Retiring early is expensive (and so is private education)

Sonnie Bailey

12 June 2020

Last week I shared a video which demonstrates a “flawcasting” tool I sometimes use with clients.

In that video, I played around with some variables to see the impact on "John and Jane", our hypothetical protagonists, of:

  • retiring earlier or later;
  • assisting their children through university and in private secondary education;
  • one or both being unable to work (due to illness, or perhaps even being displaced from the workforce);
  • buying a bach.

Private education is expensive

Every single time I run through this exercise and factor in private secondary education, the cost of private education stuns me.

As an example, if we make one set of assumptions to map out John and Jane’s financial trajectory it might look as follows:

(The horizontal axis on the chart relates to Jane’s age from 39 to 100, and the vertical axis relates to the value of John and Jane’s financial assets (excluding their home and stuff) in today’s dollars.)

The assumptions above assume that John and Jane provided assistance of $20,000 per year to each of their three children for four years once they are 18 (ie, ages 18, 19, 20, and 21), presumably to assist with education.

If, instead, I assume that John and Jane want to provide $20,000 per year for each of their children for nine years once they turn 13 (ie, between ages 13 and 21 inclusive), to also cover private secondary education, their financial trajectory looks like this:


Of course, other variables would also change. In the second scenario, John and Jane would probably reduce their spending. One of them might work, or work longer hours to help fund education. They might retire later. They might accept a lower cost of living during their twilight years. They provide provide less one-off support to their children once they get older.

But still!

Private education may be expensive.

That's not the say the choice is a bad one. It might still be the right decision for John and Jane and their children.

You know what else is expensive?

Retiring early is expensive

This might seem heretical to some people, especially if you’re interested in the FIRE movement (which I feel an affinity with). But if you want to retire early, I think it’s worth doing so with your eyes open to the financial consequences.

As I illustrate in the video below, working for even one year more can have a significant impact on your financial situation – which is to say, on:

  • the lifestyle options available to you,
  • the buffer you have, and
  • the means you have to assist loved ones and causes you care about.

I am not saying that retiring early is “right” or “wrong”!!! The key is to make the decision that is right for YOU – not your friend, your family member, your neighbour, or your colleague.

What I am saying is that you should make the decision that’s right for you based on a good understanding of the relative costs and trade-offs associated with the decision.

The more I think about the trade-off for myself, the more it makes me want to work for longer.

However, it also makes me want to invest in myself – and my relationship with work.

I make this decision not because I have to – I know that I could spend less now, save more, and make various decisions that would enable me to retire early. But I work because I choose to.

My focus now is not on retiring from work, so much as doing work that I enjoy and that I feel is intrinsically valuable. I want to work and add value to people, and be remunerated for that work. By doing it in this way, the idea of working for longer, rather than retiring earlier, is palatable, sustainable, and something to look forward to.

That’s what’s right for me, at least for now. The question is: what’s right for you? 

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