Financial Independence is Mandatory, Retiring Early is Optional

Time, Relationships and Money change as you age.  A New Year revelation for TFR.

The title is a line I often use with friends and even in comments I leave on other websites.  There is no compulsion that financially independent people must retire early.  In math, there is a concept called ‘necessary’ and ‘sufficient’ condition for a given outcome.  Without getting into math, a real-life example will make the concept clear:

Let’s say you were in San Francisco last night but were having breakfast in New York city this morning.  For this ‘event’ to happen – let’s look at 2 conditions as examples.   Condition A:  You must have traveled by air to reach New York. Condition B:  You must have taken a red-eye flight last night from SFO that reached NY this morning before breakfast time.  

A is a necessary condition but B is a sufficient condition, as no other condition is required for the event to happen.  Condition A alone is not sufficient as you must take a specific flight in a specific time frame for the event to happen. 

Financial independence (FI) is a ‘necessary’ condition for retiring early (RE) but not vice versa.  Importantly, I will show you FI is not a sufficient condition for RE.

Having observed the blogs of many retired folks, I noticed they are a few things in common that drove them to RE. FI was, of course, a necessary pre-requisite but that is not sufficient.   Many RE folks:

• Have an active family life and genuinely enjoy spending their available time with family and even cooking for them.
• Don’t like the corporate world anymore or their former boss/colleagues.  Generally speaking, they were influenced by their past negative experiences so much that they no longer want to work full-time in a mainstream career.
• Value their control of personal time more than anything else in the world.
• Have an active vocation or hobby. For some, this is world travel.  For others, it’s a self-dependent frugal lifestyle in the woods.
• Generally lean towards frugality, with notable exceptions. Many have an innate drive for self-sufficiency. For others, it’s deep satisfaction with the life they are already living.
• Have a strong contrarian view towards many lifestyle spending options that mainstream views as ‘normal’.

Granted, some of these qualities are what drove them towards FI.   Once you have experienced full control over your personal time, it totally sucks to have someone else tell you what to do and when to do it.

But what about the rest of the folks slaving away in the business world?  Are we all losers? Absolutely not!

After FI, you set the pace of the rat race.

You can be FI and still choose not to retire early if one or more of the following applies:

• Just like money, you understand there is a marginal utility to even personal time.  Beyond a point, too much time with family or by yourself alone may not be as productive or enjoyable as it first appears.   I have had retired friends tell me that they got sick of golfing after doing it for barely 3 weeks.  Even travel gets old after a while.  Months away from familiar food, friends and surroundings introduces anxiety of another kind.  
• There is an opposite concept to marginal utility called ‘scarcity‘, which says that we are hard-wired to value something more that which we have less of.   It is human nature that as time passes, our mind forms positive opinions of the very things that we gave up, especially if you encounter bumps along your new chosen path. Positive-thinking people are especially prone to this because we have a way of remembering good things more than the stuff that hurt us.  Even a not-so-good job you had can appear not-so-bad long after you leave it, especially if your current situation has new challenges.
• Your spouse or partner wants her/his own time free from you.  Doesn’t mean they don’t like you, but want their own ‘me’ time.   They may want to spend time with their own friends and colleagues outside of family. Variety is the spice of life, so too much family time – even if the location changes frequently – means you are seeing the face of the same people every day, all the time.
• You have your friends at work who you enjoy spending time with. It is difficult to have the same level or type of friendship when you are RE while your friend is busy at work.  The ‘out of sight, out of mind’ principle comes into play and even good friendships tend to drift apart.  Interests also drift apart after RE because you don’t value all the same things that your working friends do.  For some people, their office is the only real social life they have.
• There are projects that you enjoy doing at work.  Even if you don’t enjoy all aspects of your job, there are enough elements to keep you hooked.  
• You like to stay sharp in your profession and within the larger business environment.  After all, this is what you worked hard for throughout your career.  After FI, this may be for no other reason than to keep yourself intellectually stimulated and achieve growing success along the same path you charted (which allowed you to get to FI in the first place).

Can you feel this way even while sitting in the conference room?

In addition, there are distinct advantages of continuing to work even after FI:

• You can speak your mind as you care less about getting fired.   This makes you a refreshing addition to any project team. In the business world filled with never-ending Yes from subordinates and groveling sycophants, it is valuable to have a professional who speaks their mind.  As a business leader, I have a special regard for such professionals and listen to them disproportionately more.  It cuts away so much of crap and helps every project move faster and better.  It may also encourage other team members to speak their minds if you start doing so.  
• Why do FI people get listened to more?  If you want to understand the psychology behind this, consider what my successful banker friend does – he actively looks for companies who actually don’t need money and convinces them to take a loan from his bank!  That’s the way it works in the business world as well.  Honest opinions are rare in the corporate rat race, so a good business leader puts a premium on them and seeks them out actively from people who can afford to be honest. 
• You care more about the results than the ass-kissing.  The professional satisfaction you get from seeing positive results of the projects you lead or contribute to is worth a lot more than how you are perceived by your boss. Your boss may not see you as ‘management material’ but you will soon have a different name – ‘solid performer’.  True success comes from sharp focus on results and not on recognition.  That’s what the C-suite wants in every company, so you become valued in your company by delivering results.
• While too much stress is not good, some stress is healthy and necessary to keep us alert and occupied, according to some studies.  With you being FI, you can control the level of work-stress you choose to take on to keep yourself mentally alert and healthy.
• Every year you work after FI is one less year of withdrawal from your investments.   This adds to the longevity of your portfolio and reduces risk.  
• Every year you work after FI adds 25-50% (whatever your saving rate is) of your income to your savings.   This is the safety margin or ‘cushion’ that can help if you are worried about the 4% rule.  This cushion protects you from inevitable investment mistakes like buying at the top or a high yield dividend stock that you bought that unexpectedly goes bankrupt. These capital loss events are cushioned by the safety margin.
• Charities.  This is a big one for TFR household, and one of our Ten Factors.  Last year, we spent 15% of our total expenses in this category.  Applying the M.O.N.E.Y. principle, this item alone is 15 times our significance threshold, and yet, we are delighted to be able to do it.  Working after FI allows me to do this without any worry but I will be unable to maintain this level if I retired early.  Charity is often the first item to get cut in your budget when times get a bit tough, because it is totally discretionary.  That means little Sandhiya loses her future and other underprivileged people lose health and basics of living, an outcome I simply cannot accept.  

Now repeat after me…

Now you see why I keep repeating this line: Financial Independence is Mandatory, Retiring Early is Optional.

Mr. TFR

Raman Venkatesh is the founder of Ten Factorial Rocks.  Raman is a  ‘Gen X’ corporate executive in his mid 40’s.  In addition to having a Ph.D. in engineering, he has worked in almost all continents of the world.  Ten Factorial Rocks (TFR) was created to chronicle his journey towards retirement while sharing his views on the absurdities and pitfalls along the way.  The name was taken from the mathematical function 10! (ten factorial) which is equal to 10 x 9 x 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1 = 3,628,800.