Why You Can’t Retire

Last week, I read along on twitter and bit my lip as MMM tried to talk some sense into a mainstream finance writer & editor who tweeted a link to a New York Times article. Above the link, she wrote:

“The basic flaw at heart of so many retirement calculations: you cannot possibly save enough to live on for 30 YEARS.”

This wasn’t tongue-in-cheek. She was serious. I don’t know this writer, but she appears to be a professional. Her name is Heidi, and she has a twitter verified check-mark next to her name. She’s been a self-described financial journalist for 18+ years. Her twitter bio shows she’s an alumnus of Marketplace, Guardian, and the Wall Street Journal. In all seriousness, this woman is significantly more qualified to talk about finance than I am!

As Pete, myself, and numerous other defenders of Financial Independence chimed in, she dismissed us one by one. Pete was a special case: he and his wife had high incomes when they were employed. The stock market is dangerous because of frequent dips and recessions. The year 2008 was ‘proof’ that the stock market was not the vessel to choose for retirement savings.

Others came to her defense, reminding everyone that saving a million dollars is incredibly hard, that most Americans don’t make enough money to save let alone invest, and that low-income is the problem, not lack of saving. Eventually, she accused someone of mansplaining finance to her, and the conversation got quiet.

You Cannot Save Enough

Perhaps Heidi’s bold statement is technically true. From her perspective, Pete, myself, and the entire FI community are a bunch of frugal weirdos. We don’t play by the standard set of rules. We save the majority of our dollars and don’t take on debt like everyone else, which is why we can live comfortably near the traditional poverty line. Our methods haven’t made their way into mainstream financial circles yet. At the time of this writing, we are just a bunch of outliers.

The mainstream financial community would agree with her. The New York Times article she linked spewed the standard “people are all living longer, savings is hard, we have to work forever” complainypants sentiment.

Let’s talk about the average American household, with their average $168,614 mortgage, average $27,141 auto loan, average $15,762 credit card debt, and average $48,172 student loan debt. If you live in this household and don't change your spending habits, then Heidi’s statement is true: you likely can't save enough to live this way for 30 years! If you are expected to continue down the average consumer path, then yes, saving for retirement is going to be an insurmountable challenge for most Americans, even the ones with high incomes.

Let's Talk Spending

So, what’s the big deal here? Someone was wrong on the internet! Is this really a shock? Why get worked up over this? Why is Heidi different than any other member of the internet retirement police, telling us what we are doing is impossible?

What do you want me to do? LEAVE? Then they'll keep being wrong!
What do you want me to do? LEAVE? Then they'll keep being wrong!

Because it’s an opportunity to start a dialogue about underlying assumptions. Heidi clearly has the assumption that the average American doesn’t earn enough money to save for retirement. She seems to think it’s an income problem. I disagree. I am under the assumption that the average American doesn’t put any effort into budgeting or even tracking their expenses, and is therefore incredibly wasteful. I think it’s a spending problem.

So who’s right? Well, outside of the FI community, no one really likes talking about reduced spending. It’s easier to blame income: if I had a few hundred dollars more each month, I’d be able to save. If I made as much money as Pete and his wife, I’d be able to save. If I won the lottery, all my financial problem would be solved!

But this just isn’t true. The hedonic treadmill immediately robs you of the imaginary additional hundred dollars. Lottery winners don’t hold onto their winnings long and end up back at square one. Most Americans simply have a spending problem they don’t realize because everyone else has it too, and it's become completely normal. I suspect the same is happening in Canada and other wealthy nations.

Change Your Perspective

At the end of the tweet storm, Mrs. MM chimed in with what I consider the smartest statement on the entire thread:

“I think a huge shift in perspective has to happen to understand early retirement. That can't happen on Twitter.”

This. One thousand times this. The truth is that savings doesn’t have to be hard, but people need to shift their perspectives to realize it. They need to challenge many popular assumptions.

For example: having your own home and two cars in the driveway is practically a right in the United States.  I mean, everyone deserves these things, right? It’s the American dream! Check out this ad from Quicken loans to see what I mean:

“None of this makes rational sense. It only makes American sense. Here, the hard things show us who we are. Leaving your job to start your own thing. Having a kid, when you still feel like a kid. Signing a 30 year mortgage on a home. Scary? Sure. But no match for our colossal self-belief. We’re supposed to do scary. Without scary, we don’t get to be brave. BUY IN.”

