I’ve recently seen a couple members of the FIRE (Financial Independence, Retire Early) community speak on the movement that has gained momentum in recent years. While I admire some of the characteristics of adherents of this movement (e.g., careful spending, aggressive saving), and I’ve learned a few new terms (e.g., geo arbitrage, mega Roth), I’m left with some serious questions and concerns about those who are on this path. As a financial planner, here are a few of my observations:
- Shaky financial rules of thumb. One of the speakers I’ve seen mentioned that those who aim to retire early, in their 30s, 40s or even 50s, will often aim to accumulate an investment portfolio on which they believe they can sustainably withdraw 4% and not run out of money. However, this rule of thumb is based on a 30-year retirement for someone retiring in their mid-60s. People who retire in their mid-30s could have a 60-year retirement and therefore would need a much lower withdrawal rate on their portfolio if they don’t want to run out of money. The other common rule of thumb of accumulating 25 times your living expenses is the inverse of the 4% withdrawal rate, so is based on the same faulty assumptions.
- Purpose. As a financial life planner, I help my clients explore what’s important to them and then optimize their resources to live a meaningful, fulfilling life. I wonder if adherents of the FIRE movement aren’t just running away from a job or career they no longer enjoy, instead of working towards a positive vision of their future. Many people who retire in their 60s struggle to find meaning and purpose in retirement, so I would imagine it’s even harder when you have 60 years to fill after leaving work. I wonder if the FIRE movement isn’t a symptom of a bigger societal malaise, which is the inability for humans to adjust in the Age of Acceleration, where the pace of change has exceeded our natural ability to cope and adjust. Instead, people just want out. Instead of choosing such an extreme solution to an unsatisfying job, I’d work with them to explore what gives their life intrinsic value and what other careers they might pursue that they’d find more fulfilling and more sustainable for the long run.
- Societal burden. A member of the audience asked the speaker whether FIRE adherents were taking advantage of subsidies intended for poor people in health insurance or Medicaid. This question got me thinking about the societal impact of having so many people checking out of being productive members of society at such a young age. Our country is aging, with ever more retirees putting a larger strain on our social support systems such as Social Security and Medicare. Much of the cost is born by contributions made into the system by younger workers. If younger workers retire and stop contributing to the system, what does this do to already dire predictions of system fragility? There will be no Medicare or Social Security by the time they reach their mid-60s if enough people stop contributing when they are in their 30s or 40s.
While I can appreciate the desire to achieve financial independence in order to pursue a more meaningful life and escape the rat race, I think there needs to be balance between pursuing a meaningful life and contributing to the greater good. It seems many of the more extreme adherents to the FIRE movement might be basing their future on flimsy financial assumptions, a desire to escape their current situation and not taking into account their impact on society.