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. In 2020, we are at peak FIRE, as folks try and retire early with less than $1 million to live a spartan life with no kids, no expectations for health setbacks, and no sense of duty to take care of their parents or other loved ones.
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. Less than 5% of my posts are about early retirement since once you achieve FIRE, you don’t incessantly talk about FIRE. However, my FIRE posts are some of the most searched online.
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 cashed out to retail investors who are now down more than 30% if they invested on IPO day.
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 while posting fake Instagram pictures about their amazing travels starts to get mighty annoying after a while. There are people who constantly brag about how much money they’ve made each month and how their net worth has gone up without working.
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.
The DIRE Movement Is Created
When a downturn hits, if it hasn’t already began thanks to the coronavirus, 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. It stands for Delay, Inherit, Retire, Expire.
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.
Median household income has gone nowhere in awhile
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 four, I pay $1,760 $2,380 a month, or $21,120 $28,560 a year for a platinum plan. None of us are overweight or have any serious chronic illnesses either.
Granted, many FIRE folk try to take advantage of subsidized healthcare because their incomes are under 400% of the Federal Poverty Limit once they retire. But seriously, who wants to live near poverty-level incomes in retirement when you can find a more pleasant job and live a better life?
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.
But I have to admit, having kids is the best thing in the world. I would never trade kids for early retirement now that I know what I know.
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. The delay is due to the desire for more women to rightly pursue their careers and a couple’s need for more money. Therefore, future generations will likely have to wait even longer to inherit anything, especially as we’re all living longer and longer.
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.
Related:
The Negatives Of Early Retirement Nobody Likes Talking About
For F.I.R.E. wannabies, there is a simple calculation that would give them a pretty accurate idea of how they would fare if things go really bad supposing they want to fund their retirement being 100% invested in the stock market.
You can run a simulation by “investing” 100% of your nest egg in the Nikkei 225 at it’s peak in 1989 and see the effect of one of the worst secular bear markets in history on your retirement. As that markets goes steadily down for about 12 years, don’t forget to take into account that dividends would also be slashed by 50% or more or even completely eliminated as well.
If during the whole period (1990-2018), you are able to withdraw the
$ 30,000 or so you need, year after year, without running out of money at some point, then you know that your plan will probably work in most market downturns…
Doing that math is a very humbling experience, a dream-shattering reality check, but very necessary in my opinion to stress-test you retirement financial strategy.
I used a 100% allocation to the S&P 500 (with dividends reinvested) on Dec. 31, 1929. The initial annual withdrawal was 3% of the original investment and used a 3% COLA for subsequent annual withdrawals. The money lasted about 27 years.
I am 65. I retired at 63. There was no FIRE movement when I started saving in 1988/1989. I’ve been through the ’89 recession, the 99/00 recession, the Great Recession, the 2011 “flash” recession, and I am fine. Just work your plan. I had to wait a year longer than I intended to retire, but I did it. I created a 3-year cash cushion when I retired (12%), so I would never have to worry about a pullback in stocks. In December and January I got a lot of flack for that because some bloggers were suggesting a 100% stock portfolio, but right now I have no worries for the next three years. In addition, I am shifting money from bonds (18%) to stocks as the market goes down. All is going according to plan. People. Just work your plan and relax. It will work out.
If one has been on the FIRE plan but is now being forced to reconsider due to a 20% market correction, it ought to be clear that this person had no business thinking they were remotely close to being ready to retire.
“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.”
You will soon be in for a surprise. About 280% of the ACA age-related rate hikes occur after age 43. Rates from age 21 to age 43 are nearly constant – then the age-based curve starts upward on an exponential trajectory.
We live in one of the cheapest ACA markets in the country. In our late 50s, a bare bones, literally catastrophic Silver plan with huge deductibles for a married couple is almost $20,000 per year. That does not cover dental or vision, like the typical employer plan with a far smaller deductible. Adding in our youngest daughter in grad school – who we have to cover – our ACA costs would be nearly $24,000 per year for 2018. (I say would be because we ended up using a legal exemption to drop out of the unaffordable ACA markets.)
For dental, we pay about $1,200 per year for the two of us for what is effectively a dental discount/volume purchase program even though it is officially a dental insurance program and regulated as insurance. It caps each covered person to $1,000 total claims, and except for routine exams, it pays only 50% – and we pay the remainder. But one is stuck – if you don’t have “insurance”, your dentist will charge you twice as much as what they settle for with the “insurer” (based on actual experience).
We pay cash for all vision care.
Elsewhere, a married 64 year old couple earning pre-tax income of $65k/year is above the subsidy cut off, meaning they receive no financial assistance. In most markets, their ACA rates are around $28,000 to $36,000/year for a bare bones Silver plan. In Laramie WY (and most of WY) in 2018, their rates were $49,000/year. In Charlottesville VA for 2018, their rates were $57,000/year. (Quotes are from healthcare . gov web site for 2018). Their combined premiums + deductibles generally exceed their pre-tax income – and oh, they still need to cover minor stuff like food, housing, taxes….
(These bizarre situations happen because the subsidy cut off level is determined solely by the regional poverty income level. There is no connection to actual ACA prices – the poverty income level and your premium have no connection. Thus, the cut off is about $65,000/yr in income regardless of your actual premium.)
Am amazed you have a “platinum” plan. First, very few markets have platinum plans. Most have Bronze and Silver only; some have Gold. In sampling ACA premiums nationwide, I didn’t find any market with platinum plans except in Washington DC. I won’t go through the details here (unless someone wants it) but for most, a platinum plan would not be the best financial value.