To those outside the FI circle, this commercial seems innocent enough. But to me, I see predatory marketers pressuring a new generation of young home buyers to sign the damn contract and literally BUY IN for 30 years. As argued on Millennial Revolution, if you're in a high cost of living area, and you BUY IN on an ‘average’ sized mortgage, this is pretty much guaranteeing you won't have enough money at the end of the month to invest for 30 years.

Or perhaps longer… my hardworking parents owe more on their home today than they did when they took out the mortgage three decades ago… these are dangerous products when used irresponsibly. Remember, in old French, mortgage literally means ‘death pledge.’

The American Nightmare

Owning your own home is not a right. It’s not the American dream. Suburbia is nothing more than a marketing ploy. The mortgage industry is big business. There is significant profit to be made in interest payments, as we discussed in our last post. Remember: banks buy and sell mortgages, not houses. They don’t want houses. Houses are terrible investments.*

There’s nothing wrong with buying a small, affordable house when you have a respectable net worth and a sizeable (say, 50%) down payment. But treat it like the luxury it is- not a right! You don’t need a house: you can rent a small apartment. Better yet- rent a small apartment with roommates. Or live with family for a few years after high school or college. Dave Ramsey has a quote that has always stuck with me:

“If you will live like no one else, later you can live like no one else.”

Essentially, if you are willing to live slightly ‘less than comfortable’ for five years or so, you can spend the rest of your life living exactly the way you want to.

So when shopping around for that house, don’t forget: housing costs scale with square footage. The larger the house, the higher the taxes, the more it costs to insure, the higher your air conditioning and utility bills, and the higher and more frequent your maintenance expenses. With housing, less is more.

A similar concept applies to cars. Shiny new cars not only have a higher sticker price, but are significantly more expensive to insure. If you buy a high performance car, you’ll likely need to pay for premium gasoline. You’ll likely drive it more aggressively too, using even more gas. And luxury cars indirectly encourage driving more often, scaling the above costs even more.

When you get your driver’s license here in Florida, they reiterate that driving is a privilege, not a right. I completely agree. You don’t need a car for every member of your family. Especially not a shiny new car. Save up and buy a small used car for $5k cash, change the oil, tires, and brakes regularly, then drive it for ten years. Worried about increasing gas prices, or perhaps your family's safety driving in a small car? DRIVE LESS. Carpool more. Utilize public transportation. Move closer to work. Walk. Rearrange your life in such a way that you are in control of, not a slave to, your car.

Let’s Fix the Leak

OK. So you’ve taken my advice: You've moved closer to work, or relocated to a more affordable city. You rent or own a small affordable house, and share an affordable used car. You’ve done everything right but you STILL can’t find any money to save at the end of the month. Perhaps you are a single mom, working near minimum wage just to pay the bills.

Well then, let’s track your money for a month on Mint or Personal Capital and see where it’s going. Compare your monthly household spending on these common problem areas to mine:

Cable television $0.00
Car payments $0.00
Cell phone plan $50.00
Childcare $0.00
Cigarettes and other vices $0.00
Dry cleaning $0.00
Gasoline $40.00
Going out to eat $100.00
Insurance (car, home) $88.00
Interest on cars, credit cards, loans, etc. $0.00
Landline home phone $0.00
Lottery and gambling $0.00
Monitored alarm service $0.00
Soda and other gas station conveniences $0.00

Cut out the waste from your spending!

How do you stack up? You don’t actually need to spend money on any of the items above. Any spending in these categories should be planned and intentional. I used to pay for a monitored alarm service, until I realized I was just being paranoid. I used to pay for cable TV, until I realized I was paying money so I could be less healthy and have less free time. My long car commutes and dry cleaning bills were the worst: I was literally paying money just to work! I had to change my perspective on what expenses were ‘normal', vs. what expenses I actually needed in my life.


JD Roth makes an excellent point in his interview with Brandon on the Mad Fientist Podcast. I’ll quote it here:

“…Take responsibility for your situation, for your future, for your destination, where you’re going. Don’t wait for somebody else to solve your problems for you. I like to say your situation may not be your fault, but it’s your responsibility to get out of it and to change it if you don’t like what you’re in.”

He goes on to reiterate that it doesn’t matter how or why you reached your current place in life, what matters is to focus on the hand you're dealt. This is crucial to achieving the shift in perspective that Mrs. MM mentioned. YOU are in control of your money! If you don’t have have any money to save at the end of the month, that is your own decision, whether you recognize you are making it or not. It is YOUR responsibility to fix it.

