Early Retirement Has Never Been Easier

We live in a time when any report of “Retirement” is coupled with stories of worry and acquiescence. “Woe is us,” cries the media, who long for the golden age of retirement. They speak with reverence of our parent’s retirement of yesteryear, when defined benefit pensions were part and parcel to the job. The numbers bear this out, as 10% of workers feel as though they’ll never retire, and a full two-thirds feeling they are behind to retire at 65.

Who can possibly afford to retire nowadays? What with college and healthcare costs rising, those blasted gas prices, “whole paycheck” grocery bills, the “economy” (how long can we beat that horse?), and that casino we call a stock market.

And then, there we are. “We” being those folks in the financial independence community. While living seemingly normal lives, we speak confidently of obscenely young and lengthy retirements. How is this possible? Some believe this is simply an idea whose time has come, that there has suddenly been a collective realization to this possibility.

I believe something greater must be afoot, because you can’t tell me that a nary a single person, for the eons preceding the past few years, failed to arrive at this same conclusion. No, something else is happening.

I’m probably one of the lazier people you’ll meet. Sure, I’m good at a few things: writing, drinking Bud Lite, and going to college. But, I’m straight-up lousy at the rest. I procrastinate on almost all home and car maintenance. I barely know how to get dressed. I rarely work out. I can’t wake up on time to save my life. If I were born in 1985 BC, instead of AD, I’d have died at a young age of starvation or lack of pioneering skill. If I were born 80 years ago, I’d most certainly be stuck in a rat race for my whole existence–slowly awaiting my pension to kick in. But fortunately, I was born 30 years ago, so I’m living now, in 2015, when early retirement has never been easier.

The World Is Making This Possible

What do we spend our money on? Food, transport, and housing make up about two-thirds of the average consumer’s expenses. Despite the chorus to the contrary, these necessities of life have never been cheaper. Thanks to advances in production technology, crop yields, availability of information, and manufacturing efficiency, we now need to work fewer hours than ever before to provide for our basic needs. This leaves more money to be saved and invested, all while working the same amount.

Take Average Joe, a production and non-managerial type, living in the U.S. today. According to the BLS, Joe (a median American) makes an hourly income of $21.08 (as of 9/30/2015). If Joe goes to the grocery store, Joe will spend about 1.5 minutes of wages (about 50 cents) on a pound of bananas—the lowest in history. He’ll spend about 4 minutes earning the money to buy a loaf of bread, or 10 minutes for a gallon of milk—both also the lowest in history. In fact, across a basket of goods, most groceries are at the lowest point in history.

Food Prices Based on Hourly Earnings

The downward trend is not true for every item at the store. Beef and eggs seem to be on a bit of an uptrend, but the average (bold black line) trend is undeniably flat and markedly down from 35 years ago. The statistics are not impacted by inflation, either, as all goods and wages are taken in nominal terms, and expressed as a unit of time needed to work at the prevailing average wage in order to purchase the goods.

But, it doesn’t stop at food. Housing prices, even with their recent run-up, are nearly as cheap as they’ve ever been in the last 25 years. Still using our Joe as an example, he needs to work 4.3 hours for each square foot of housing he buys at the median price-per-square-foot across the U.S. While this is slightly higher than the bottom of the market in 2011, it is still one of the cheapest points in history to buy a home in terms of average wages.

Hours to Work Per Square Foot of Home

But what about energy costs? Sure, gasoline and natural gas are cheap this year, but they’re sure to rise in the near future as oil prices rebound. Well, that’s gonna take one heckuva rebound (with no associated wage increases along the way) to bring energy back to levels we’ve seen in the last forty years…

Energy Prices Based on Hourly Earnigns

Average Joe today needs only to work about 25 seconds to buy a kilowatt hour of electricity—about enough to run your microwave for an hour, and almost the lowest in forty years. A gallon of gas requires Joe sit in an air conditioned office for seven-and-a-half minutes; not quite the lowest in history but not far off. And, thanks in no small part to the fracking boom, natural gas is cheaper than it has ever been in the past forty years. It now takes about 3 minutes to buy one therm, which is very roughly enough natural gas to reheat your 40-gallon hot water heater three times over to a piping 123 degrees. Imagine how long it would have taken Average Joe to heat that water a hundred years ago? Probably more than three minutes.

The Rebuttal

I can hear you now….

But Eric, we spend money on way more than just food, housing, gas and energy. There’s miscellaneous stuff, college, healthcare, car and home maintenance, clothing, daycare, the list goes on.

Okay, I appreciate constructive feedback. But, let us be clear, most everything labeled above is definitely a “want” rather than a “need.” However, we still “want” a lot of things about modern life that cost money—good healthcare, secondary education, electronics, home maintenance, and a lot of other nice things.

Even most of that stuff, though, is getting far cheaper.



Take college. We all hear that costs for college are rising super fast. In fact, costs are at an all time high. This really shouldn’t surprise anyone, as prices tend to rise over time. But, dig into the numbers for five minutes, and you’ll see that this isn’t so much a crisis. Why? Do you know what is also at an all time high? Endowments. And the corollary there is that out-of-pocket costs for college (thanks to scholarships and grants) are at some of the lowest levels of the last fifteen years, according to data from The College Board.

