early retirement This seems like a dream come truebut it’s not all rainbows and roses for most people.
Economics professor and author Lawrence J.
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The reason, Kotlikoff writes, is simple: “We as a group are bad savers, which makes early retirement unaffordable,” he said. “From a financial point of view, it is much safer and smarter to retire later.”
If you’re planning to retire early, why not learn from the regrets of those who have done so before? Here are four Early retirees say you should plan for it.
Increased cost of living
“Your retirement money is not as secure as you plan it to be,” Jen Voronkova, who retired at 38 in Bali with her husband, said in a video on her YouTube channel. She said this is especially true if your plans include having enough to spend more than 30, 40, or even 50 years in early retirement.
In the two years since she and her husband retired, Voronkova said, the cost of living has skyrocketed and prices have gone up due to things like inflation, but they have been fortunate enough so far to navigate financial challenges.
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Charitable donations
Joe Kuhn had a successful career as an operations manager and chose to retire at the age of 55. Although 55 is older than anyone in their 30s or 40s, it still counts as early retirement by society’s standards.
On his YouTube channel, Kuhn said he and his wife agreed on about 85% of things when it came to spending, but that there were some “weaknesses.” For example, Kuhn said that they donated a lot of money before retirement. However, he saw fit to cut this amount in half after retirement, while his wife did not.
“You know, it seemed obvious to me that if I wasn’t working, I wasn’t going to make the income I was getting and I’m living off savings that we wouldn’t part with the same amount. It seemed obvious to me. Well, it wasn’t so obvious to my wife, and that was probably one of the biggest The arguments we had about money…”
Spending on discretionary things during bear markets
Cohn also talked about how he and his wife never saw eye to eye on discretionary spending during bear markets. He gave some examples of planned spending he was willing to do when markets were bearish, such as a family wedding and a new car, but says he doesn’t think discretionary, unplanned spending should happen during bear markets.
One example of optional unplanned spending given by Conn is spending $10,000 on a kitchen renovation, such as replacing cabinets, when there is nothing wrong with the cabinets’ function but they may be out of style.
“We’ve had some special one-off costs that we knew were going to happen — market down, inflation up — now is not the time to do these elective things,” Cohn said.
However, Kuhn made it clear that he wasn’t trying to make it seem like his wife was at fault, but rather that they weren’t of the same mindset about spending at times. “I’m not trying to portray my wife as a villain here. It’s just… there hasn’t been this consensus about what spending looks like in a bear market and then in a bull market, so that’s a conversation I wish we had.”
Taxes and Roth conversions
“This may seem small,” Cohn said, “but I should have started Roth conversions a year early.”
“In the first year of my retirement,” he said, “I was used to being a spender versus a saver.” Conn went on to say that when you transfer $100,000 Roth with 25%-26% in taxes, it kind of hits you. “Taxes are the first expense for most people in retirement, so make a plan for that,” he said.
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This article originally appeared GOBankingRates.com: I Regret Retiring Early: 4 Expenses I Should Have Prepared For