There are a growing number of us becoming financially independent and proving that you absolutely can save enough for a 30+ year retirement. If enough of us change our perspectives on money, we can change mainstream financial advice. Start tracking your spending! Cut out the waste. Don't fall for the ‘American Dream' of a brand new house in suburbia with a white picket fence and two new cars in every driveway.

With the right perspective, we can all enjoy a very early retirement, whether Heidi thinks so or not.


*This doesn't mean you can't make money in the real estate market. Many do, with intelligently purchased flips and rental property portfolios. I am merely challenging the age old “your house is a great investment” advice. Absolutely wrong.  

Interested in starting your own Financial 180? You've come to the right place. The math is easy: create a gap between what you earn, and what you spend. If you can save half your income, your working career will only be around a decade long! Want to shorten it even more? Read on to see exactly what expenses the wife and I cut from month to month. Track your progress against the milestones of FI, and gradually build up your own savings snowball. Check out the books and links in our resources section and jump-start your journey to FI. The you ten years from now will be glad you did! Ready? Start here.

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16 thoughts on “Why You Can’t Retire”

  1. I agree – and am cutting back expenses… I can do this, MUST do this. But I do think that any such analysis must allow for at least SOME people not to be able to make much progress here. So many are making less than minimum wage, or are unemployed with no income. Can even those folk cut down? Yes, many waste even what little they have on lottery tickets etc. But I’m not sure minimum wage ever gets you to early retirement, even allowing for compounding? While most of us are over spending and could do a lot better, is it true that everyone can retire early, no matter their income? Maybe just earlier. And maybe that’s enough.

    1. It all goes back to assumptions. My implicit assumption is that the majority of my readers live in first world nations, above the poverty line, with luxuries like computers and spare time to browse financial blogs. The middle class American has the best chance at achieving financial independence in their 30’s or 40’s, and is my ideal audience.

      Perhaps there are some who are too far into poverty to retire early. They’re probably worrying about their next meal, not social security being inadequate. But the advice here is sound no matter where you are on the income spectrum: Don’t spend superfluously. Avoid debt. Don’t buy more house than you need. Don’t waste money on new cars.

      Most of us in wealthy nations can retire earlier than 65. Whether that is in your 30’s, 40’s, or 50’s depends on your savings rate and personal comfort level. But minimum wage is still sufficient to retire early. MMM did a case study on this here: http://www.mrmoneymustache.com/2011/09/26/reader-case-study-minimum-wage-with-a-baby-on-the-way/

      Another great article on retiring early on minimum wage by MMM’s accountant: http://wealthyaccountant.com/2017/03/15/thriving-on-minimum-wage/

  2. It’s definitely possible…. but you have to shift your entire mindset. It’s hard to do in the US because we’ve been programmed to think a certain way almost from birth. Like taking the red pill v blue pill in the Matrix lol

    1. It’s true. I’m guilty of it myself. If it weren’t for the car accident opening my eyes, I may not have changed my ways. But I’m confident that as more of us lead by example and show it can be done, people will gradually become more open-minded to the idea of financial independence.

  3. Just found your site . Figured out long ago that saving was important. Watched people buy bigger and bigger houses. Fancy trucks, boats and toys. Did some of that as well. Now the money is saved. It’s invested mostly in boring Vanguard index funds. I’m mentally ready to retire. I’m in my late 40s and we save about 50% of take home pay. Using the 4% rule we could pull about 70k a year on current stash. My problem is health care. What to do about coverage for my family. I know i have to work till at least 2019 and 2020 to keep my two sons coved till 26. I’m afraid for their future. The oldest is a cancer survivor. No way I can drop my employer coverage till legally forced. Good news stash will grow for two more years. But then I’m 50. That’s a hard number for me not to work after 50.

    1. Healthcare is an issue on everyone’s minds lately. My wife and I are currently maxing out our HSA’s right now. If proposed changes go through they may be doubling the contribution limits next year. Our plan is to build them up as much as possible in the year or two we have left before retirement, have a nice health savings buffer, and then see what remains of the Affordable Care Act at that time.

      Before ACA, there were quite a few states that offered their own health exchanges, and I assume this will continue even if the ACA is completely dismantled. My wife and I will likely relocate to one of these states if FL doesn’t have affordable options for us.

