Reader Q&A: Early Retirement Dilemmas

The other day, we received an interesting email from a woman who we’ll call Zoe (not her real name). She had stumbled upon the Frugal Hackers' blog after reading Minafi's interactive retirement planner. She had some questions pertaining to a few common dilemmas faced by many people trying to retire early. We thought our answers to those questions could be useful generally to anyone trying to retire early, so we decided to publish the questions and answers here (with permission) on our blog. Hope you benefit from our email exchange!


Note: Even though I’ve chosen to publish my answers right after the questions for clarity, the entire exchange actually took place over only a couple of emails. There wasn’t any serious back-and-forth as might be portrayed below.


Zoe: Hello there. I saw your blog listed after doing the minafi interactive retirement planner (which was just too much fun). I was intrigued because I saw you're in SF (I'm in the East Bay), and most early retirement enthusiasts are not living in one of the most expensive metro areas in the country (world?), which skews their experience. I see that you plan to leave, so this might be moot. But here are the questions I'd like to ask all the ER lovers/practicers out there.

Mr. FH: Hi Zoe, great hearing from you! You're right, in some sense, we're primarily in the Bay Area for the money. If we had all the money in the world, we too would probably live closer to family (in Vancouver, BC). So our goal now is to save just enough money ($1M) and then move back to Vancouver. Keep in mind that Vancouver isn't that cheap either, but it's at least a bit cheaper than the Bay Area!

Zoe: You make much, much more than me. I make under 100k/yr because I work for a remote company (not paying Bay Area wages) in a low-stress job that I can do from home for people for whom it doesn't suck to work. I know I could drastically up that number by going to work in the local tech industry, but I'd be commuting, stressed, and likely miserable. How would you balance making more for complete freedom in a few years vs. making less for current lesser but ongoing freedoms?

Mr. FH: We're a bit aggressive in this regard. We think it's perfectly acceptable to tolerate a sub-optimal life for a few years if it means complete and total freedom after that. Not everyone thinks that way, but that's how we think. For us, sacrificing a part of our present for a better future tomorrow seems totally worth the trade-off. We've made this kind of trade-off numerous times throughout our lives, and it has paid off handsomely every single time. The benefits of delayed gratification never cease to amaze us.

Zoe: Next question. I grew up in the Bay Area. My community and parents are here. I absolutely would not choose the most expensive place to live if I was starting elsewhere, but having my roots here makes it difficult to justify leaving - it feels like I lose what matters most (deep connection and community) in favor of money. Last year I did buy a home - allowing me to stay in the area at under half a million and with low interest - but this still pales in comparison to people who buy $80k homes. How would you balance this dilemma?

Mr. FH: If you think a deep connection with your family and community matters most to you, then it makes sense to optimize for that. Not everyone feels that way about their family, so you should consider yourself lucky! But, choosing to stay in the Bay Area comes at a steep cost, one that you are well aware of. Perhaps you can downsize and/or rent cheaply in the El Cerrito or Hercules area rather than owning a large home (I'm assuming) and accommodating all the expenses that go with it. There's always ways to live cheaply, even in the Bay Area, and the trade-off might be worth it for you.

Zoe: I also find that most ER fanatics buy bare bones insurance policies (health, auto, etc.). As a very risk averse person, which is part of how I end up poring over ER literature all the time since I was a wee one, it is very scary for me to consider having tiny limits on policies that protect me in various circumstances. How do you balance risk with budget in this area?

Mr. FH: Each of us has to purchase the right amount/level of insurance that allows us to sleep at night. I'm personally okay with cheap insurance because I'm comfortable taking charge of my health on my own, and getting my cheap car totaled. But that doesn't work for everyone. Ultimately, you can and should only retire when you have 25x your annual insurance premiums saved up. It's fine to have to work a bit longer in order to afford better insurance for the rest of your life and sleep better each night in retirement - ER isn't a race! And working for a few more years isn't the end of the world either. I'd rather retire at 40 and be happy and safe for the remaining 30 years of my life than rush it and try to retire at 35 and constantly feel insecure.

Zoe: When I follow ER enthusiasts, those are the 3 areas where I end up crestfallen and feel like I'm doing it "wrong". Would love insight from fellow frugalers. I realize this was long and you have busy lives - respond only if any of the questions resonate with struggles you've experienced on the journey. Thanks for making a little blog world for frugal lurkers like myself!

Mr. FH: Ultimately, ER is pointless if you can't sleep soundly at night, or if you're so far away from family that you care deeply about. However, for each decision you make that involves additional monthly expenses, figure out the cost of it, and then compute how many more years you'll have to work in order to save 300x that additional monthly expense. Retiring any earlier than that doesn't seem prudent. You're free to enjoy whatever you want in retirement, but only if you're willing to calculate and internalize the trade-offs involved.

Zoe: Thank you so much for your speedy and thoughtful response! I really enjoy hearing others' standpoints on this stuff. I historically can sometimes have an unhealthy relationship with delayed gratification - i.e. putting it in front of enjoying the present moment. It's a constant struggle to find the right balance, and I appreciate hearing how other people think about it.

Mr. FH: Personally, I don't think one could ever regret delaying gratification too much. It would be a very long time into my life before I get to that point. Constantly delaying gratification for a better future is what keeps humans happy so we have an improved future to look forward to. It's what gets us out of bed everyday. Otherwise life would look the same day after day, year after year, decade after decade. Even if you kept delaying gratification for a long time, eventually in life there will come a time when there will be lesser and lesser gratifications to delay, and at that point, you will have no choice but to enjoy the present moment. This is a bit of a philosophical debate, but that's our stance on it.

Cheers and happy ERing!
Mr. Frugal Hacker


Readers, did you find the above email exchange useful? Would you like to see similar exchanges in the future published here on this blog?

Mr. Frugal Hacker

Born in India. Grew up in Dubai for 15 years. Studied and lived in Canada for 8 years. Backpacked in Europe for 2 months. Lived in Toronto for 1.5 years. Working in San Francisco for the past 4 years. Runner, cyclist, software engineer.