Early retirement can be costly.

John from ESI Money did the math: by retiring early at age 52, he "lost" $3.1 million in income.

However, he considers the money "well spent" for several reasons: it wouldn't have changed his lifestyle, early retirement is more enjoyable than working, and he probably added extra years to his life by escaping the stress of work.

I've been thinking about this issue for some time now. And since I had fun digging into my financial independence numbers, I thought I'd do a few more math gymnastics to see how much I had "lost" by retiring early.

I had considered this idea a while ago, but what prompted me to finally write about it was a conversation with my mom.

She and my dad have been working on retiring for some time now. They are in no hurry though and things that could be done in days or weeks are taking them months. I'm wondering if they will ever retire.

As we were discussing this, she told me that my dad said he wants to retire but just "can't give up all the money he'd make" (he owns his own business and has been doing well despite trying to down-shift).

Almost on instinct I asked her what she thought I gave up when I retired at 52 since I made 5x what my dad makes. From there it was just a short jump to "I should write about that." And here we are.

So let's do some math and see what I've given up.

Before we do that, we need to make some assumptions.

Time frame

The first set of assumptions is probably the easiest: how long I would have worked if I had not retired at 52.

A few choices:

I could have retired at 60 — my original "early retirement" projection.

I could have retired at 65 — the "official" retirement age for what seemed like forever.

I could have retired at 67 — the Social Security full retirement age for someone born after 1960.

For the purpose of this exercise, I'm going to pick 65.

If I used 60, that's still early retirement and we're trying to figure what I would have made if I had not retired early.

If I used 67, it just seems like it's too old — I would never wait that long to retire.

So 65 it is. Given this we have our answer: I gave up 13 years of income.

Estimated salary

Now that we know the number of years I missed, we need to project what salary I would have earned during those years.

I'm sure you know this is going to be a relatively high number because:

I worked hard over the years to grow my income.

grow my income. The 50's are peak earning years for many, especially those in business.

I want to include only salary and likely bonuses — not the value of benefits like 401k matching and health insurance. Otherwise we could go down a huge rabbit-hole with one assumption after another until the whole premise became a joke.

I know my earnings wouldn't grow at the rate they had up to the point where I retired, so I wanted to pick a single number and use it throughout the entire time. I also wanted to be conservative, if anything. In other words, what I actually "lost" is probably higher than the number we'll end up with in this exercise.

Read more: I retired at 52 with a $3 million net worth — here are my 10 best tips to build wealth

Given where my salary was when I retired and the sort of jobs I might want to take during the lost 13 years, I ended up selecting $250,000 per year as the cash compensation I gave up. FWIW, my average cash compensation for the last five years I worked averaged just over $300k annually. (BTW, for those wondering why anyone making that salary took so long to retire, remember 1) I didn't make that much all my working years — it took 28 years to get to that level and 2) while we didn't spend much, taxes and giving took almost 50% of our earnings).

How much would I have saved?

The assumptions above mean that the gross amount I gave up was $3.25 million (13 years * $250k).

But how much of this would I have saved?

On the low end, we could use 36% of gross income since that's what we averaged during my working career.

On the high end, we could use 100% (less taxes) since I make enough from other sources to cover our living expenses. Taxes took an average of 21% of our income while I was working, so this means we could have saved 79% of the total.

So the number is somewhere between these two. I'm going to go with one smack dab in the middle — 58% of the total. We would have probably given some of the 79% away and we would have been a bit looser with our spending, so 58% seems viable.

This means that we would have banked $145k per year or $1.885 million during those 13 years.

How much is that worth?

Of course we wouldn't have literally "banked" that money. We would have invested it.

So the next question is: what is the value of $145k invested at a given percentage rate over 13 years? This only requires the selection of one new number — the return rate. In my case, I'll use 8% as that's been my go-to assumption return for years.

Read more: I retired at 52 with a $3 million net worth — here's what a week of my spending looks like

Now it's a simple calculation. $145k invested at 8% return each year ends up being worth $3.1 million at the end of 13 years.

So that's the answer: I gave up $3.1 million by retiring early.

What do I think of that?

There are two main thoughts I have on this:

1. That's a lot of money!

$3.1 million is nothing to sneeze at. It's less than my net worth now, but it would still be a nice chunk. Even if I gave it all away, think of the good it could do…

2. It was totally worth it.

There are several reasons it was worth giving up over $3 million:

I do not need another $3.1 million. It would not change how I live my life very much, if in any way at all. So what's the point? I've already won the game, so I need to quit playing it.

I've already won the game, so I need to quit playing it. I probably bought myself some years. They say that money is replaceable and time isn't, so time is more valuable. But there is one way you can get some time back — you can live longer. What would 13 years of stress from terrible bosses cost me in terms of life? Even if I had the best of bosses and the best of jobs, there's still a lot of stress. If nothing else, my quality of life would have been lower, probably much lower (less time with family). But not having to work 13 years might add what — an extra two to three years to my life? Yes, there are studies that say early retirement can lower life expectancy, but I think those pertain to people who have zero interests. On the opposite end of the spectrum, I believe I heard a wealthy man (I thought it was Warren Buffett but I can't find the quote) say he'd give everything he owned for just five more years of life. At that level, living an extra two years is worth way more than $3.1 million!!!

What's enjoyment worth? Imagine 13 years of life enjoyment in retirement versus 13 years of life enjoyment if I remained working — especially in the last 13 years of my career. What is that life enjoyment worth? What am I going to be able to do that I would miss out on if I was working? (I've already got a fairly good list of these things — just read my retirement updates.) Is that worth $3.1 million?

In the end I would say that I "lost" $3.1 million by retiring early. And it was the best $3.1 million I ever spent.

ESI Money retired at age 52 with a $3 million net worth.