Standing under the shower this morning I came up with the idea that there might be a reason for all these early retirement blogs from US people.
In this post I hypothesize that early retirement is harder to achieve in continental Europe than in the US due to higher public expenditure quota in continental Europe.
What do you think? Is ER harder to achieve in continental Europe? Is it therefore an Anglo-Saxon thing?
Looking forward to your ideas.
Some ideas:
- In the US people have to save for their retirement, the government isn't taking care of that. Maybe it makes them feel more in charge of their destiny and makes some of them aware that they can control when and how they'll retire. (in my country the tendence is now to private additional savings plans, because the old pension system may turn out to be unsustainable due to an aging population)
- Americans get extremely little vacation, that would be reason enough for me to want to get out early. The most generous vacation situation I've head was while working for a regional government: if I remember well we had 30 days of vacation + 17 official holidays. Good times!
- In my country money is kind of taboo, most people won't boast about how much they earn or own. If they'd ER or win the lottery many would probably keep quiet about it.
- Some (I know a single case, I have no idea how rare this is) are abusing the unemployment benefits system to help fund their retirement. If they'd mention they're retired, they'd lose that source of income. Also, many people have undeclared income that they can't talk about. (probably varies a lot from one country to another)
I have lived both in continental Europe and America and I don't think I would have been able to retire at 36 in continental Europe.
First, incomes are higher in America and taxes are much lower. That means more disposable income and if you don't climb on the consumer treadmill, which not an easy feat in America, a higher savings rate. I also think that, once you have made your money, Europe perhaps offers better chances of continued success because there are many more ways for early retirees to go broke in America (health care costs, lawsuits, consumeristic pressures, etc...).
Second, Europeans tend to focus on society whereas Americans tend to focus on the individual. So while Americans see early retirement as a sign of personal success, Europeans might see it as a selfish act against the greater good of society as a whole. Therefore, early retirement is often discouraged in Europe.
A 36 year old early retiree in Europe would be considered either unemployed or a welfare queen. I have had a hard time explaining early retirement to my European friends and family members. In their minds, I am still nothing more than a bum who refuses to work.
Money-wise it's no problem. I saved a lot of money while I was a grad-student in Europe. However, back then I wasn't thinking about early retirement at all. I had not even realized that ER was possible, that is, that the concept existed, until I almost had all the money to do so. I was saving up to buy real estate in cash rather than with a mortgage.
During my time in England and Germany, I seemed to have noticed a lot of people who did not appear to be doing anything to earn money. In fact we met one couple who had a nice two story home in England, and he "had" been an electrician, and she "had" worked at St Mary's Hospital as a medical secretary. They were in their 40's a the time, and all they did was travel back and forth to Cypress and the US on vacation. They even later came over to visit us for three (3) (long) weeks!!
I noticed people just moving around on mopeds or bikes, just visiting, just walking around. This was in both England and Germany. A lot of folks sat in outdoor coffee shops a lot.
I was in the military, so I did not do too much research on the lifestyles of Europe.
@HSpencer: When was this? Maybe they had inherited money? Maybe you noticed this during summers (when Europeans tend to be more relaxed and have time on their hands)?
I can't speak for Continental Europe but I can tell you that, just like CestLaVie says, here in the Nordic countries I'd be considered a non-contributing, welfare free-rider if I were to stop working.
I have lived and worked both in USA and Europe - and it certainly is true that salaries are a lot higher and taxes lot lower in USA than here. But I find it a lot easier to stay focused on my plan because there just isn't that runaway consumerist culture here (a 23% sales tax helps provide additional motivation :-). Also, not owning a car is easy as first class public transport options and bike paths are considered basic.
If I were to reach ER, I'd very likely have to continue working or move out of Finland if I wished to fit in. Europe is very much about doing it together.. there's no not carrying your weight -something I quite like and appreciate actually. So my plan for post-ER revolves around trying to build out a business and perhaps start a non-profit site that contributes to society in some positive way.
Rather than "harder to achieve" in Europe, I'd say it is harder to sustain if fitting in socially matters to you. :-)
@Ktn "Europe is very much about doing it together.. there's no not carrying your weight -something I quite like and appreciate actually."
My (superficial) impression is that Northern and Southern Europe are somewhat different for these kind of things. Not that people are individualists in Southern Europe, but there seems to be much less pressure to be productive.
Probably something to do with protestantism (in the North) and a hot climate (in the South).
@ktn - if you were a "landlord", would you then fit in socially?
