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What could the long term detrimental effect on the entire economy be if too many people are able to retire early?

I've been thinking about this for a while, because, everything has its bubble right?

If a lot of people find themselves financially independent and are able to leave the workforce, that means they make room for a lot of other people to be employed into meaningful jobs - a least in jobs that pay enough for them to potentially save for early retirement too.

Unemployment goes down, the labour pool shrinks, salaries go up=> inflation?

But we've been there before. Currently, the target inflation is 2% and if governments can maintain that, it shouldn't be a problem.

Meanwhile, during times of recession, there's a lot of financially independent people who continue to spend thus keeping the economy going.

What can go wrong?

Your thoughts?
 

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The bigger issue is insufficient work force to do productive work and create GDP longer term. Workers are the big spenders. Retired folks are not.

That is why Canada's goal is for upwards of 1% (of our population) target for immigration. We are not breeding enough on our own.

We need that immigration just to stay either even, or for some added real GDP growth. We are not getting it through productivity increases, i.e. behind a number of developed countries in terms of productivity per person. Risk of inflation is pretty small plus Bank of Canada is shifting their mandate some to work towards 2% inflation longer term rather than a ceiling. IOW, they are likely to let inflation move up some to get jobs and economy out of 1st gear.
 

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Since the big boys sent the manufacturing jobs overseas in the 70s and 80s there is a shortage of jobs not a shortage of workers. There are many thousands, possibly millions, on some form of disability, social assistance etc and others have been out of work so long they are no longer counted as unemployed. Not to mention those who are under employed, such as college graduates working part time at Starbucks.
If more people can become self employed or self supporting by their own efforts or investment it will be good for the country in many ways. Especially if their saving and investing goes into Canadian companies that will bring jobs back to Canada.
The idea that we need millions of immigrants from third world countries is pure hooey.
 

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Many/most FIRE enthusiasts simply want to create flexibility in their lives. They want to be in a position where they can decide to work if they want instead of feeling like they must work at full time positions. They try to create a "work optional" opportunity. That's what I did and I'm one of those FI who continue to spend.
 

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I seriously doubt enough people can pull this off to be statistically relevant. There is a lot of talk but not a lot of action. Life is expensive and the only way to really live financially independent for the vast majority is to accept a significant reduction in their living situations, and sometimes that doesn't even work.

I have some friends who have tried this at relatively early ages (35-40 after 15-20 year careers) and have to give up and go back to work after 5-10 years as the money runs out. Some cashed out big return of pension contributions and are now back at work at 45-50 and starting from scratch. Maybe they enjoyed their 10 year sabbatical, but they will likely be working for another 20 years.
 

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I seriously doubt enough people can pull this off to be statistically relevant. There is a lot of talk but not a lot of action. Life is expensive and the only way to really live financially independent for the vast majority is to accept a significant reduction in their living situations, and sometimes that doesn't even work.
Totally agree. It's extremely rare that someone can pull this off, so the last thing we need to worry about is everyone retiring early in droves ... not going to happen.

What might happen is people seeking more work flexibility and adding more freedom and choice into their working lives, but that's not retirement and these people are still in the workforce. They still spend money, too.
 

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Imagine if everybody saved 10% of their income so they could retire early. Economists would freak out, fearing the economy would grind to a halt. That is because economists are nitwits. What do they suppose people do with their savings, burn them? NO they put them in the bank. Then the bank loans the money out or invests it, they get rid of the money as fast as they can because they have to pay interest on it and they don't make anything till they loan it out. So someone comes into the bank and borrows the money and hey presto it is back in circulation when they buy a new sofa, a car, a house, etc. After all nobody borrows money from a bank unless they want to buy something right away.
Even better would be if they loan the money to someone who is starting a business or buying new equipment and expanding or improving an old business. That way you not only get the money in circulation, you get new jobs created as well.
So now money is in circulation, new jobs being created, new products being made, debt being paid down, and people have money in the bank, financial security and are on their way to financial independence. But some half wit economists and politicians call this a disaster for the country. The only disaster is the bad management and extravagance of the economists and politicians. They would rather see everyone in debt up to their eyeballs being bled white by the interest payments and quivering on the brink of bankruptcy including the government
 

