things which are nice but don't necessarily make life more enjoyable....now that's opportunity cost!

Anyway, terrible article and not thought provoking at all. Opportunity cost is lost income? LOL
My wife and I took a different approach. While we have lived below our means since the second year of our marriage we also made the decision to take amazing trips earlier in life, that is what is important to us. Figuring there would be either physical or fiscal risk in not being able to take these trips when where older we decided to do them during our worklife. As a result we were frequently 20-30 years younger than our travel companions. We quickly realized that every year we were taking a trip of someone else's lifetime. As a result in my 50's I have no large bucket list or many places I haven't been that I want to go. Sure it meant we probably needed to work 2-4 years longer than what is outlined above. But it also means I could die today at my desk with no regrets beyond not seeing my loved ones this evening.
As have we. We have opted to take a few years off every decade. Call it mini-retirements.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by Nahum »

I have enjoyed reading all the responses. The main idea took out of it is too have enough. We live in a very fortunate and rich country where we have so many options. I believe when people read blogs like Mr. Money Moustache people often compare themselves to those who retired early and others living on a Tiny house traveling all over the States. It is a mistake to compare your life like that. Your choices are unique to you, you make your life what you want and adapt to your circumstances. There are many ways to live comfortably, make wise choices and enjoy your life. I once asked a waiter "which is the best wine" and he said to me "the wine that you enjoy the most". A nice idea that can be applicable to our life choices.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by Wildebeest »

Nahum wrote:I have enjoyed reading all the responses. The main idea took out of it is too have enough. We live in a very fortunate and rich country where we have so many options. I believe when people read blogs like Mr. Money Moustache people often compare themselves to those who retired early and others living on a Tiny house traveling all over the States. It is a mistake to compare your life like that. Your choices are unique to you, you make your life what you want and adapt to your circumstances. There are many ways to live comfortably, make wise choices and enjoy your life. I once asked a waiter "which is the best wine" and he said to me "the wine that you enjoy the most". A nice idea that can be applicable to our life choices.
Great post.

For me the main idea be to would replace "to have enough" with " financial indepence", which I equate with liberty and the pursuit of happiness, otherwise Nahum's post resonates with me.

I took the original article by Harry Sit to be tongue in cheek with the brown bagging lunch and staying in Motel 6 and then the perfect rejoinder to the frugal co worker pointing out retiring early opportunity cost is driving several BMWs to the junkyard a year. I do not know if his article was intended to humourous. It helps I have tremendous goodwill to him thanks to his priceless step by step explanation of how to complete a backdoor mega Roth succesfully.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by PhysicianOnFIRE »

Harry has published a follow-up post in response to the many comments on the original article:
Opportunity Cost and The Concept of Enough

My comments from the site are copied and pasted below:

I’ve participated in some discussions on the opportunity cost of an early retirement, particularly as it relates to high earners, and the concept of “golden handcuffs” that the opportunity cost represents.

I’ve said more than once that the only way I can justify walking away from millions is to have millions already. I’m going to disagree with the assertion that Enough is too big a gray area to be useful. Across society, it’s a gray area. $500,000 may be more than enough for a simple, single person. For others, something north of $10 million could disappear in a year.

Enough is an individual concept, and it’s based on annual spending. The caveat is that individuals change over time, and so might needs and wants. So each individual or family has a gray area or a couple standards of deviation from what Enough might be at one time point.

To cover our gray area, I’m shooting for more than Enough. It helps that I usually enjoy my job. But I enjoy all those non-job related things I could be doing even more (sleep, bikes, Guatemala…). My answer is not to call it a day at 25x expenses, but shoot for 40x to 50x and re-evaluate. For me, that should be more than Enough and our gray area will be accounted for.

The opportunity cost balance will have shifted in favor of recapturing my time rather than more money.

◦ Harry Sit says

Physician on FIRE – I agree with you. How large is a couple standards of deviation? It sounds like plus or minus 50%, which is still quite large.

Physician on FIRE says

Thanks, Harry. I don’t suppose you could calculate the standard deviation without knowing how much you spend each year for a number of years.

I think a 50% buffer is large enough to cover most peoples’ “gray area.” If you are starting from a barebones existence and a shoestring budget, you’ve got more room to grow than someone already living a middle class lifestyle with the usual creature comforts, which is where I’m at.

I think of the opportunity cost dilemma in terms of a “likelihood of regret” scale. At this moment, age 40, I am more likely to regret retiring early and giving up my best earning years. By age 50, I think I’ll be more likely to regret not retiring earlier, rather than continuing to work for money I clearly don’t need. The 2 lines of likely regret intersect somewhere. In this example, it’s probably somewhere near age 45, which is the age I expect to have my 40x to 50x expenses. I think I just derived my ideal retirement age.

