Don’t Play With “FIRE”

Categories : Financial, News
May 4, 2022

Back in 2019, we reported on a spreading phenomenon known as F.I.R.E., an acronym for “Financial Independence, Retire Early.” According to the “movement,” making certain current lifestyle adjustments would allow young workers to retire at age 40 and live happily ever after. Our comments at that time were very skeptical, as the idea seemed to have little redeeming social or practical value. Looking back, it appears that our comments were both timely and spot-on. Since then, the “movement” has been perpetuated.

Naturally, the emphasis for F.I.R.E. believers is on saving more money than they do now. That means cutting back on almost every aspect of lifestyle, including, if necessary, living in their parents’ basements. Cutting out, or at least reducing, Starbucks and certain other luxury items, makes sense (for everyone), but it won’t add up to retirement at 40. Maxing out 401(k) contributions is a great idea, but compounding investments requires decades to create real wealth.

Unless the young F.I.R.E. follower is an. Unusually high earner, such as certain physicians and attorneys, etc., making ends meet is enough of a challenge without having to save 80% of income. Many highly trained professionals also graduate with substantial student debt. Also, they contribute to society through developing and practicing skills. Most derive great satisfaction from their careers.

But all that is paltry compared to the inevitable conclusion from F.I.R.E. gurus that critical to the early retirement plan is earning extra money. “Do something you love,” they say, “write books, do whatever it takes to provide income.” In a word, “Work.” So, the secret to retiring is to work. Who knew?

We should mention health care, health insurance, Medicare, and Social Security, as well. Those require years of contributions in order to provide useful future benefits. Retiring prior to vesting, or missing the largest contribution years, will curtail the availability and value of later benefits.

Our bottom line is that taking shortcuts in life frequently results in disaster. Retiring at an age when most people have a very limited understanding of the world is a formula for failure. Are those braggarts who tout their own success stories doing something for mankind? Or, do you think that, just maybe, they are selling their books for a profit?

Some of the more recent F.I.R.E. supporters are actually raising the targeted age to 50, or even 59. While perhaps not totally practical, at least a planning case could be made for the possibility of success at those ages.

Van Wie Financial is fee-only. For a reason.