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Retirement on FIRE: Lessons From a Challenging Concept

There is a small, but fervent movement afoot among Millennials known as FIRE -- Financial Independence, Retire Early. It's sort of a hipper version of the old country song by Jonny Paycheck: "Take This Job and Shove It." 

 The goal is to save as much as possible and then retire early -- in your 30s or 40s. Once you have sufficient money to live decently, additional money doesn't bring any more happiness.

Achieving a sufficient pot of gold early -- short of inheriting a fortune or winning the Power Ball -- requires a lot of hard work and an incredibly frugal lifestyle. Can you save over 50% of your income? Few of us care to live on a shoestring budget and forgo life's pleasures.

Those embracing FIRE would counter that the ethos of consumerism is too strong and that experiences should take precedence over material possessions. Of course, experiences can be expensive as well. Travel, for instance, is not cheap.

Financial independence may seem like a lofty goal, but significant obstacles to success exist once you stop working early:

  • A loss of prestige, self-identity, and social connections that employment often entails
  • Not earning higher wages as you get older (as most people's income increases in the later years of their career)
  • Lower Social Security benefits due to not earning more over time
  • Not being eligible for Medicare until age 65; the cost of health insurance is high in the interim
  • The risk of a serious health event
  • The inability to tap into qualified retirement accounts without penalty until age 59-1/2
  • Stock market returns do not support projected living expenses over such a long retirement period
  • Inflation and/or tax rates rise considerably over time
  • Inability to adapt to so much newfound free time

The FIRE concept has little practical application for most Americans. The vast majority of people struggle to save enough money to retire at a "normal" age at a level that meets their needs, let alone their aspirations.

On top of that, depriving yourself now holds little appeal, even it means not having to work for decades. The desire to enjoy life today is strong while the ability to conceive of, and prepare for, an unknown future is difficult.

Such a balancing act will always be a challenge. The key is to make your decisions thoughtfully and not leave your future to chance.

Words of Wisdom

Every morning I get up and look through the Forbes list of the richest people in America. If I'm not there, I go to work. -Robert Orben