Thanks!

Best,
-PoF
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Re: Early retirement and opportunity cost, by Harry Sit

Post by azanon »

There's a few famous internet bloggers that have found a way around this. Don't feel like you have to choose, just take both instead! For instance, go into paid self-employment, with multiple paying ventures (at least 3-4 minimum), but still make sure and find the time to get on TV so you can talk about how you retired early. There's a lot of money at stake at being able to claim early retirement, as paid TV advertising is guaranteed to generate lots of extra traffic to your highly profitable blog. So take it from these guys... don't choose! Retire early for sure, or at least claim to have done so, then generate mutiple paid earned income streams so you can buy as many BMWs as you want! :mrgreen: :beer
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Re: Early retirement and opportunity cost, by Harry Sit

Post by EnjoyIt »

PhysicianOnFIRE wrote: I think of the opportunity cost dilemma in terms of a “likelihood of regret” scale. At this moment, age 40, I am more likely to regret retiring early and giving up my best earning years. By age 50, I think I’ll be more likely to regret not retiring earlier, rather than continuing to work for money I clearly don’t need. The 2 lines of likely regret intersect somewhere. In this example, it’s probably somewhere near age 45, which is the age I expect to have my 40x to 50x expenses. I think I just derived my ideal retirement age.

Thanks!

Best,
-PoF
PoF,
You and I have talked about this before considering we frequent all the same forums. We seam to be in similar boats. What I find very interesting, is that the less I work, the more I enjoy work and think I would be willing to work longer as long as I can be part time. Can you imagine working 2 days a week? Maybe once every 2 months do 4 days in a row and have 2 weeks off for long vacations? I think I can work this type of job well into my 60s. Can you imagine how large that nest egg would grow if you did not have to touch it till you are 60 instead of 45?

This is where the regret scale would go off the chart, but you have no regret because you choose to work for the joy of working and not for the money. The extra income can fund lavish vacations and philanthropic endeavors. Maybe even a Rolex (joke.)
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
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Re: Early retirement and opportunity cost, by Harry Sit

Post by tbradnc »

I need to find someone to be me and not charge me for it.
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Re: Early retirement and opportunity cost, by Harry Sit

Post by PhysicianOnFIRE »

EnjoyIt wrote:
PhysicianOnFIRE wrote: I think of the opportunity cost dilemma in terms of a “likelihood of regret” scale. At this moment, age 40, I am more likely to regret retiring early and giving up my best earning years. By age 50, I think I’ll be more likely to regret not retiring earlier, rather than continuing to work for money I clearly don’t need. The 2 lines of likely regret intersect somewhere. In this example, it’s probably somewhere near age 45, which is the age I expect to have my 40x to 50x expenses. I think I just derived my ideal retirement age.

Thanks!

Best,
-PoF
PoF,
You and I have talked about this before considering we frequent all the same forums. We seam to be in similar boats. What I find very interesting, is that the less I work, the more I enjoy work and think I would be willing to work longer as long as I can be part time. Can you imagine working 2 days a week? Maybe once every 2 months do 4 days in a row and have 2 weeks off for long vacations? I think I can work this type of job well into my 60s. Can you imagine how large that nest egg would grow if you did not have to touch it till you are 60 instead of 45?

This is where the regret scale would go off the chart, but you have no regret because you choose to work for the joy of working and not for the money. The extra income can fund lavish vacations and philanthropic endeavors. Maybe even a Rolex (joke.)
Yes, EnjoyIt, we certainly do frequent the same online haunts. :beer

I think when I hang up the stethoscope for the last time, it will feel like a heavy weight lifted off my shoulders. I can say goodbye to the threat of a case gone wrong (and potential lawsuit as a result), so long to being at the beck and call of the surgeons and obstetricians, and start living life on my own terms and schedule.

When I think it through, I think I'd rather work one or two years full-time compared to three, five, or ten part time. But I've never tried part time, so I don't really know if that's true. I'm still on a roughly 5-year plan, I think. Subject to change, of course. :sharebeer

-PoF
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Re: Early retirement and opportunity cost, by Harry Sit

Post by EnjoyIt »

PhysicianOnFIRE wrote:
EnjoyIt wrote:
PhysicianOnFIRE wrote: I think of the opportunity cost dilemma in terms of a “likelihood of regret” scale. At this moment, age 40, I am more likely to regret retiring early and giving up my best earning years. By age 50, I think I’ll be more likely to regret not retiring earlier, rather than continuing to work for money I clearly don’t need. The 2 lines of likely regret intersect somewhere. In this example, it’s probably somewhere near age 45, which is the age I expect to have my 40x to 50x expenses. I think I just derived my ideal retirement age.

