Retired Early But Now I'm Back to Work – Did I Make a Mistake in My Financial Journey?
If you retire and then go back to work, did you make a financial mistake? This is a question that a Reddit poster recently asked. The poster explains that he had retired early at 48 years old, but has now signed a contract for a new job.
FIRE Failure
by u/LeeeeeeRooooyJenkins in ChubbyFIRE
His issue is that he is "disappointed" in himself for returning to work because he wanted to trust that compound interest and his wise investments would see him through for life.
He has $4.38 million in total assets, including real estate, retirement, and brokerage accounts, and feels like that should be enough, but fear is driving him back to work. Specifically, he's scared of market turbulence and the economy tanking.
So, did the poster make a mistake in leaving work and then returning? Did he derail his finances for good, and should he be disappointed in the decisions he's making?
Is it a failure to retire and then return to work?
Everyone's situation is different, of course, but there are a great many people who retire and then return to work. In fact, the 2022 Retirement Saving & Spending Study from T. Rowe Price found that 20% of retirees were working either full-time or part-time, and 7% were looking for work.
All of these retirees, and the Reddit poster, are not failures for deciding to return to the workforce. In fact, as one Reddit commentator suggested, it is not a failure to respond to changing market conditions, but rather a strategic choice to return to work and build a larger cash cushion.
Now, the poster may be fine with $4.38 million in assets, as long as he maintains a safe withdrawal rate. But it's just as important to feel comfortable with the size of your nest egg as it is for your nest egg to be large enough to support you -- so if going back to work provides the poster with added peace of mind, there's no real downside to doing it.
How big a cash cushion should retirees have?
The Reddit poster also felt like he should trust in compound interest rather than returning to work.
As a general rule, the poster -- and anyone else who is invested -- should have investments they feel confident in, and should try to make sure they have the right asset allocation to get through turbulent economic times. Hopefully, the poster did that. If he did, maybe a return to work wouldn't be strictly necessary, since he does have more saved than most.
Still, there are very few people who regret having too much money saved for retirement. So, if the Redditor's investments perform as expected and he works to earn extra income too, he shouldn't end up in a bad place -- he will likely find himself better off. Other posters also commented that having a bigger cash cushion is good given ongoing economic uncertainty, and that's absolutely true.
Turbulent markets are a part of life and not a reason for panic, but that panic will really only get you into trouble if it takes the form of selling low because you're afraid to wait for the recovery. If you respond to a down market by investing more, that's usually a smart choice, since you're taking advantage of buying opportunities.
Of course, if you work hard for early retirement and then you have to go back to work, it's hard to make that mental adjustment. And, if you do return to work unnecessarily, perhaps you are giving up some of your precious time for no real gain. In this situation, though, the poster is going back for a short time, has specific financial goals, and has a clear plan.
Given those circumstances, it's hard to see what could be wrong with this poster's choices. If he still has doubts, though, talking with a financial professional about how much he should end up with in his nest egg, and how to leave work for good and feel confident in doing so, could be his best bet.
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