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Thoughts on FIRE

As a financial planner it’s common to come across articles, blogs, and other material advocating individuals, especially those that are young to embrace FIRE. The acronym FIRE stands for Financial Independence Retire Early.

Essentially what this movement advocates is for individuals to save as much as they can, in order to retire early, preferably while young, and no longer be dependent on wages.

At first glance, this appears to be a great concept to embrace. After all, there are many individuals who would like to retire early and not have to worry about where the next paycheck is coming from.

However, the FIRE lifestyle is not a strategy to be taken lightly. Additionally, be wary of those selling the idea of FIRE, without having skin in the game.

Let me explain.

First, to retire early, and be financially independent requires an enormous amount of discipline and an extreme amount of frugality. The general recommendation for folks saving for retirement is 15-25% of gross income to an IRA or 401k. Those looking to FIRE, should aim for 50-75% of gross income.

Why so much?

Think of it this way. If someone retires early at age 30, and expects to live another 50 years, that’s 50 years of living off portfolio income! Keep in mind this portfolio income is still subject to volatility – so even in down years, withdrawals must be made.

So, an individual looking for FIRE, must be frugal while saving, but also while in retirement. There’s a lot of sacrificing to be done. This isn’t necessarily bad but should be considered.

Some articles report that FIRE individuals retired on $1 million, expecting to live off 4% annually, or $40,000. Personally, I think this is way too low. What if their investments decline? Is the 4% guaranteed? What about unforeseen expenses such as health care, education, etc.?

Additionally, people who FIRE, can expect their Social Security income to be small.

Second, play devil’s advocate with those selling the FIRE philosophy. I’ve read several articles and blogs from self-proclaimed FIRE folks that say they “retired early and so can you.” But after further inspection, they aren’t truly retired. They either have a spouse that still works, or they continue to earn income through their blog, side jobs, etc.

Again, none of this is bad, but is it really retirement or simply working from home? Could they maintain their FIRE lifestyle if they quit blogging, or working from home? This I question.

Finally, there’s nothing wrong with working. Many individuals receive great satisfaction from their job – giving a sense of purpose, pride, and contribution. Many individuals would could retire, choose to continue working for other reasons – money aside. They have a sense of purpose, and many love what they do. Why would they retire?

Personally, I have nothing wrong with FIRE. I think it’s a lifestyle choice that can work for many individuals. For individuals considering embracing the FIRE philosophy, it will be important to do their due diligence, prepare for extreme frugality, and save more than they expected. It’s not something to play around with; after all, we all know what happens when we play with fire…


  1. dn says:

    You are getting yourself hung up on the “retirement” word. The movement is more about the optionality of working than retiring to do nothing. By “retire”, the FIRE folks are obtaining the option to step back from the regular grind that most people have, and instead are open to the possibility of taking a leave from work to travel, taking a lower stress/number of hours job to get their life&sanity back, and just enjoy life more rather than contine to part of the rat race. They can do this because they have saved and invested and staged their life so that they may elect to do this at a point earlier than is conventially practiced.

    1. sraskie says:

      I agree with most of what you are saying. However, there needs to be more transparency. Individuals should not say they are retired when they are in fact simply working a different occupation.

      Maybe they should say they are making money doing something they enjoy?

      Otherwise, they should not use the acronym. It’s my understanding that financially independent means not dependent on job income, and no longer working means retired.

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