Tuition Net Cost

I recently experienced this first hand, as my Goddaughter just began school an out-of-state University on a 100% academic scholarship. She’s a great student (although not 4.0) and I love her to death, but I know what she did (i.e. apply for scholarships) didn’t rewrite the book on paying for school. Along with the tax trifecta of the American Opportunity and Lifetime Learning Credits, and the never-going-away tuition and fees deduction, the out-of-pocket cost of college is always going to be far less than the headline number. And let’s not pretend there aren’t a litany of free learning options like Codecademy (for learning to code), Coursera (for college courses), or Khan Academy (for everything), among so many others. You now can be smarter than Socrates without paying a dime.

Then, there’s health care. I’ve discovered that Obamacare will actually decrease our premiums once we exit the workforce. However, for healthy families (God willing), you will never really need health care until far later in life. There’s no magic bullet to health care costs, except to try to avoid it altogether by going to your annual physicals, maintaining a healthy diet, not smoking cigarettes, and exercising routinely. I refuse to believe the rising cost of health care and America’s obesity epidemic are not causal in nature—even if only partly.

We also are living in a society where information is nearly free of charge. Most home maintenance and mechanical work is just a YouTube video away. It used to take a HVAC repairman to change a capacitor on your A/C unit (yes, it’s always the capacitor), now it just takes this video. The same can be said for changing a tire, or a headlight, or your countertops, refinishing your cabinets, installing a fence, building a retaining wall, swapping your spark plugs, tiling your shower, and a million other videos that probably apply to your exact make and model and type of whatever you need.

Let us not forgot about the income side of the retirement equation, either. It’s easier than ever to start a blog (hint: follow this link), or to become an Instacart shopper, or a freelance writer, or a Amazon reseller, or selling your used good free and easily on Craigslist, or to a worldwide market on Amazon or eBay, or your custom kitchy stuff on Etsy. These are all very recent opportunities of just the last decade, and are avenues of easy moneymaking that were never available to prior generations of wannabe early retirees.

The Big Question

Alright, so if everything is all roses and moonbeams, then why are people still struggling mightily to get by, much less retire? Well, your answer is probably in your driveway, or under your feet, or hanging on the wall, or cluttering up your closets and crawlspaces. Lifestyle inflation and consumerism are the evil of today that are causing us to not see the tremendous easiness by which today’s lives can be lived. We willingly now spend $33,560 for a new car—an all time high. We have huge homes, the largest in history and 1,000 square feet larger than 40 years ago, despite the fact that household size (in number of people) is the smallest in history. We now spend more money dining out than we spend on groceries. We buy more TVs, we buy more fun, we buy more phones, we buy more everything all in an effort to fill an unfillable need, to satisfy an insatiable want, and to meet an unreachable level of “enough.”

Once you can understand that you only need so much in life, that only so many “wants” actually bring happiness, you then suddenly realize how easy and affordable it has become to meet those needs and wants. The world is better than ever before, and things are cheaper than ever before. We are swimming in a sea of money, in an abundance of low prices, we only need to plug the holes in our life to realize that the world is with us on this journey to financial independence and early retirement……we just need to hop along for the ride and get out of our own way.

Thanks so much for reading what I write!

Eric

19 Comments

  1. Eric,

    Agreed 100%.

    I actually wrote an article a while back that touched on some other points as well, including the proliferation of discount brokerages (which make investing much cheaper and accessible than it was just 20 years ago) and our community (which serves as an immense source of support).

    It’s interesting in that a lot of stats show the mountain isn’t as tall as it used to be, yet people want to load their climb up with more on their backs – houses are something like twice as big as they were back in the 50s. And now you have $500 smartphones and $1,500 laptops available that weren’t around way back when. Consumerism knows no bounds. Even when the climb should be easier, people make it harder. In some alternate reality, Keynes’s predictions came true and everyone is working 15 or 20 hours per week. But in this world, people’s wants continue to expand even while needs become cheaper/more accessible/easier to attain.

    Best regards!

    • Hi Jason,
      Awesome to see you around here again. My goal for 2016 will be to get into your blogroll. I’ll try to up my game. My wife and I are very comfortable with the idea of downsizing our house in retirement. We have 3600 square feet for two adults and a baby. There are rooms in our home that only are entered every few months–it’s crazy.

      Good reference to Keynes prediction, I seem to recall that now from Econ undergrad. Very good point.

      Thanks for commenting!

      Eric

  2. Well said Eric. “We spend our lives working to buy things we do not need, with money we do not have, in order to impress people we do not like.” I’m not a huge fan of Dave Ramsey, but I think he hit the nail on the head with this quote. One of the reasons my wife and I are happy is because we recognize our needs are fairly low and our opportunities quite large. We are intentional in our spending, and it’s really paying dividends….pun intended.