@Marius - I agree on the protestant ethos and that southern Europe appears to be different. I suppose you have the big debtors in mind - Greece, Italy, Portugal, Spain.. all that slacking does show on their bond rates. :-)
@Original George - my guess is you would fit in, IF you owned so much property that keeping them up could be considered a full-time job. I know of people who own 3-4 rental apartments, and they have a regular day job. The thing is that you need to be seen as doing enough to stay busy all day (moms are considered 'busy enough', especially when the kids are young.. but once they start going to school, many women here start working).
Disclosure: I am not a native European. Finland is my adopted country.
@ktn Yep. :-) Are you planning to ER in a different country? If not, do you have a plan that will help you fit in?
In my limited experience in Europe as a tourist and job travel, I would say the minimalist way of life is harder in Europe. My experience told me that the cost of food, parking, and living are relatively higher than in the states. Making the financial goal appear yet more unattainable. However, there are several expenses many people in America choose to ingnore (maybe me in the future?) like health insurance, inflation, etc.
I am from Czech Republic, Europe. In the Czech Republic, before 1989 during communist time, it was illegal to do not have a job, they just sent you to the jail for not having job (there were some exceptions - artists with income from abroad, freelancers with permission, etc).
Most czechs consider ER people as criminals (because where can they get enough money to retire early?) and to be ER is basically rather lower social status (with exceptions of big company owners who publicly sold companies for fortune).
There is definetely influence of (protestant) religion in other european countries like Germany, Austria, ...
There are quite a lot of people roaming southeuropean countries in their RVs and most "reguler" citizens consider them as underclass on the edge of society (a lot of them abuse social welfare, I met one Czech guy in Thailand who spend there basically every winter just for social support he got from government).
Anyway, it is easier to retire early in Europe because - schools/universities are free or cheap (you do not have that massive college loan debt when you finish your studies), healthcare is "free" (when you are employed) or much cheaper than in US, there is very low property tax even on luxury mansions (that is really important!), free vancamping is much easier in Europe, almost everybody can count with some old-age pension when they are about 60 years old.
@Marius: My plan for getting to ER involves moving out of Finland, so post-ER could be somewhere else too. Plans for that phase can wait, as achieving ER will take many years still. :-)
@Matthew. Living the minimalist way of life can actually be quite cheap in Europe.
If you live in a city, even one of modest size, you can walk or use public transportation to go virtually anywhere and you don't need a car (no insurance, no parking, no depreciation costs, no gasoline, etc...). If you are a renter with a low income, you qualify for government aids. When I was a student in Europe, more than half of my rent was paid by government subsidies for example. Health insurance was also very affordable compared to what I pay in America.
I used to spend less than 500 euros per month living on a ritzy street in one of France's most beautiful cities. My apartment was only a few hundred meters away from the nearest metro station, bus stop and train station. But food was indeed expensive in the city.
My thoughts (as a European):
- Taxation. High taxes mean lower savings (bad!) but also that it is easier and normal to be frugal (good!) because nobody has much disposable income after the gov't takes its big cut.
- Role models. There are hardly any ER role models in the EU. In the US there are more because there are more people with a boatload of money, and that is because entrepreneurship is more popular and high incomes aren't excessively taxed. As a result, there are people can afford to make extravagant expenses such as private jets, huge ranches and also ER!
- Lots of people in Europe are semi-retired, i.e. they work less. It is true that people won't advertize that they're early retired, because having money is met with jealousy whereas in the US it's seen as a sign of success.
- Living off gov't subsidies when you're able to work is not done, and IMHO, of course it is not done!!
- There is this hypocrisy in the EU. Everyone in their late forties starts fantasizing about quitting their jobs, working less, winning the lottery, being the fuck retired already ...but for young people this is not done! We are "supposed to work". Probably because there are no role models of young people who could afford to retire early, like in the US.
- How to avoid social stigma as a young ER? Say you're a self-employed trader/investor. First off, it's correct as you may be spending a few hours a week following the markets. Second, this will bring about some understanding (people don't understand ER but they do understand self-employed) and respect for making it work for you ... or at least that's what I like to believe. Also, if you happen to be writing a book at that time or building a house, call that your other job. Being a stay-at-home mom is socially acceptable even after the kids have grown up. It's not usual, but it is "just" acceptable.
- EU taxes vary a lot! Some countries like Switzerland and the UK have taxes comparable to the US, while others like Belgium and probably Denmark put you in a 60% marginal tax bracket as soon as you earn $50k.
I imagine it might be easier to achieve in europe because of (1) lower average debt levels for university education and (2) lower or minimal costs for health care.
WRT (2), my US HDHP is cheaper than what I paid in Switzerland. Both where market plans, not employer-subsidized.
@CestLaVie
I guess you are proving that my "tourist" experiences are not valid. Which is also not surprising. I went to Shanghai once and the fancy hotels were just as expensive as in America. However, on my own, I found much better deals.
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