Anyway, your price quote suggests you are going to be in for a surprise on future ACA premiums as you get older. Unless the government fixes the ACA or does some other random thing to health care.
DIRE is not the flip side of FIRE; it’s just regular life when people don’t save, particularly with an economy and culture dependent on spending. The basics of living under your means are not new so even missing fire but still having savings/investments is a good idea. As for Suze Orman’s recent statement of needing $5M to retire…where does the average American get that when they don’t even have $400 for an emergency? Pie in the sky either way.
Thoughtful comments Sam. I don’t entirely agree with the conclusion, but expect we’re heading back towards more “lifestyle design” instead of everyone trudging on a death march into their 50s.
I figure I’ll give up $4.5mil in earnings by leaving before my 37th birthday instead of working in corporate america until 50. Hobby entrepreneurship? Now I’m interested
Probably not far off of what will actually happen in the next downturn. Unfortunately so many are bought into all you have to do is live a frugal life and save enough so you can live off 4% of your capital. I just saw yet another MMM article that espouses that once again, completely discounting all the risks associated with that. I kind of feel sorry for the rude awakening so many will feel. Thanks Sam for painting the picture of the other side of the FIRE coin.
With that said, there is another perspective on FIRE/DIRE through a downturn. You can always delay the RE part of FIRE until after a downturn. If you are facing a market down 20-50% and have the capital for FIRE at that point, you’re in a much safer spot. Sure the market could decline more (catch a falling knife). But you are way better off than if you are sitting at the top of a market and FIRE. The ideal spot to FIRE is at the bottom of a bear market as you said in a previous article.
Yeah, it’s been a rough year for MMM and his cult followers. First his divorce and now the stock market really taking it on the chin. His followers don’t realize MMM makes millions off his site and can withstand the financial hit. He spends more than he says and is laughing all the way to the bank.
A bull market has made people lazy and stupid. They can’t think for themselves.
I’m not a follower of MMM, but does he really say 4% for the Fire movement? That’s almost malpractice. 4% MAY be ok for the normal retiree with a 30-35 year time frame, but almost impossible for the 50 to 60 year time frame some of these FIRE types need to plan for. Stepping down a 1/2% for each additional decade of expected life, and plan to 100 years of age, and you probably can make it. People need to recognize that they’ll have a 20-40% bear market every decade, and they need to keep the percentage low enough to be able to recover after each.
You are ABSOLUTELY right on the timing. Never FIRE at the top of a bull market : that is financial suicide !
I prefer FINER: Financial Independent No Early Retirement.
At work I simply stay away from those mortgage slaves and only socialize with like-minded people who know I don’t need the pay check. It gets a bit lonely but beats sitting at home.
I think how much the FIRE movement has jumped the shark depends on where you are. My circles are more NYC-based big corporate, or when entrepreneurs, the VC-funded kind, and FIRE isn’t as widespread an idea there. I actually think FIRE has much more room to emerge, and I think it’s still an important concept b/c jobs are so much more contingent now. You really should be aiming for FIRE just for the FI part and the ability to not rely on a job, whether or not you do the RE, Retire Early part or not.I say this as an HR consultant with 20+ years of recruiting and coaching experience, much of it with mid- to late-stage professionals (i.e., over 40). Someone who has reached FIRE, is close to FIRE, or is simply aware of that concept will have a stronger foundation from which to make good career choices in an increasingly uncertain job market.
Your best post ever, Sam – and the comments just keep getting better too, all so helpful. This is just intended as a word of encouragement to allay any apprehension about going back into the world of work. Anyone who has achieved what you have, has the imagination, resiliance and discipline to succeed at whatever you try.
Here in benighted Brexit Britain the FIRE movement has only quite recently become an identifiable trend. I’ve walked that path alone most of the way.
We don’t earn what you earn, but we do have effectively free health care, and it’s clear that this gives us a head start, as does being child-free (by choice). Having supported my spouse through seven long postgrad years there was a brief respite, then an involuntary geoarbitrage when he went to work 12,000 miles away, literally the other side of the world, in a place where trailing spouses were not permitted employment. It was a very hard decision to take b/c I was by then well established in a career I loved, but there was a lot of free global travel and when I’d had enough and London drew me home, three further careers (related enough to use transferrable skills) followed, the last being running my own micro enterprise. Terrifying financially but immensely fulfilling and again with plenty of paid-for travel and exploration. Currently on my fourth retirement, I’m certain keeping on learning is the one vital skill which will provide motivation, and you have plenty of that. – yours is the most inquiring and open mind among the US FIRE bloggers, IMHO.
When working the long hours it’s hard not to envy those with the freedom to spend their time as they choose, but also to make them understand that travel and expensive outings are not often possible for the non-retired. Once retired, it’s equally hard to imagine where the time came from to be able to go to work. Stepping back from childcare 24/7 will likely be harder than getting involved in a new venture b/c you’re doing it in the reverse direction from most – pioneering as ever!
All best wishes as and when, hope you can keep us updated with observations from the front when you have the chance.
Sam – Great column! At age 68 I am five years into my retirement following a rewarding 30 year career in hospital and academic medicine development. I, too, find the millennial based FIRE movement to be unrealistic in its thinking and personally disappointing in their values. They look at early retirement through rose colored glasses failing to consider the realities life can bring – often with significant financial impact: divorce, major recessions, health issues, parents in need of financial help, and poor investment choices. Also, I have found that many are so insular in achieving and maintaining their FIRE status (where independence and often travel are priorities) that, while perhaps sympathetic regarding the burdens of the underserved and marginalized, they generally are not at all philanthropic. Of course, my observations come from my 68 years of living life where hindsight can tend to be more 20/20. Thanks, Sam!