    I hope you have a great weekend!
    -Bryan
    Income Surfer recently posted…Updated Thoughts on FastenalMy Profile

    • Thanks for commenting Bryan! That is quite a classic quote about our relationships with money and work. It is quite amazing how just by maintaining lifestyle we can achieve great wealth.

      Eric

  3. Thanks for the thoughtful article Eric. No doubt bud. I hope we all find whatever it is that makes us happy. Life’s too short. We don’t need much to be happy because we have our family / friends / and most importantly our health. Everything else is a blessing. It’s okay to want lots if you can afford it. Other wise, keep it simple.
    Let’s do it up and enjoy the ride bud. Life’s wonderful.
    Dividend Hustler recently posted…Life’s Soo Precious.My Profile

  4. Love this post! If people had their priorities straight, they’d be so much happier. I’m also lazy but very fortunate to live in a time where savings is largely automated (e.g. 401k, direct deposit of paychecks, automatic transfers from checking to brokerage or savings accounts, etc.). It couldn’t be easier to create wealth.
    Kate @ itsakatelife recently posted…Keeping Energy Costs LowMy Profile

    • Kate,
      Most people just can’t get out of their own way. 401k/IRA contributions have an overnight return of whatever your tax rate is (and 100% more than that even, if employer matches).

      We still live a great life, but the costs to do so are remarkably cheap. A great time to be alive. I need to work like four hours to buy an iPad–a computing device that is more advanced than a space shuttle. Amazing.

      Eric

      Eric

  5. Great post! I think it’s definitely true that the cost of wants (aka lifestyle inflation) are the real issue keeping most people from not only financial independence but achieving it at a fairly young age.

    I’m hardly frugal, but it amazes me how much money people are comfortable wasting. I think it’s just because they assume they will have to work forever either way. If people crunched the numbers and realized how wealthy they could be and how quickly, I think it would have a huge impact on savings rates and consumption.
    Elizabeth recently posted…Why You Shouldn’t Want to RetireMy Profile

  6. This is a great approach in evaluating costs of purchases today. I have noticed that as a nation we have tended to upsize in all these areas. You mentioned that the square footage price of homes has remained consistent since 1992. In an article I posted, I noted that from 1975 to 2010 that we doubled the average square footage from 1500 to nearly 3000! Even though the cost per square foot has held steady, the price of our houses have doubled since we need more room for all our other stuff.

    When you take the same review of cars, TV’s, and cell phones, we get a similar story. One car or TV used to be enough in the past, now we need three or more per household. All of this while family sizes have decreased!

    The bottom line: if we avoid being caught in the hedonic treadmill, the prices of many items are staying in check with our income. The challenge in not upsizing our lives.
    Bryan @ Just One More Year recently posted…The future is uncertain: Save every pennyMy Profile

  7. There is the data and then there are the headlines. The real data is almost never used in the headlines, usually only a teaser or an incorrect conclusion.

    I think it boils down to we have more choices in jsut about every possible area now than 50 years ago. That applies to food, cars, houses, hobbies, pretty much everything. Some people get lost in that maze of choices and just forget to save anything for later!

    I like having options, but I also like having more money in my bank account. It is a hard balancing act, but we are slowly prioritizing the things that matter to us (travelling, some hobbies) and dropping the rest (cable, shopping, fancy gadgets).
    Vawt recently posted…Cutting the Cable CordMy Profile

    • Vawt,
      We are the same way, and thanks for the great reply. The thing that matters most to us to ownership over our time. Therefore, we are trying to buy a lot of time.

      Eric

  8. Can’t disagree with much here. My favorite is the ridiculous personal finance articles that make it to the homepage of Yahoo, there is one almost every week. WOE IS ME! LIFE IS HARD! CAN’T MAKE ENDS MEET! Go out there and do something about it! I saw a recent article where people in there 20’s and 30’s didn’t even know what a 401K was… pretty scary stuff.
    The Fire Guy recently posted…Who Is The Fire Guy?My Profile

    • Amazing how folks cannot know what a 401k is. There is a lot of complaining and shoulder shrugging going on. I feel like it might be some easy clickbait, as people like read things that confirm their plight.

      Eric

      • Even for those who do know about 401(k) plans. I shared an office with a lady who graduated the same year as I did and started about 3 months prior. I asked if she was participating in the 401k. She said, “Well, I don’t know if I’m going to stay here long enough to vest.” So? She wouldn’t have received the match (turns out she stayed long enough to keep 40% of the match) but she would have saved 6% of her salary. I couldn’t convince her that it was a good idea. I’m still looking for a way to talk to people about their financial life. It’s more socially acceptable to talk about the last time somebody had sex than how much they are saving for retirement. (at least it seems that way for the <30 crowd)
        Mr. Benny @ Stuff That Pig recently posted…Tuesday Morning Bluster: Fore! Bad Decisions!My Profile

        • Lol, Benny, you are too funny. But yes, you’re right on. People tend to ignore the huge immediate gain that comes from tax avoidance. The popular mantra is to hit the employer match, which is an obvious dangling carrot. But, the 20-35% tax benefit seems to get lost along the way.

          Eric

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