      The idea of being handcuffed to an employer just to have health insurance really ticks me off. It makes absolutely no sense, and stifles entrepreneurship. I think this topic deserves it’s own post…

  4. I found this post through the Wealthy Accountant. I also love the tone you took with this post–frustrated but still respectful.

    Most people lock themselves in at a high cost of living, and then feel trapped. Never considering that they can get out the same way they got in–by their own financial decisions.

    Our family realized that we had started justifying our expenses based on the fact that we were a family living on one “lower than average” income. Like everyone else, we could either change that trend, or plan on working indefinitely.

    We are a family of four, now living on the equivalent of one Minimum Wage income plus the child tax credit ($17,080 for the year). Even with that, we still have room to splurge. Many things in our “budget” are padded toward luxury–much more than rice and beans, occasional restaurants, 2 cars, road trips and in-town driving, 3-bedroom 2 bath house, $40/month of fun money, etc.

    The funny thing is that after a few month of readjusting to our self-imposed Minimum Wage budget, we are back to feeling like we did back when we spent double.

    Here’s to taking responsibility!

    1. It’s amazing how far money goes when you avoid debt and trim unnecessary spending from your budget. Glad to hear you all are thriving on such a low annual spend. After reading this, I’m going to go back to my household budget and see where we can trim!

  5. Joel,

    Nice article, however I have two cautions for you. Below your table, you state “You don’t actually need to spend money on any of the items above.” Caution One: Invoking the single mom working near minimum wage, and then telling her she does not need to spend money on childcare can be perceived as irresponsible, ignorant, or callous on your part. This is a complicated and challenging issue, and should warrant more than a throwaway line of dialogue on your part – or maybe don’t bring it up at all, given your lack of experience in this area. Caution Two: It is also irresponsible (and could open you up to liability) to tell readers they do not need insurance. While it is true that one can construct a lifestyle that does not require insurance, if one has a vehicle, one must carry liability insurance. If one has a house, one should carry both liability and replacement insurance. There are certain catastrophic losses from which most individuals will not recover without insurance. They should consider their insurance needs carefully and make an informed decision as to whether, how much, and what types of insurance they should carry. I offer these cautions to you in the spirit of constructive criticism, to point out some potential pitfalls you may not have considered.

    1. Thanks for the feedback Crew Dog. Most of the ideas on this blog revolve around the idea of rearranging your lifestyle in such a way to reduce expenses, and open up a gap between income and spending. Any time someone takes an entire category off the table, it artificially constrains them. And with too many constraints, nothing can change. I know plenty of people who artificially constrain themselves: “I can’t switch jobs. I can’t move to a new city. I can’t live with roommates. I can’t live without owning a car.” The list goes on. Perhaps what I wan’t people to say is “It would be really hard to move to a new city and require a lot of work on my part but maybe I shouldn’t say it’s impossible until I put the work in.”

      It’s not so much about judging specific categories of spending, as it is questioning the constraints. If you want to drive an $80 Tesla Model S, but are willing to live with four other roommates in a tiny flat, that’s probably fine. If you want to eat out at a fancy restaurant every night, but live right next to where you work and have no transportation costs, that’s probably fine too. It’s all about the gap between income and expenses, and less about the actual expenses themselves. I should write a whole post on this topic!

      To address your specific examples: Childcare: you can design a life without childcare costs. Maybe not immediately, but it’s possible. Many of us in the FI community pursue FI primarily for this reason! The working mom might realize that after childcare and transportation costs she’s not making any money at all and working crazy hours for nothing. I’m not anti-childcare, I just want people to do the math and make sure it actually makes sense.

      Insurance: Again, it’s about lifestyle design. Why would I need life insurance when I have no kids and my wife has a job making more than I do? Why do I need collision and comprehensive coverage on a car whose value is less than my emergency fund? I’m not completely anti-insurance (I think catastrophic is valuable), but I just want everyone to run the numbers. Obviously everyone’s situation is unique, and the things you cut comfortably from your expenses wont be the same as the things I cut from mine. It’s all about finding what works for you and your family. Sometimes my writing comes off a bit harsh, but this post in particular had me fired up.

      1. Yeah, I understood what your intent was. I was just trying to point out a different way that your remarks could be construed. MMM comes off as misogynist and tone-deaf sometimes, but is pretty resistant to feedback. I’d hate for that to become a trend in FI blogs and drive an important part of the demographic away. It’s great that you’re FIREd up, and thanks for responding to my comments.

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