Early Retirement: Things to Consider (cough Health Care cough)

“But they make wonderful patients:  they have excellent health insurance and they never get better.” – Frasier

Fairbanks Memorial – they didn’t charge extra for ice.

Although I’ve discussed Early Retirement before here (Frugality, Financial Samurai, Mr. Money Mustache, and Early Retirement Extreme) I thought that it would be good to revisit the topic, primarily because I have a spreadsheet.

What kind of spreadsheet?  A crystal ball spreadsheet, one that predicts the future, all the way until 2081 when the ice sheets have melted and the dinosaurs have returned.  I’ve maintained this spreadsheet since 2014 or so, and it’s been very accurate for predicting my net worth over the course of four years.  I used it to decide (once upon a time) whether or not to quit one job and move to another.  Spoiler:  I didn’t move jobs.

The real reason I didn’t change jobs was fairly simple:  the spreadsheet told me that within three years I would have enough money that if I decided to chuck it all and get a job as say, a school teacher for a few years, I could continue to live the dissolute lifestyle awash in PEZ®, long essays, and regret to which I had become accustomed with no changes.  But there is a faction that sees a more radical idea:  just retire early.  They even have an acronym for it:  FIRE – Financially Independent, Retiring Early.

One of the biggest advocates of that is still Mr. Money Mustache.  MMM as he is affectionately known to his “Mustachians” retired several years ago, and has been blogging about it since.  His blog is exceptionally popular (LINK).  One secret of MMM is that he, by choice, has created a lifestyle of voluntary low-spending, i.e., he’s cheap.  By cheap?  His family has only one car, which they rarely use.  Mainly he uses a bicycle to go where he needs to go.

This is a fascinating idea.  You gain financial independence not by having the biggest pile of cash, but by having the smallest pile of needs.

For example:

I have a stack of books that is literally over 12 feet (143 meters) tall of books that I’m planning to read.  They’re stacked up by my bedside.  They’re stacked up on a bookcase near the bathroom.  They’re stacked up on my dresser.  And I get several new ones every month to replace the ones I finish reading.  And this doesn’t account for my library, which houses a collection of thousands of titles on every subject from tanning a hide to hiding a tan.  When we moved from Alaska to Texas, the movers set a company record for number of boxes packed in one day AND amount of weight packed in one day.  Reason?  Books.

Mr. Money Mustache would (probably) say:  “Why are you spending money on books?  There’s a library not two miles from your house that has a decent collection, and if they don’t have the book you want they can get it through interlibrary loan.  You could even get your fat butt on your bike and go down there to get a book and lose some weight in the process.”

He’s just that kind of party-pooper, but that would also impact my love of gadgets and gizmos that, ultimately, aren’t worth the time and money that I spend on them . . . except the drone, which is really, really cool.  Everyone needs a drone, right?

But let’s look at the major categories of spending and consider them through the soup-stained Mustachian paradigm.  Each of these topics could be a blog post by itself (and some have) but we’ll skim them today:

Mortgage: 

Don’t have one.  You probably have more house than you need, which causes you to spend more on heating and cooling than you would need to if you had a house of human proportion.  Pay it off so you’re not paying interest to a bank and can keep the money yourself.  But you still have to pay taxes and I’d still suggest you have insurance on the place, since it protects you in several different ways, especially from certain lawsuits that could dig deeply into your cash.

Home Location: 

Why live in an area that causes you to have to spend a lot of money?  Why live in an area (if you’re still working) that causes you to drive lots of miles to a job, which eats up both money in commuting cost and your life in drive time?  I know!  Location!

This was an awesome location.  Wonder why we sold it?  Oh, yeah, piles of money.

Cell Phones: 

Why have a big data “full everything” when you can have a phone that costs less than $40 a month that gives you some data as well as more talking than anyone actually does on a cell phone?  And the need for the newest iPhone©?  Probably not so much.

Satellite/Cable Television: 

We have satellite television, along with a DVR box that records television shows so we don’t have to spend time watching them.  But let’s look at television . . . do we need a subscription to DirecTV® and Netflix™?  The number of things that I watch on satellite is dwindling – Silicon Valley™, Game of Thrones©, Better Call Saul™, The Last Ship®, sure I watch those when they’re on.  But most of the year, they’re not on.  And I can get most things on Netflix™ or Amazon®.  Do I even need satellite or cable anymore?

Landline: 

When I was a kid and the phone rang, I’d jump off the couch, and run to the receiver to pick it up.  It was an event!  Now, in a day where communication follows you to every crevice of your life, when the phone rings, we rarely even pick it up unless the phone announces that it’s Grandma.  Wondering why we even have one . . . oh, yeah.  Grandma.  And the phone is free with the Internet.

Food: 

Food is big business.  And an even bigger scandal.  How much food do we buy that we end up never eating?  Since we have teenage boys in the house, the answer is “very little.”  It’s been my saying (for forever) that the most expensive food that you buy is food that you don’t eat.

