When I first started writing about achieving financial independence early in 2009, I never thought the FIRE movement would reach such a huge level of interest a decade later. After all, only misfits decide to aggressively forgo material pleasures, save 50% or more of their incomes, and retire from well-paying jobs in their 30s and 40s.
Back in 2009, the “lifestyle design” movement was all the rage because people were getting blown out of their jobs left and right. Some people went back to graduate school to save face. Others decided to start lifestyle businesses after getting laid off. I figured there was a good chance my head would also roll, which is one reason why I started Financial Samurai that summer.
Thanks to a raging bull market that ensued, life turned out fine and the FIRE movement picked up steam. Today, we are at peak FIRE, perhaps similar to peak crypto reached in December 2017. Unfortunately, when you’re at the peak, there’s usually nowhere to go but down.
Growing Angst Against Financial Independence
You know we’re at peak FIRE because not a day goes by where there isn’t a new story about someone leaving a job early and how they did it. Recently, the most popular posts on Financial Samurai from an organic search perspective are all related to financial independence as well.
As an investor, we know that by the time the news is in print, it’s often too late to invest. Rather, it’s likely a more opportune time to sell. Just think about Uber and Lyft finally filing to IPO in 2019. After all the easy money has been made as private companies, they’re hoping to finally cash out to public investors.
My job as an investor and as a personal finance writer is to do my best to forecast the future. Writing about what may happen is infinitely more interesting (and risky) than writing about the past. Forecasting the future challenges your mind and could make you a rich hero or a broke fool with egg on your face.
But as with everything in life, no risk, no reward. Today, my crystal ball is saying the FIRE movement is in for a rude awakening.
On the one hand, there is growing disdain against the FIRE movement from the majority of Americans who will never reach financial independence. With the median household income going nowhere over the past 10 years, it’s been hard for middle-class Americans to get ahead. Further, the average American has a pitiful amount saved in their retirement accounts.
When you’ve been spinning your wheels for so long, all this brouhaha about people retiring early to live fabulous lives in their mom’s basement while posting fake Instagram pictures about their amazing lives starts to get mighty annoying after a while. Annoyance turns into rage and a new movement is born.
On the other side are FIRE practitioners who are finding out that not all is sunshine and rainbows once they’ve quit a stable job with wonderful benefits. With a slowdown in the economy on the horizon, things are not looking good.
The DIRE Movement Is Created
The Fed is on a mission to suffocate the economy with more rate hikes. The current administration wants to further escalate trade wars because of alpha male ego, no matter how adversely it affects the stock market. Meanwhile, the housing market has gone past its peak and will likely continue to be in the doldrums for the next several years.
When a downturn hits, if it hasn’t already, it’s an inevitability that FIRE followers will be forced to go back to work and earn their retirements the old-fashioned way. Some might even say FIRE during a recession stands for Foolish Idealist Returns to Employer.
However, as long as we keep the FIRE acronym alive, we give hope to its original meaning. But when all is lost, false hope only gets people into further trouble. Therefore, let’s eliminate FIRE entirely from our vocabulary so that we can finally make a change!
Let me introduce the newest retirement movement to the world: DIRE. As a realist who sees the future, it is all but a certainty the DIRE movement will supplant the FIRE movement as the retirement path of choice. Let’s find out why.
D Is For Delay
For most people, delaying retirement due to the rapid rise in costs for housing, healthcare, and education is the only way to survive.
Given the median household income has stayed stagnant at around $61,000 for the past decade while the median house price in America has risen from $177,000 to $222,000 during the same period (26% increase), housing has become less affordable. In some cities, real estate prices have appreciated so quickly that most residents have no hope of ever owning.
Healthcare costs are out of control, especially if you plan to carry the entire monthly premium burden yourself. The average total healthcare cost is now almost $20,000 a year, subsidized mostly by the employer. Once you’re out of a job, the entire $20,000 cost falls upon you unless you have a low enough income to qualify for subsidies. For my family of three, I pay $1,760 a month, or $21,120 a year for a platinum plan. None of us are overweight or have any serious chronic illnesses either.
Education costs, specifically college tuition has grown unbearable with annual tuition increases averaging 5% – 7%, regardless of a recession or not. That’s a doubling of tuition every 10 – 15 years. Good luck retiring early if you’ve got to pay $50,000 – $100,000 a year for four or five years for even just a single child.
For parents with kids, retiring early will be all but a pipe dream. There will always be at least one parent working full-time to earn a steady income and have subsidized health care. The non-working parent can shout they are FIRE as loud as they want, but nobody will buy it. Being a stay at home dad or mom is nothing to be ashamed about. It’s a damn hard full-time job! Yet for the man especially, he can’t seem to accept his new reality of living off his wife’s income.
I Is For Inherit
With no hope of retiring early, many Americans are counting on an inheritance as their retirement strategy. With 25 as the median age when parents had kids in 1970 and the median life expectancy currently hovering around 80, the average American will likely have to wait until around 55 to inherit anything.
