Now that the financial independence, retire early (FIRE) movement is growing more mainstream, you can’t throw a rock without hitting someone who thinks the whole thing is a bad idea.
And there are legitimate criticisms of the concept, from the fact that most people — especially minimum wage earners and those earning below the median — can probably never achieve full early retirement in our economy, to the truth that not everyone is temperamentally cut out for early retirement.
You’ll get no argument from me there. As much as I’d like everyone to have an equal chance at early retirement, the current reality is that low earners can’t even afford rent in most U.S. cities right now, so we have a long way to go as a society before everyone can attain financial independence.
For people who can’t imagine what they’d do outside of work, the best answer is certainly to keep working (though it’s not a bad idea to save a good cushion for yourself at the same time, because your job may not always love you back, and of course make sure you’re saving enough for traditional retirement).
But those who get most fired up in disdain for the movement like to focus on a few key points that aren’t actually true.
Myth 1: Everyone pursuing FIRE takes frugality to the extreme
It’s a compelling image, isn’t it, of people pursuing early retirement holed up in our freezing cold homes (because we’re too cheap to pay for heat), wearing socks full of holes (because we’re too cheap to buy new ones), eating rice and beans (obviously) with only library books as entertainment (because $10 a month for Netflix
is too expensive)?
The only problem? That’s not true.
Virtually everyone pursuing FIRE lives what looks like a pretty normal middle-class lifestyle. We spend on things we value, like travel and time with loved ones, and we eat normal food. (Some of us even famously spend large sums on craft beer.) Where we differ is that we get strategic about cutting out spending that doesn’t add value to our lives, and we’re ruthless about avoiding mindless spending and lifestyle inflation. Most of us don’t upgrade our cars or homes often (or ever), we don’t pay for unnecessary and easily replaced things like cable TV and we don’t spend money just because others expect it of us.
But large numbers of us living some faux poverty existence to make it all possible? That’s not a thing.
Myth 2: We don’t consider long-term risk
In nearly every critique of the FIRE movement, someone will quickly shout, “But it’s been a historically long bull market! It’s going to go down and likely not repeat these gains anytime soon!” And that’s true. But they say it as though we don’t know that, and haven’t planned for it.
You’ll meet few laypeople who can talk in as much depth about the history of the stock markets or about the science of safe withdrawal rates as those pursuing or living in early retirement. We know the ins and outs of the Trinity Study, we know the shortcomings of the “4% rule,” we’re well aware that market volatility is part of the deal and we build our plans to guard against sequence of returns risk.
Myth 3: Early retirement must mean tapping Social Security early
In plenty of FIRE critiques, you’ll see the false conflation of early retirement and claiming Social Security early, at age 62, instead of at the expert-recommended 67 or even 70. The problem is, again, it’s not how most early-retirement aficionados actually think about Social Security. In fact, many of us don’t even count it in our calculations at all.
While it’s true that retiring early will reduce your ultimate Social Security benefits, because those benefits are factored on your 35 highest earning years and a bunch of years with zeros will inevitably drag down your average, it’s not true that we’re all jumping to claim Social Security at 62 just because we’re not working.
Myth 4: We haven’t thought about health care
Another common refrain in FIRE-hater articles is, “But what about health care?!” As though we’ve all collectively forgotten that we live in human bodies that might sometimes require professional looking-after.
Health care in early retirement is a top concern for nearly everyone pondering leaving traditional employment, and it’s the single biggest reason why so many people stay at work even when they could otherwise quit and create a job opening for someone else. The uncertainty around health care is a great source of anxiety for plenty of working people, too, but early retirees have even greater urgency in figuring things out. Fortunately, there are several good options for early retirement health care right now, and if the political landscape shifts enough to change that, we’ll adapt.
The bigger problem that we should all be focusing on is how much traditionally retired seniors still have to pay for health care when they have Medicare coverage, and how unprepared most of them are for that.
Myth 5: We’re all going to be bored in a few years
This is the one that every early retiree I know finds most laughable, because there’s some definite projection going on with the folks making this claim. Just because someone might be bored without an employer telling them what to do every day doesn’t mean everyone would be bored in the same situation. Those of us who seek early retirement are generally people of many interests, and I know in my case, I will never come close to checking everything off my life list, even though I have nearly endless free time now to pursue my own interests.
If you have a life list that’s miles long, then don’t worry about being bored in early retirement. And if you are legitimately worried about being bored without a job? Then keep working as long as you’re able to. It’s as simple as that.
Myth 6: We’ll have no identity without work
Related to the boredom myth is the idea that every early retiree is destined for an identity crisis after we lose our job titles or other aspects of our work identity. And certainly some might. But that’s a normal feature of retirement at any age, not just early retirement, and it’s something that many of us who’ve ever worked will have to cope with at some point.
The years of planning for early retirement give you plenty of time to consider how you’ll derive identity and purpose from your postwork life. That could be through volunteering, though involvement in the lives of loved ones, or even from work itself, though work you do for yourself and on your own terms rather than an employer’s.
Myth 7: Working forever is a guarantee of not running out of money in retirement
The final myth is perhaps the most dangerous, because of the false sense of security it brings to those who don’t actually have security. “Keep working,” many experts say. “It’s far better to retire late than retire early.”
But just continuing to work is no guarantee of retirement success. The two benefits of working longer are you can increase your Social Security benefit by claiming it later (but you can also achieve this through proper planning, even without continuing to work past 65), and you need your retirement savings to last fewer years.
Most Americans are dramatically undersaving for retirement, with only a third of Americans having anything saved in a 401(k), and the average couple having a mere $5,000 put away for retirement. Most retirees are wholly reliant on Social Security for their retirement income (and they’re spending an alarming proportion of that benefit on their health-care costs, even with Medicare). At the same time, new analysis shows that more workers over 50 are being forced out of longtime jobs and into early retirement well before they feel ready.
The solution? We all need to be saving more, and much earlier.
What are aspiring early retirees doing? We’re saving more, and much earlier.
Instead of criticizing early retirees for not working long enough, perhaps we should instead invite everyone to emulate the savings behavior of those pursuing FIRE.
Bonus myth: Working longer guarantees you’ll live longer
FIRE haters like to trot out the statistic that there’s a spike in deaths right around retirement for those who claim Social Security at the earliest possible age: 62. But they’re confusing correlation and causation. Those who claim Social Security right at 62 tend to be the sickest among us, and so it’s expected that many of them would die young.
That doesn’t mean that retirement causes death, or that continuing to work guarantees living longer. There’s equal evidence that work is killing us, and planning your escape from the workplace might just be the best thing you can do to improve your odds of living longer and have more healthy years to enjoy.