Thanks!

Best,
-PoF
PoF,
You and I have talked about this before considering we frequent all the same forums. We seam to be in similar boats. What I find very interesting, is that the less I work, the more I enjoy work and think I would be willing to work longer as long as I can be part time. Can you imagine working 2 days a week? Maybe once every 2 months do 4 days in a row and have 2 weeks off for long vacations? I think I can work this type of job well into my 60s. Can you imagine how large that nest egg would grow if you did not have to touch it till you are 60 instead of 45?

This is where the regret scale would go off the chart, but you have no regret because you choose to work for the joy of working and not for the money. The extra income can fund lavish vacations and philanthropic endeavors. Maybe even a Rolex (joke.)
Yes, EnjoyIt, we certainly do frequent the same online haunts. :beer

I think when I hang up the stethoscope for the last time, it will feel like a heavy weight lifted off my shoulders. I can say goodbye to the threat of a case gone wrong (and potential lawsuit as a result), so long to being at the beck and call of the surgeons and obstetricians, and start living life on my own terms and schedule.

When I think it through, I think I'd rather work one or two years full-time compared to three, five, or ten part time. But I've never tried part time, so I don't really know if that's true. I'm still on a roughly 5-year plan, I think. Subject to change, of course. :sharebeer

-PoF
I am an ER doc which is more conducive to part time work. But I can't believe that there is no part time anesthesia job opportunities near your residence. Not even a single out patient surgical center where you don't need to take call?

Several months back I cut my shifts to bare minimum full time. I still work nights and weekends like everyone else but it ends up being less overnights. It took a few months to set in, but today I enjoy work so much more. Patient care is fun. Interacting with nurses and other docs is also fun. Making a difference in someone's life feels good.

As for being sued, maybe I am naive, but I am not overly stressed about a lawsuit. Don't get me wrong, I don't want to get sued, but I carry malpractice insurance, do my best to make my patients happy and ideally give appropriate care. If I do get sued, isn't that the purpose of insurance? BTW a lawsuit can take many years to come to closure. Plenty of time to keep plugging along if you want/have to. I will admit though, if after I hit my number, I could imagine getting sued for something frivolous and just calling it quits. Kinda like a middle finger to society for allowing it to happen.

PoF, you and I are about the same age and on the same trajectory. I am very curious what the future brings for us.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
SQRT
Posts: 1417
Joined: Sat Feb 05, 2011 9:44 am

Re: Early retirement and opportunity cost, by Harry Sit

Post by SQRT »

Of course the concept is valid. By foregoing earnings you are going to have less invested, obviously. As many have already said, this does not mean you should work forever. As each year passes, the addition to your "stash" will decline ( as a percentage) and have less comparative utility. Also, as each year progresses, the cost of working (in aggravation, health costs, or simply the realization that you have fewer years left in your life) will increase. At some point these factors will equate and that is when a rational person should retire.

OMY syndrome may be quite rational in your fifties when you are adding 5-10% each year to your "stash". It makes much less sense in you 60's when adding 2-3% to the stash. Having said that, there are no absolutes here. It really depends on each person's thinking and utility functions.
jjface
Posts: 3073
Joined: Thu Mar 19, 2015 6:18 pm

Re: Early retirement and opportunity cost, by Harry Sit

Post by jjface »

Problem is you have to define retirement age before you have a concept of early retirement. Who is to say 50 is early? Otherwise you might just work forever thinking that each year you are giving up serious money.

The whole point of retirement is to stop work because you don't need to or want to any more. Early retirement just means you reached there sooner. Retirement itself by definition has opportunity cost not just early retirement. At some point one simply values retiring more than the extra money.
Ari
Posts: 640
Joined: Sat May 23, 2015 6:59 am

Re: Early retirement and opportunity cost, by Harry Sit

Post by Ari »

This is a long thread and I haven't read it carefully, so apologies if I'm repeating people here, but here's my take on this:

Yes, the argument is sound and always applies, no matter how much money you have. The trick is of course the decreasing marginal utility of wealth. As you accrue more and more wealth, your marginal utility of the money you earn from your time is decresing. And as time is a restricted good (you can't have more than 24h/day), this applies much less to your time (which also grows more scarce as you get older). At some point your utility of the time you spend working is greater than the utility of the money you earn from doing so. At this moment, you retire.

Or, put another way, you retire once you value your own time more than anyone else does.
All in, all the time.
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