Today, the average age when women start to have children is 28. Therefore, future generations will likely have to wait even longer to inherit anything, all else being equal.
Not all is bad news on the inheritance front, however. With the average net worth in America rising to almost $700,000, parents are doing more than ever before to help their adult children thrive in adulthood. After all, Baby Boomers have benefitted the most from the longest bull market in history.
Every single one of my immediate neighbors in San Francisco has parents who either bought them their house or are letting them live in one of their multiple properties rent free. When I first moved into my house in 2014, I met my neighbor’s son who at the time was a 24-year-old senior at UC Davis. When he graduated in 2015, he returned home and still hasn’t left! Curse him and his noisy motorcycle.
Can you imagine relying on an inheritance as a retirement strategy? You might never be able to start a family, create your own sense of independence, and make your great contribution to society. Clearly, one side effect of DIRE is a surge in depression.
R is for Retire
Forget about retiring in your 30s, 40s, 50s, or even 60s. With DIRE, we’re talking nowadays about the majority retiring in our 70s or older, baby! We’re living longer. This means we’ve got to work longer to support ourselves. Once upon a time, people would retire at age 65 and die within five years. We are returning to the phenomena of that bygone era.
The earliest one can collect Social Security will rise from 62 to at least 65 if the government wants to make the program whole. After all, the government runs a massive budget deficit each year. With little-to-no social safety, achieving a comfortable retirement life will all depend on you. Thankfully, there are now free financial tools to help manage your finances.
With the trend towards retiring in our 70s or older, retirement life won’t be as fun. It’ll be much harder to play leisurely sports like golf or tennis when your back is always in pain. There’ll be no way to ever climb the stairs of Santorini when your knees don’t have cartilage. Donkey ride it is!
The only thing left you can do in this new world of retirement is watch tons of TV and surf the internet. At least with the popularity of food delivery apps, you will no longer have to go out of the house to eat a nice rubber chicken dinner. Staying glued to a lounge chair is what the new retirement reality will be like.
E is for Expire
Here is where the DIRE movement will be at its saddest. After a long life of working because you had to, not because you wanted to, reluctant DIRE followers will look back on their lives with regret. They will curse the day they ever heard about FIRE because otherwise they would never have taken the leap of faith at the top of the market and fallen splat on their faces.
Instead of being the hare, they would have won the race as the tortoise – steadily saving and investing their income during their highest income earning years with much less stress and worry. They wouldn’t have had to embarrassingly gone back to work with their tails between their legs and watched old colleagues now become their bosses. They wouldn’t have needed to go through multiple mental breakdowns and countless nights of self-doubt because they couldn’t replace their day job income with freelance income or entrepreneurial income to take care of their families.
Contrast reluctant DIRE followers with DIRE enthusiasts. DIRE enthusiasts see the FIRE movement is in trouble and decide to stay the course. Instead of retiring in their 30s or 40s, they decide to maximize their highest income earning years and retire with multi-millions in their 50s. Given everyone is living longer, retiring in your 50s is like retiring in your 40s of yesteryear. Of course, they also don’t just stay miserable at their jobs. DIRE enthusiasts proactively search for better opportunities in order to keep on working.
A DIRE enthusiast doesn’t scoff at families who believe they need $5 million in an after-tax portfolio to retire early. DIRE enthusiasts understand that runaway inflation, globalization, and structurally lower investment returns in the future will wreak havoc on living the early retirement dream. Therefore, instead of getting into a rage about why the world’s round peg doesn’t fit into their square hole, they simply adapt and work longer.
The DIRE Movement’s Future
Unless you’re willing to work more than 40 hours a week, build some side hustle income, generate some stable passive income, save aggressively, and continuously make shrewd investments for the long term, you have no chance of FIRE. And if you don’t do all these things and still decide to retire early, you will likely be screwed and join the reluctant DIRE camp.
Yes, some of you will decide to live like paupers and either delay or not have kids to keep expenses to a minimum to hold onto your FIRE dreams. However, for the majority who want to live more conventional lifestyles, it’s more important than ever to follow some key financial principles to increase your chances for financial independence.
If you are wise, you will embrace the realities of DIRE as the world heads south. Giving priority to caring for your family and delaying a super early retirement is the responsible thing to do. Don’t let FIRE FOMO foster irrational decision making.
Yes, if the economy gets really bad, there will be more face-saving by folks who say they are FIRE instead of admitting they got laid off and are drowning in a sea of despair. Just recognize not all is what it seems as people put on brave faces. If your passive income cannot comfortably cover your best life’s living expenses, you are not FIRE and only fooling yourself.
It’s time for the DIRE movement to rise up! I’m personally looking to head back to work to buffer the expected obliteration of my finances, but I’m afraid after almost seven years of unemployment, nobody will hire my dire self.
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