3736: What's the Difference Between Retirement and Financial Independence by J.D. Roth of Get Rich Slowly on Early Retirement

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[00:00:56] This is Optimal Finance Daily. What's the difference between retirement and financial independence? By J.D. Roth of GetRichSlowly.org. And I'm your narrator, Justin Malek, here reading to you every day to help you save more, earn more, and invest the rest. So let's get right to today's post as we optimize your life.

[00:01:21] What's the difference between retirement and financial independence? By J.D. Roth of GetRichSlowly.org. I've spent a lot of time lately reading about retirement and financial independence over at Reddit. Reading other people's questions and comments helps get a feel for the sorts of challenges they face as they boost their saving rate and cut their spending in order to pursue bigger goals.

[00:01:48] For those unfamiliar, Reddit is a large internet community with discussion boards dedicated to different topics. Though Redditors would cringe at this characterization, in many ways it reminds me of America Online 20 years ago. I like to browse forums, or subreddits as they're called, like Personal Finance, Simple Living, Financial Independence, and LeanFire. That last one merits more explanation.

[00:02:15] I never heard the term LeanFire until I found the LeanFire subreddit. But I think it's something that might appeal to a certain group of Get Rich Slowly listeners. According to the LeanFire subreddit, quote, If you want to retire before 60 with less than $40,000 in planned yearly expenses, this is the place to discuss it, end quote. In other words, LeanFire is a term for early retirement with minimal money.

[00:02:45] It's strange to me that the LeanFire subreddit considers a $40,000 annual expense lean. That's 75% of what the average American household spends, $53,495 per year, which doesn't seem particularly parsimonious. My normal spending when I'm not traveling the U.S. in an RV is about $36,000 per year, and I don't consider myself frugal at all.

[00:03:14] To my mind, people like Pete from Mr. Money Mustache, with household spending of around $25,000 per year, and Jacob from Early Retirement Extreme, with household spending of around $14,000 per year, qualify as LeanFire. But $40,000? That's just slightly less excessive than the Joneses next door. My desire to argue over what qualifies as a lean retirement

[00:03:41] highlights one problem we all have when we talk about money. Different words mean different things to different people. Today, I want to explain what I mean when I use certain words and phrases at Money Boss. Defining Retirement To many people, retirement means one thing, reaching a ripe old age, 60 or 65 usually,

[00:04:07] and leaving the workforce to enjoy whatever money they've managed to save. For these folks, retirement is a time to travel and try things you never had time to do before. But it's not a time for work. While that's how most people think of retirement, my own view of the term is more nuanced. I consider myself retired. So does Mr. Money Mustache. Are we crazy? I don't think so. To me, there are many flavors of retirement.

[00:04:38] Here are a few. Early Retirement Early Retirement is the same as conventional retirement, but doesn't come at the end of life. Instead, it's achieved at age 50, or 40, or 30. To retire early, you have to save more than average. To retire very early, you have to save a lot more than average. Some folks believe early retirement is a pipe dream, but it's not.

[00:05:06] If you can boost your saving rate to 50%, which is tough, but possible, you'll probably be able to retire in about 15 years. Semi-retirement Another option is semi-retirement. When you're semi-retired, you continue to work, but on your own terms. You have significant savings, maybe even enough to be truly retired, but you choose to earn an income so you don't have to draw down your savings as quickly.

[00:05:36] I consider myself semi-retired. I could probably quit working and live out my days happily, but I opt instead to do meaningful work. Doing so lets me travel more than I might otherwise be able to. Bob Clyatt explores semi-retirement at length in his book, Work Less, Live More. And mini-retirement. In the four-hour work week, Tim Ferriss describes another approach to retirement.

[00:06:03] He argues that instead of deferring decades of retirement until the end of our lives, we'd be happier, more fulfilled, and more productive if we instead redistributed this time in the form of mini-retirements throughout our careers. These career breaks allow us to explore new people and places while we're still young and fit, and while we still have time to change course if we discover a new opportunity.

[00:06:30] To my mind, retirement comes in a variety of shapes and sizes. There really isn't one good definition for the term. For many, retirement means you no longer work for pay, but a lot of folks who meet this definition would chafe at the notion that they've retired. In Work Less, Live More, Bob Clyatt writes, Quote, Plenty of people are uncomfortable using the term retirement

[00:06:57] to describe their lives after leaving full-time work, even if they are already collecting social security. For them, that word conjures up images of frail elderly people who have hung up their spurs. They think of themselves as fully engaged in living life, not withdrawing from it in any sense. End quote. In the end, it doesn't matter how you label your lifestyle. Whether you're retired or not,

[00:07:24] all that matters is making sure your work and spending match your personal mission statement. If you do, you'll be happy. Defining financial independence. Ultimately, retirement is a loaded word, and I try not to use it except in casual conversation. I prefer to talk about financial independence, which is essentially the same idea, but without the baggage. Reframing the conversation in terms of financial independence

[00:07:54] has another advantage. There are clearly different degrees of financial freedom, so it's possible to talk about progress along a sort of phi continuum. I've suggested that there are seven stages of financial freedom. Dependence, solvency, stability, agency, security, independence, and abundance. If you wanted, you could get even more granular.

[00:08:21] You could create a list of 16 stages of financial freedom, or 60. The key takeaway is that the more money you save, the more freedom you have, and the greater risks you can take. To me, as I've said, there's little or no difference between retirement and financial independence, but I usually prefer to use the latter terminology in order to avoid fights with the internet retirement police.

[00:08:52] You just listened to the post titled, What's the Difference Between Retirement and Financial Independence? by J.D. Roth of GetRichSlowly.org. And I'll be right back with my commentary. Many leaders think they know where time goes, but as teams grow and tools multiply, reality can look surprisingly different. So decisions about what to automate and where AI fits can be a gut call. That's the problem today's sponsor, Scribe, is helping solve.

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[00:10:19] This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. Thank you to JD. I think this is especially helpful

[00:10:47] if you're planning a future with someone else. You could both say you want to retire early and assume you're talking about the same thing, but one person might mean never having to earn another dollar, while the other is imagining a few days of work each week doing something they enjoy, which is probably more my style. Those could be very different plans, even though you've been using the same word. You might not find that out

[00:11:14] until you start talking about what you'd actually do. Would you want to stay where you live, spend more time with family, go back to school? Those answers tell you a lot more than whether someone considers you retired. And I like that he includes taking a break and then returning to work too. That's a different thing to plan for than leaving permanently, but it might be closer to what you wanted in the first place. In either case, I think it's important to be able to describe

[00:11:44] the life you're hoping to have to yourself and to anyone you're hoping to share it with. So thank you to JD for this one, and thank you for being here every day. It means a lot. Have a great rest of your day, and I'll see you tomorrow, where your optimal life awaits. Let's see you tomorrow, .