When I first started writing about achieving financial independence in 2009, I never thought the FIRE movement would reach such a huge level of interest today. After all, only weirdos decide to aggressively forgo material pleasures, save 50% or more of their incomes, and retire from well-paying jobs in their 20s, 30s and 40s.
Thanks to a raging bull market that ensued, life turned out just fine and the FIRE movement picked up steam. Today, we are at peak FIRE, similar to peak crypto reached in December 2017. There are 30-something year olds who are foolishly telling the world they're going to retire on less than $1 million.
Unfortunately, when you're at the peak, there's usually nowhere to go but down.
Why We Are At Peak FIRE
Here are some reasons why we are at Peak FIRE.
- Not a day goes by where there isn't a new story about someone leaving a job early and how they did it.
- Organic search traffic on Financial Samurai has never been higher regarding topics on early retirement and financial independence
- I'm contacted on a weekly basis by big media outlets asking to share my story about leaving work in 2012 at age 34.
- The stock market is in a 11-year bull run without seeing a 20%+ correction yet
- Fed Chair Jerome Powell has decided to raise rates even more in 2019, despite a clear slowdown in growth.
- The housing market in the coastal cities and major inland cities like Denver are seeing a surge in inventory and a decline in prices.
- There are slowly more stories about people who claimed they were FIRE, but ended up going back to work.
- More stories about those who quit their jobs but who had nervous breakdowns as they found it too difficult to replicate their day job income and benefits from work as an independence contractor or early retiree.
- A decline in passive income streams as companies cut dividends, rental prices soften, and risk assets fall.
- A huge uptick in fearful comments and personal e-mails I get about whether they made the right move.
The DIRE Movement Is Born
With the downturn upon us, it is clear to me that the FIRE movement is slowly going to get extinguished. The principles of saving aggressively, investing aggressively, and living below your means will always be there. But the movement, where people quit their jobs in theirs 20s, 30s, and 40s, to claim they are free will disappear.
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.
Peak FIRE Is Real And Coming
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.
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.
And the reality is, FIRE is also becoming obsolete post pandemic. With so much work flexibility and working from home, there's no need to focus on retiring early and achieving financial independence ASAP anymore.
Recognize Peak FIRE And DIRE
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.
Keep working and saving aggressively until you are absolutely 100% sure that even in a bear market, your passive income can cover your best life's expenses. If you exit the work force for an extended period of time, it is very difficult to get back in with the same job and pay you once had.
Eventually, the FIRE movement will rise again. But as of now, it's best to buckle down and jump off the bandwagon. I know what I write here won't make me any fans. I know there's a huge cult following of FIRE enthusiasts that I helped perpetuate starting in 2009.
But in order to build sustainable wealth, you must recognize the changes and adjust accordingly. Only a fool stays the same forever.
Related posts:
An Early Retirement Master Plan: FIRE By 45
About the Author:
Sam started Financial Samurai in 2009 as a way to make sense of the financial crisis. He proceeded to spend the next 13 years after college working in finance. In 2012, Sam was able to retire at the age of 34 due to his passive income investments. He spends time playing tennis, taking care of his family, and writing online to help others achieve financial freedom.
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