What are the risks of retiring early?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 262.3 million views in recent years.

In the answers below I focused on the following topics and issues:

  • What are the risks of retiring early? Is it only running out of money, or are there additional factors to consider?
  • Why do people buy things they can’t afford? Is it habit, upbringing or culture?
  • What is the best city in China for expats? I look at many factors including your industry, age, hobbies etc.
  • Why do some investors always seem to profit? Or perhaps they don’t and just ride the good and bad times?

If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me, email (advice@adamfayed.com) or use the WhatsApp function below

What are the risks of retiring early?

Source: Quora

This was Bangkok in the 1990s:

It was said to be heaven for people on relatively modest pensions. Many European and American retirees lived well.

Things started to change. Thailand became more expensive and developed. The rising Thai Bhat didn’t help.

This meant some people needed to go home. In a few extreme cases, people were in the streets.

Now not everybody wants to go overseas if they are retiring early, but regardless there is always one huge risk – the facts changing.

That could be currency movements, inflation being higher than expected and so on.

Of course, there are ways to manage these risks which are tried and tested.

The thing is though, there is no substitute for a bit of common sense as well, and conservatism in planning.

It is always best to have too much in retirement rather than too little.

Other risks are

  1. Unexpected events like divorce, needing to support family members, ill health too early and other unexpected events.
  2. You don’t mind retiring but you get bored. So this is a non-financial risk. Good planning tends to be the key here. People who plan early tend to make the most of retiring early. This one also shouldn’t be the end of the world. Let’s face it, there are loads of volunteering opportunities out there, and remote jobs which are part-time. Somebody who is bored with retirement can easily move to semi-retirement.
  3. Your health might go downhill even if you love it. Many studies shown that people who keep working (voluntarily or paid) into their 70s, are healthier and live longer than most people. Again though, this issue can be dealt with like the second issue.
  4. You pick the wrong place to retire, and then need to keep moving to find the right place.

Honestly, it is a good problem to have. It is better to have the ability to retire early with risks, than being worried about whether you can retire at all.

Few have that choice, and most of the risks can be migrated by either planning or pivoting if things don’t work out.

Why do people buy things they can’t afford?

Source: Quora

I have read some studies on delayed gratification and the phycology behind spending.

Some studies have shown that people who grow up very poor, like in war zones, are less likely to delay gratification regardless of their income levels.

Why save and invest for the future, or play the long game in business, if it could all be over tomorrow?

Many years ago I travelled to Lebanon. To the surprise of many travellers, there is quite the party scene in some parts of Beirut.

I was in a cafe with some American tourists who were surprised about this and asked their Lebanese friend why he thought this was the case.

He mentioned that most Lebanese have known people who have died in the various conflicts.

Therefore, when it is safe, people love to have fun, spend and live for the moment.

It is only one man’s perspective, but what he was saying made sense to me at the time.

In comparison, if you have been bought up in more stable conditions, what do you fear?

Most people don’t fear dying with loads of money. In fact, many people with resources even want to, in order to help their kids and grandkids

To the contrary, many people fear not being in control. Having to put up with an obnoxious boss to pay the bills.

Needing to work until 75 even if you have long since lost love for the day job.

Therefore, from this perspective, wealth is a means to an end. Being independently wealthy gives you more choices in life, and allows you to say no to things (and people) you don’t want to entertain.

If you want to achieve this, you don’t waste as much money as people who are living for the moment.

There are other reasons as well

  • Some people, especially those who are young and impressionable, think showing off is worth it. This issue has always existed. Social media makes things worse. It takes experience to know that most people don’t care, and you only need to impress a small number of people – including yourself, considering happiness comes from inside.
  • Marketers have become more skilled at targeting people in the digital age of cookies and tracking.
  • Habit. Once a habit is installed, regardless of whether it is good or bad, it is difficult to change. Habits in young people often come from peers, parents etc
  • With close to 0% interest rates and increases in loan services, it has become easier to buy now and pay later.
  • Keeping up with the Jones’. This is an issue which ensures that even some high-income people become broke. They are trying to compete with other high-income people.
  • It is very human to assume price and quality is always correlated. In fact, it sometimes isn’t. Yet studies have shown that people get more excited by higher prices. For example, if a hotel tells you “i will upgrade you for free into this suite which normally costs $500 for $50 extra than your room”, you are more likely to report favourably on the experience compared to just being offered an upgrade for $50. That is why events like blind wine tasting are popular. Tasting things blind takes away the prejudices we have due to price and branding.
  • The media. Often the media reports on the flash millionaire. Seldom do they report on the frugal millionaire. If they do, usually they report on it like it is unusual. The data tells us otherwise.

