Retiring Five Years Earlier Is Not Just Five Years
The decision isn’t just about time, it’s about what comes with it
Time Changes the Equation
Retiring earlier doesn’t just mean you work less. It can require significantly more money and introduce a completely different set of tradeoffs.
That’s because financial independence (FI) isn’t just reaching a number. It’s an equation that keeps shifting as your life does.
Change the Inputs; Change the Outcome
Time is unique because it affects both sides of the equation at once.
Let’s look at an example to see this in action.
Mary is 57 and planning to retire at 64. Based on her current spending and savings trajectory, she’s on track to reach her FI number by then. But like a lot of people, Mary starts asking a simple question:
What if I retired earlier?
I ask myself this question all the time.
Let’s say instead of 64, she wants to retire at 59. That might seem like a straightforward decision.
Stop working five years sooner and give up those five years of additional savings. But it’s not that simple.
What Actually Changes
Retiring earlier doesn’t just shift the date. It changes multiple parts of the equation at once.
You’re giving up years of:
Peak earnings (income)
Compounding investments (savings)
And taking on years of:
Additional withdrawals (expenses)
Health insurance coverage (expenses)
Less income and savings, combined with higher expenses, means less margin for error if things don’t go as planned—and less flexibility. That’s where the tradeoffs become real.
This is the FI equation in action and why I think it’s so important to view it from this lens.
Why This Matters More Than It Seems
Those five years carry a lot of weight. Extending retirement by five years means:
More exposure to market variability
More time your plan needs to hold up
This isn’t a small adjustment. It’s starting to feel like a completely different equation.
The Tradeoff
Let’s make this more concrete.
Assume Mary currently has $1.2M saved and is saving an additional $80K per year for retirement. If we assume a 6% annual return:
Scenario 1: If she retires at 64 (in 7 years), her portfolio grows to almost $2.5M
Scenario 2: If she retires at 59 (in 2 years), her portfolio grows to about $1.5M
That’s nearly a $1M difference—from just five additional years.
What’s easy to miss is that this isn’t just five years of lost savings.
It’s about losing five years of compounding on your entire portfolio—while also adding five more years of withdrawals.
That’s why the gap becomes so large, so quickly.
To make this more tangible, assume a 5% withdrawal rate—the amount you’ll pull from your investments to have available for expenses each year in retirement:
Scenario 1: Retire at 64 with $2.5M portfolio at 5% withdrawal rate = $125K
Scenario 2: Retire at 59 with $1.5M portfolio at 5% withdrawal rate = $75K
That’s not a small gap. It’s the difference in how much room she has and how often she has to think about what she spends.
Travel, helping family, even smaller decisions that repeat over time start to feel different with less margin.
In Scenario 1, she likely won’t think twice about stopping at her local coffee shop.
In Scenario 2, she may start to limit how often she goes.
Those small decisions add up. Not just financially, but in how her days feel.
Mary’s routine stops were more than just a coffee break. They connected her to the community. Gave her that energy boost that comes from interactions with the friendly and familiar locals she’d gotten to know over the years. Brought a little more enjoyment to her day.
Would she now stress about the growing cost each time instead of being in the moment?
With a smaller amount to spend, every choice carries a little more weight.
Time compounds in both directions. It can help you, but it can also work against you.
Even small changes in retirement timing can have outsized consequences.
Shrinking your time horizon to retirement means:
Less time to build your portfolio
More years your portfolio needs to support
Understanding the Decision:
So what is Mary really choosing?
If she retires at 59, she gets five additional years of freedom.
But she’s doing it with:
Smaller portfolio
Lower sustainable spending
Longer time horizon to sustain it
If she waits until 64, she gives up those five years—but gains:
Significantly larger portfolio
More flexibility in spending and withdrawals
Extra margin for error
Retiring early could easily mean giving up five of her most financially impactful years. It’s reasonable to think she’s probably making more later in her career than closer to the beginning or middle.
And remember that retiring earlier reduces your overall savings and increases the burden on those savings at the same time.
Another Cost to Consider:
But before you conclude that retiring earlier is the wrong choice, there’s one more factor to consider: opportunity cost.
For those not familiar, opportunity cost is what is given up (missed opportunity) by choosing one thing over the other. In Mary’s case, we know the financial opportunity cost would be greater if she retires early. We saw that in the example above. But what about nonfinancial costs?
I find the nonfinancial opportunity costs of working longer start feeling bigger when I’ve stepped away from the office for a bit and start thinking about all the work emails I’ll return to. How much nicer Monday morning might be if it didn’t involve “getting all caught up again.” The relief of waking up with ownership of how I want to spend the day. My day.
Delaying retirement isn’t risk-free. It assumes you’ll have the time, health, and circumstances to enjoy those extra years later.
Most people have seen or heard of situations playing out where that didn’t happen.
For some, the earlier years of retirement may be the most valuable—when energy is higher, options are broader, and more is still possible.
That doesn’t make retiring earlier right. But it does make the decision more than just a financial one.
Mary also has the power to adjust—by increasing savings or reducing spending—to shift the outcome.
Until you’ve considered the impacts on everything, including opportunity cost, you haven’t seen the whole picture.
Retiring earlier isn’t free—it’s paid for with either more effort towards saving, lower spending, or higher risk. But retiring later has its costs too.
Where Flexibility Comes In
Remember that this isn’t a binary decision.
Mary doesn’t have to choose between working full-time until 64 or stopping completely at 59.
She has options:
Transition to part-time work
Reduce spending in early retirement
Delay certain expenses
Adjust along the way
Each of those changes the equation—and that’s often overlooked.
A More Useful Way to Think About It
The idea of retiring earlier is appealing. But once you start to see what it requires, the decision becomes more nuanced.
It’s not just about leaving work sooner. It’s about what you’re willing to trade for that time.
Increase time in retirement, and the required resources go up. Adjust spending or income, and the equation shifts again.
If you’re thinking about retiring earlier, what are you really trading for those extra years?
What might become harder to do later than sooner?
It’s worth taking a closer look at what you’re really giving up and getting in return.
Remember, change the inputs, and you change the outcome.
— Brad
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This is meant to help you think through financial decisions and tradeoffs—not tell you exactly what to do. It’s general in nature and not personalized advice.