The "FIRE" movement (short for "financial independence, retire early") has been gaining in popularity as more people, particularly millennials, have taken an interest in securing their financial futures and exerting control over their careers.
After producing a Grow documentary about FIRE, I was left wondering if the movement was right for me. After all, as an unmarried man in my mid-30s with a decent income, I'm an ideal candidate for FIRE, at least in theory. However, after lots of research and conducting over a dozen interviews for the documentary, I was left with several key takeaways that keep me from fully embracing the idea.
Here's what I learned.
Video by Stephen Parkhurst
Most FIRE advocates recommend saving anywhere from 25% to 70% of your annual income. Such enormous percentages are challenging for people with families, large debts, or a high costs of living. I don't have kids or debt, but I do live in a very expensive city. Rent, transportation, and food make up the majority of my expenses. While I don't live lavishly, I enjoy dining out, traveling, and the occasional Lyft ride when the subway is snarled up on weekends.
I currently save 12%-16% of my monthly income for retirement and general savings, and I certainly could save more. However, I'm reasonably healthy and I would like to enjoy my money now, instead of living like Smaug from "The Hobbit," hoarding his riches. (Look how well that turned out for him.) Life is short, and while I want to prepare for the future, I don't want to deny myself every pleasure now with the hope that I am still able to enjoy things 40 years from now.
I discovered some genuine benefits to early retirement while producing the documentary. Most notably, I would save lots of time, money, and stress from my commute. And while I like my job (Hey boss!), there are aspects of it I wouldn't miss (Meetings! Endless Slack messages! The worst coffee machine in Manhattan!). But I also learned I wouldn't really be able to "retire" in the traditional sense.
In truth, "FIRE" should be "FICC" for "financial independence change careers."
Even if you saved millions to retire at 35, you'll need those millions to last the rest of your life. You most likely won't be able to live out your days on a beach sipping margaritas, and will probably have to find a new source of income. So while the most successful FIRE participants are able to transition into activities like writing, podcasting, YouTube, or speaking engagements, at the end of the day, it is still work.
Financial independence is great way to give yourself more flexibility to pursue other paths, but it's important to be realistic about what "retirement" will actually look like for you. For the vast majority of working Americans, even the most aggressive savings plan won't allow them to completely retire at a young age. You'll most likely need to find other income sources to supplement your new lifestyle.
Many FIRE participants use calculations from The Trinity Study, which argues that you need 25 times your annual spending rate to retire, assuming you'll spend 4% of your savings each year. The Trinity Study assumes there will be no major unexpected expenses, which unfortunately isn't realistic for the vast majority of us.
I had a huge health scare a couple years ago, and if I hadn't had health insurance through my job, it would have probably cost me upwards of $100,000. Even with good insurance, my total out-of-pocket expenses have been approximately $6,000 over the past two years. Health care can be especially fraught for retired or freelance American FIRE participants with high-deductible marketplace insurance plans, or no health insurance at all.
Even if you are healthy, other expenses like car repairs, elder family care, home repairs, child care, and moving can pop up. Joyful occasions like weddings and births are wonderful, but they can rapidly deplete your savings as well.
While I'm not aiming for FIRE, my deep dive into the movement left an impression on me. I've bumped up my 401(k) contributions and am working to expand my emergency savings from several months to a full year. I'm also cutting down my food budget by cooking at home and meal-prepping lunch more often.
While I admire the commitment and dedication of FIRE participants, I'm not interested in fundamentally changing my spending habits and lifestyle. After years of crushing austerity as I clawed my way out of the recession, I'm enjoying the relative luxury of not living paycheck-to-paycheck. I recognize I may be sacrificing some comfort later in life, but I believe I've found a good balance between saving for old age and enjoying my life in the moment.
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