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Even better would be if they loan the money to someone who is starting a business or buying new equipment and expanding or improving an old business. That way you not only get the money in circulation, you get new jobs created as well.
Oh, I couldn't agree more. In a parallel thought in "Can Canada afford a Liberal government"
...You cannot stop the world at the border. This is why I believe entrepreneurship is the only way out of this dilemma. Canada workers need to walk away from the traditional/regular employment "of working for someone/megacorp" and created their own money making asset. Sounds easy, but it is not. Short term support by the government would be useful during that transition.
 

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Many/most FIRE enthusiasts simply want to create flexibility in their lives. They want to be in a position where they can decide to work if they want instead of feeling like they must work at full time positions. They try to create a "work optional" opportunity. That's what I did and I'm one of those FI who continue to spend.
That's the important part.

Look at Tim Ferris of the "4 Hour Work Week", or Sean DeSouza of the "3 month vacation".

It's all about being able to get the valuable work done, so you have freedom.

The thing is people need to work. It's a sad and depressing life when you do nothing of value.
I know people in their 80's and 90's who teach fitness classes, and have for decades.

Maybe it doesn't pay well, but both they and society benefit, even if there isn't a lot of money changing hands.
 

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Economists would freak out, fearing the economy would grind to a halt. That is because economists are nitwits. What do they suppose people do with their savings, burn them?
Yes. Yes. Yes. Economist truly believe that-money should never rest-future use is irrelevant. That is just one of underlying messages that Michael Wolfson brought to Bill Morneau during his attack on CCPCs.

So bringing this back to the OP's question "What could the long term detrimental effect on the entire economy be if too many people are able to retire early?"

FIRE (Individual or CCPC owner) is just a method of changing Money velocity, but it will soon trickle out for good and services needed. It allows the FIRE individual to have different life engineer by themselves rather than forced by others. The effect on the economy will be miniscule.
 

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Okay, look at this hypothetically.
Lets take 100 working age people and pretend they're the whole economy.

100 people work. no problem
99 people work 1 person invests and retires fine, still lots of people to do the work.

Other extreme
100 people retired, nobody working, nothing gets done, investments don't pay any returns, they get back to work
Before that we'll have lots of retirees, and few workers, the few workers will demand high wages, reducing the investment returns until the retirees go back to work.

The only way this could be a problem is if someone artificially subsidizes the non-workers so they don't need to go back to work.
Some sort of "Basic income" could support the collapse, because it removes the "get back to work" incentive.
 

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An unscientific poll found for every motivated, hard working, financially literate, goal driven and dedicated FIRE chaser, there are 40 to 50 lazy and uninspired people. So have no fear, this FIRE won't get out of control anytime soon.

My question is. Instead of FIRE and other cute acronyms, why not look for meaningful work that you enjoy waking up for? And a lifestyle within your budget so you're not killing yourself working??
 

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Imagine if everybody saved 10% of their income so they could retire early.
Actually this is a key metric and will likely show it can't happen. What percentage of ones income for even 50% of the working population would be required in order for FIRE?

Sure the top 5% of earners might be able to pull off saving 10% over 20 years to be FIRE but for the masses what would that percentage be ... 25%,50%,75% of their yearly income?
 

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An unscientific poll found for every motivated, hard working, financially literate, goal driven and dedicated FIRE chaser, there are 40 to 50 lazy and uninspired people. So have no fear, this FIRE won't get out of control anytime soon.

My question is. Instead of FIRE and other cute acronyms, why not look for meaningful work that you enjoy waking up for? And a lifestyle within your budget so you're not killing yourself working??
Because it's easier to just vote for UBI.
 

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Actually this is a key metric and will likely show it can't happen. What percentage of ones income for even 50% of the working population would be required in order for FIRE?

Sure the top 5% of earners might be able to pull off saving 10% over 20 years to be FIRE but for the masses what would that percentage be ... 25%,50%,75% of their yearly income?
The wages will get bid up.