Which city is the best for expats to live in China?

Source: Quora

It depends on the following factors:

  • Which industry you are in.
  • Why you are in China
  • Your personal preferences and situation If you are married to somebody who is from a specific city or town, for instance, then just like everywhere else in the world, you might be more comfortable there.
  • Your budget and how much you want to spend.

If you are in China to learn Chinese, then a place like Beijing is good, or indeed a smaller town or city where fewer people speak English.

In comparison, oil & gas workers and especially technology-focuses people have more opportunities in Shenzhen, with finances jobs being more prevalent in Shanghai.

Those in education have opportunities all over China, but especially in first and second tier cities.

I have noticed a commonality. If you are fresh of the boat and looking for “an experience:, then second and third tier cities will be suitable.

This is especially good for people, like students, who only plan to stay in China for a short period of time.

In comparison, after years of being an expat, you care less about what is “the real China” or any other country.

The same is true in your home country. Few of us only eat in the restaurants, bars and cafés which are “typical British” or American or wherever else you come from.

We just go to where feels right. In which case, Shanghai is an easier place to live in China than anywhere else in the Mainland.

That is because you can live the lifestyle you want. You can go to those flash bars and cafés where it costs 100RMB+ for a drink, and the place is full of other expats and rich Chinese:

Or you can eat and drink at traditional places like this:

Shanghai is a great place to live for a few years. Honestly though, there are better places to live in Asia.

Places with no restrictions on the internet or getting money out of the country (which is a pain).

Places which are more developed and for that matter you can also practice Chinese in the case of Taiwan and Singapore to an extent.

In fact, the irony is Taiwan is in many ways more traditional Chinese than Mainland China.

Just friendlier (it came number two in the list of the friendliest places for expats), democratic, more developed, less restrictive etc.

China is also very high-tax, as the government don’t make a distinctive between overseas income and locally sourced, unlike Malaysia, Thailand, Singapore and Hong Kong where most forms ofverseas income is charged at 0%.

Why do some investors always profit?

Source: Quora

I have never seen any investors always profit every day, every month or every year.

Even Buffett and Soros have been down some years, as has almost every other investor.

Yet I have seen some investors always profit in the long-term.

The reasons are simple

  1. They invest very long-term. Markets do rise over time, especially adjusted for dividend reinvestment.
  2. There is a lack of panic when markets fall.
  3. Excitement when markets go up is also smaller than for most people. Many of the most successful investors I know don’t even check their valuations very often.
  4. They don’t chase fads
  5. The asset allocation between stocks and bonds isn’t appropriate for their age.
  6. The amounts put in to begin with are sufficient to increase the size of the portfolio. Many people forget this basic fact. Percentage returns are important. Yet the length of time you invest, and how much you put in, is more important than simple percentage returns. Getting a huge return for two years, or on 5% of your total wealth, isn’t the same thing as doing well over the long-term.
  7. They tend to ignore media sensationalism every time there is a crisis.
  8. They don’t speculate, and market time.
  9. They don’t adjust the strategy that much as things change. Many people think you need to be proactive with investing. That is true up to a point. We all need to be proactive to actually get started to begin with and invest. But once your money is invested, it isn’t always needed to make huge changes. People who make such huge changes seldom benefit.
  10. They get advice or really know what they are doing.

The above sounds easy, but that doesn’t mean it is in reality. How many people, including older people, do you know who have been invested since 1975 or 1985?

Most people find “boring yet effective” investing too dull long-term.

Perhaps most importantly of all, these investors understand the difference between gains and profits and losses and declines.

A decline isn’t a loss. 100% of people who just bought and held after 1987, 2000, 2008, 2020 and other crashes didn’t actually lose money, assuming they were in the whole market and not individual stocks.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 262.3 million answers views on Quora.com and a widely sold book on Amazon

Further Reading

In the article below, taken from my online Quora answers, I spoke about the following issues and subjects:

  • Which habits prevent people to become rich? Not investing? Lack of focus? Or something else?
  • What are the disadvantages, if any, of being wealthy? I speak about aspects such as risks, happiness and much else.
  • Why do most wealthy families go broke by the third or fourth generation, but some escape that fate, such as European royal families?

To read more click on the link below.

Add a comment

*Please complete all fields correctly

Click to Hide Advanced Floating Content

Adam Fayed financial consultant WhatsApp