One of the biggest benefits of Early Retirement and financial independence is that it offers Freedom from the Rat Race. Actually Rat Race Freedom is the best benefit as far as I and the other early retired people I know are concerned.

There is nothing more satisfying than being able to come and go as you please. Never HAVING to drive in rush-hour commuting hell. No longer having to answer to “The Man”. Having the time to take things slow, grill at home instead of eating out, etc.

The frosting on the cake is being able to focus on hobbies, volunteering, recreation, exercise, and spending time with the people we care most about. For me and others who made it to early retirement this is all worth more than any new Sport Utility Vehicle or luxurious sedan. It is worth more than extravagant expensive vacations or the fake and meaningless accolades of the corporate world.

Yet you seldom if ever hear the traditional financial world talk about it even though if a value could be attached to Rat Race Freedom it would be massive. What you do hear about is how you have to save enough to generate 80% or some other high percentage of your existing INCOME for retirement.

However this most satisfying and happy producing elements of retirement cost little if nothing. Here is the good news. Becoming a Rat Race escapee may cost less than you have been convinced to believe.

The Rat Race Trap

If you are listening to the numbers spewed by the mainstream that you need to be able to generate 70%, 75%, or 80% of your current income to retire. If that is what you believe then you are probably in for a surprise.  That’s because those figures are not exactly the truth.

They are just simple numbers thrown around over and over so that they begin to sound true. A tactic taken from politicians who do the same. Repeat the same garbage over and over, hoping others repeat it to convince everyone their line of BS is fact.

Trap Savings Scenario

If my and my Bride’s combined income was $100,000 a year. Then based on the 80% of income nonsense I have to generate $70,000 – $80,000 yearly from retirement savings.  I would certainly fall into the Rat Race Trap believing that. That is the trap of feeling like I have no choice but to stay in the Rat Race until I was too old to keep up and had no choices.

Coming up with $80,000 a year in retirement income to match 80% of our combined $100,000 pre-retirement income means we would need to save $2,000,000. That $2M amount is based on the safe 4% withdrawal rate.

$2,000,000 is a tall order on a combined income of $100,000 because our ending salary is no indication of the many more far-lower salary years that everyone goes through.

No wonder most people give up on the notion of early retirement and retirement in general.

The Truth and Reality about Freedom from the Rat Race.

Based on my early retirement the real figure you need to reach is 90% to 100% of your current lifestyle cost. Perhaps even lower if you have high employment associated cost that would go away. Even if you lose a highly subsidized employee health insurance plan I believe the cost decreases elsewhere will mostly offset your new health care insurance costs in most cases. Especially if you have low lifestyle costs in retirement and qualify for US ACA subsidies.

The beauty of this is you have control over what your lifestyle cost is. If Freedom from the Rat Race is a high priority goal then it may come less costly than you think.

For every $10,000 in lifestyle cost you need to fund it takes $250,000 in savings to support it based on a 4% withdrawal rate. That $10,000 a year is $833 a month. If you get rid of car payments, credit card payments, signature loans, student loans, and if you can reduce your house payment or payoff your mortgage, there sure is the possibility to lower your lifestyle costs.

The lifestyle vs salary funding math works like this:

In my example scenario me and my bride’s combined income was $100,000. Based on the conventional 80% of final salary to retire we would need $2,000,000 to provide that income using the 4% safe withdrawal rate. Yikes! That’s $2M before we could escape the Rat Race.

However, our actual lifestyle cost including travel, gifts, and everything else is around $44,000 (includes taxes). Based on the 4% withdrawal rate I only need $1,100,000 to fund and support our lifestyle. That is a huge difference but it only gets better.

At some point we will be collecting Social Security which will help offset some of the lifestyle cost burden from our savings. So we could have less than $1,100,000 and still have a safely funded early retirement. Believe me, we had far less than $1,100,000 when I first retired. Just because our lifestyle budget is $44K doesn’t mean we will spend that much because the best parts of early retirement are free. We find we spend much less than we did when we worked living our envisioned retirement lifestyle.

Freedom from the Rat Race- What to do now

• Create your Strategic Retire Early Plan which will include a smart frugal sustainable budget. This is so you can pay off debt and maximize your savings rate. It just takes cutting spending waste from your life. Concentrate on what brings true happiness and cut the rest.
• Live the smart balanced life you want to live in retirement now while still working. Envision what your retirement dream looks like and create it today. You then will see what you really need to save for. It’s not a percent of your final salary. Every day while still part of the Rat Race you will know you are doing what it takes to get out early. Keep your dream alive.
• If your retirement visions includes much more travel then calculate what that will cost. Plan on how your funding needs will get there. If you will be traveling much of the year then include downsizing your current housing needs.
• If you live the “retire early and often” lifestyle as I have then income will be coming in on occasion for periods of time. That offsets savings needs and if you do as I did, all income was added to the portfolio. Use the FIRECalc retirement calculator and run your numbers under different scenarios.
• Never again think about trying to keep up with the Joneses. Enjoy the freedom that comes with that.

Final Thoughts on freedom from the rat race

Freedom from the Rat Race may be easier to reach than you thought. Get out of the trap and wrap your mind around the fact that you can control you financial and retirement future. It takes a plan and motivation to carry it out.

The often cited having enough saved to generate 80% of final salary requirement for retirement may only be true for some. Those whose lifestyle costs them every penny they make after taxes.

Face it, if you are living that close to the bone, paycheck to paycheck, then forget about retirement for now.  Concentrate on finding a way to start living below your means.

Find extra work or better paying work to increase income and/or knock costs out of your lifestyle.  For most people saving enough to generate enough income to give 80% of your final salary is not going to happen.

The financial industry paints retirement as a time of daily spending sprees, travel, spoiling grand-kids and buying a new retirement dream home. For most that is false except for the spoiling grand-kids part. But you can do that without spending money or a lot of money.

We the Rat Race escapees, the early retired, have time to enjoy life without spending money everywhere.

Do you long for Freedom from the Rat Race?

Do you use a different way to calculate your retirement funding amount?