Right now about 1/3 of the country isn't working.
 

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I don't think 'a lot' of people are close to FIRE, what with so many two paycheques away from bankruptcy, or so the media keeps reporting.
 

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Most people nearing retirement have $25,000 or less saved. Many have nothing and owe debts.

The statistics tell me that a "UBI" will continue to be paid to retirees in the current form of OAS/GIS benefits.

Under the current system, people qualify to collect GIS while keeping their assets and homes.

Maybe it is time to change the qualifications for the GIS from income to total net wealth and force people to spend their own money first.
 

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I don't think 'a lot' of people are close to FIRE, what with so many two paycheques away from bankruptcy, or so the media keeps reporting.
I think there is a statistically insignificant number of FIRE.

There might be some who are sustainable and able to pursue other things, Mr Money Mustache is working a lot, despite "retiring".

That being said I think most people are financially and numerically illiterate.

One famous example is the Burger King 1/3rd pounder, which failed to beat the 1/4 pounder, focused groups said because 1/3 is less than 1/4.
.

That being said, you don't need fancy math to balance a budget.
 

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Yes. Yes. Yes. Economist truly believe that-money should never rest-future use is irrelevant. That is just one of underlying messages that Michael Wolfson brought to Bill Morneau during his attack on CCPCs.

So bringing this back to the OP's question "What could the long term detrimental effect on the entire economy be if too many people are able to retire early?"

FIRE (Individual or CCPC owner) is just a method of changing Money velocity, but it will soon trickle out for good and services needed. It allows the FIRE individual to have different life engineer by themselves rather than forced by others. The effect on the economy will be miniscule.
But money never does rest, that is the point. Savings are not squirreled away in a hollow tree they are loaned out and spent as fast as any other money, and hopefully to better purpose. The more people retire early on their own resources, the more jobs available for the unemployed and the more money available for investment in new industries.

Imagine 2 parallel cases. Person A has a good job and a nice apartment, and every toy known to mankind. New furniture, stereo, guitars, radio control models, closets full of new clothes he hardly ever wears, fancy kitchen appliances, a $50,000 leased car and another $50,000 in credit card debt. He has a good job but can barely keep up by making minimum payments and he is used to a certain lifestyle - dining, dancing and drinking at expensive night spots every weekend for example.

Person B lives in an identical apartment next door, and makes the same amount of money. But he has no debt and $100,000 in savings. Comfortable furniture, likes making tasty home cooked meals, drives a 7 year old Toyota that is paid for.

Now imagine there is a recession and both lose their jobs. Which one is up **** creek without a paddle and which one regards it as a mild inconvenience? Both get unemployment insurance of about 60% of their usual wage, for 26 weeks.

What if Person A was regarded as normal, and was the most common situation while Person B was odd and unusual? Where would that leave the country in a recession?

Now imagine the opposite where Person B was the most common and normal one, while Person A was the oddball? Now would the country be better off or worse off in a recession?

I will go further. Imagine a country of savers where there is a continuous supply of money being reinvested in the most modern industry, vs a country of spendthrifts smothering in public and private debt that has been asset stripped for consumption and now depends on selling their natural resources and importing the necessities of life from foreign countries. Which would be more vulnerable to internal and external shocks?
 

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Actually this is a key metric and will likely show it can't happen. What percentage of ones income for even 50% of the working population would be required in order for FIRE?

Sure the top 5% of earners might be able to pull off saving 10% over 20 years to be FIRE but for the masses what would that percentage be ... 25%,50%,75% of their yearly income?
You take me too literally. I know everyone will not be able to do this, I am suggesting that the modern obsession with consumption and going into debt public and private is NOT necessary to have a thriving economy, and in the long run can be counter productive. More saving and investing would have little or no ill effects in the short run and great benefits in the long run. Our country's greatest growth and progress was when we were a nation of savers and investors, the same is or was true of England, the US, Japan, China, Singapore and no doubt many other nations.
 
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