The second-most expensive?  Restaurant food, especially fast food.  I can buy three pounds of delicious ribeye steak for about $30.  Dinner for our family at Taco Bell™ (remember that we have teenagers) costs about $40.  Full disclosure, I account for a chunk of that $40 myself, but steak is so much better than a Nachos Bell Grande®.  And I can buy six pounds of ribeye for $60.  And we can eat for several meals on that, versus one trip to a nice restaurant, which would cost about $120-$180, including tip.  I maintain that I can eat better food more cheaply if I prepare it at home myself.  And by myself, I mean (except for grilling) The Mrs.  And as for high-priced Internet meal kits?  Wal-Mart® is our meal kit.

Cars:  

Mr. Money Mustache suggests having one or zero of these.  And he has a huge financial point.  Cars depreciate, so they’re crappy investments.  Cars require taxes and licensing and insurance cost annually, so even if you own one, keeping it around so you can drive it costs you annually.  And my family has an “N+1” philosophy about cars, where “N” is the number of licensed drivers.  Why?  We drive used cars, and they need maintenance at a higher rate than brand-new cars.  So we have a spare.  If we were retired?  One car would probably be enough (assuming we didn’t have the teenage boys in the house).  And, yes, a car is required for the rural area that we live in – you really couldn’t bike your  ten year old kid to a wrestling tournament (in winter) that’s 100 miles away . . . so we’d need at least one car.

I’m hoping this one is paid for.

Home Maintenance:

If you own a home, something will break.  At my house, that seems to happen weekly, and it’s more than me having my 19th nervous breakdown.  Some things get fixed when I get around to it, like when one Wilder child broke the bannister.  It sounds like I’m blaming the kid, but I’m really not – if the bannister had been put together correctly in the first place (or fixed better than I did when last I fixed it) then it wouldn’t have broken in the first place.  This bannister got broken, oh, six years ago.  It still swings loosely.  I’ve never even been close to being motivated enough to fix it.  But when the air conditioner pan rusted out and started leaking condensed water onto the bathroom carpet?  Yeah.  Fixed in 12 hours.

And I estimate that immediate repairs (not fixing the place up) that are required to make the place habitable are probably about 1% of the home value each year.  If you’re handy and can do it yourself?  So much the better.  When the hot tub “brain board” fried?  I consulted with a hot tub repair guy and swapped it out myself – saving about $200 in the process.  When the flame rollout sensor on the furnace went out in winter?

I paid to have that done, since the consequences of screwing that up involved mortality via explosion or asphyxiation if I screwed it up.  $25 part, $50 in labor, and fixed that afternoon.  My rule is:  if it doesn’t require real expertise and can’t kill anyone?  Sure, I’ll try that.  I’ve saved thousands by doing that – but I think (after putting two complete roofs on and fixing two others), I’m done roofing.  Enough roofing.

Medical Insurance:

Medical insurance is the biggest variable to deal with for anyone attempting to retire early.  I will say this gently:  the health care system in the United States is the most unholy mixture of the worst parts of socialism and near-monopoly capitalism on the planet Earth, and that’s the planet that has the Department of Motor Vehicles AND school cafeteria lunches.  How is it messed up?  On the socialist side:  A hospital is forced to treat anyone who shows up.  Anyone.  By definition, if you don’t have any money, all the hospital can do is send you bills and not take the money you don’t have.  So, your incentive?  To go to the emergency room whenever you get a sniffle, so everybody who has insurance can pay for you.

On the evil capitalist side?  Hospitals don’t have to let you know what they’re billing you, or why.  Your ability to even remotely influence your bill is nearly zero.  From Karl Denninger’s post on how to fix healthcare – emphasis in original (LINK):  “. . .  the practice of charging someone $100,000 for scorpion antivenom in Arizona when the same drug from the same company is $200 for the same quantity 40 miles to the south and across the Mexican border.”  Denninger’s post has a list of similar issues – and common sense solutions that we’ll never undertake.  Why?  Look at the stock prices of the drug companies and the insurance companies.  Who would want to mess that party up?

MMM discusses his vexation with insurance in a pretty good post here (LINK).  Since I’m working at a job and have crappy insurance from them, I’ve not scouted the market too much – but my last look at the market mirrors MMM’s.  But in addition to the horrible composition

But up until you are ready for Medicare (and until your spouse is, too, which is a consideration for me, having married a younger – but still legal in most states! – woman) you’ll have this risk.  Medical insurance costs are estimated to rise between 15% and 30% next year.  And 7% thereafter.  Said simply, medical costs can’t continue to increase at that rate.  And when something can’t continue?  It won’t.  The system will break.  Insurance companies will go bankrupt, as every body . . . walks away.  When people can’t pay for insurance, they won’t.

But if you’re retired, have insurance while you can until the system breaks.  After that?  The rules will change again.  This will happen even if you are working.

So what does it all mean?

Retiring early has risks, but, so does life.  One thing I’ve seen is we certainly don’t know what’s around the corner.  If you could retire early and found out later you had a terminal disease, wouldn’t it be great if you retired early?  No.  You’d still be dead.  Seriously.  Dead is dead.

Retire early only if you don’t find what you’re doing fun.  If you’re having a blast at work and it has meaning to you, keep doing it until you die.  Why retire from a dream job?

I mean, who else would watch Johnny Depp’s finances for him?  By the way, what’s the best way to clean the money after having a money bath?

Asking for a friend.