One Seattle-area marketing professional told us she has mixed emotions about the word “retirement.” To her, it brings to mind a 70-year-old sitting in a rocking chair. Her retirement will be different.
She plans to “retire” from full-time work in 2020 — when she’ll be 30 years old. She says she will spend her life traveling the world, starting in Australia and New Zealand. She goes by the moniker “A Purple Life” online, and doesn’t disclose her real name because it’s easily identifiable and she doesn’t want her employer to know she’s thinking of retiring soon.
“I’m still planning to decide this upcoming November if my numbers are looking good enough to retire in October 2020,” she says. “I’m looking pretty good, but, based on the stock market, we’ll see.”
Her net worth, which she credits to scrimping although she makes a large salary for her age, now totals $340,000. To retire, she wants to reach $500,000, with dividends and other fixed payments, she hopes, seeing her through adulthood.
She isn’t alone in her dream of financial independence: freedom from debt — and from the rat race. She wants to live life on her own terms.
In recent years, interest in retirement at middle age, or even earlier, has taken off, helped, in part, by a popular blog by “Mr. Money Mustache.” The blog’s now-unmasked author, Pete Adeney, writes about his own experience of financial independence, living off investments and savings, rather than beholden to a paycheck. Adeney, a former software engineer from Canada who now lives in Colorado, retired in 2005 at age 30.
The movement has a name: FIRE, or financial independence, retire early.
There are no statistics on the number of FIRE adherents. The U.S. government doesn’t keep records, nor do retirement-investment companies such as Fidelity Investments. Still, the number of people who share stories on social media is exploding. There are more than 14,000 members in a Facebook group called Mustachians in Practice, in a nod to Mr. Money Mustache. Adeney says the blog, which has birthed dozens of others, has attracted tens of millions of visitors.
“This idea that you have to earn six figures, not have kids, that it has to be all-or-nothing — I think that’s silly. Most people doing it are actually living normal lives.”
Those who aspire to early retirement live frugally. Some are known to ride bicycles instead of drive cars, live in so-called tiny homes or vans, grow their own food, make their own clothing and home products, and forgo modern conveniences such as smartphones and home Wi-Fi.
Once they’ve saved a sum they estimate will enable them to live without steady work in the future, they quit their full-time jobs and settle into early retirement. To be sure, many take on part-time, seasonal or occasional work to help make ends meet.
How much money is enough? First, set a “FIRE number,” a calculation based on the funds required for an extended retirement. Mr. Money Mustache has developed guidelines for determining that number, factoring in the often-recommended 4% withdrawal rate during retirement.
There are variations on the plan. Some people work part-time, pursuing a strategy called “barista FIRE,” while others start businesses. Some don’t work at all.
Many people have almost nothing saved for retirement
If you think FIRE sounds impractical, you’re not alone. The movement has taken plenty of criticism. Some has come from best-selling personal-finance author Suze Orman. She says she “hates” the movement.
“It is the biggest mistake, financially speaking, you will ever, ever make in your lifetime,” she says. Unexpected hardships, including sickness, accidents and unforeseen expenses, lurk around every corner, she says.
Another reality check: Most Americans won’t retire early, if they can afford to retire at all. One in five has no retirement savings, according to financial-services company Northwestern Mutual.
And one in three baby boomers, the generation for which retirement concerns are most immediate, has less than $25,000 saved for retirement.
“There are corporate executives who have come into my office paying a mortgage, have kids in private school, and they’re exhausted in their 60s and want to retire. There have been a few times when it just wasn’t feasible.”
That said, the FIRE movement is changing the retirement conversation. Gone are the days of fantasizing about spending one’s golden years on a golf course. Why not do that now, even if you have to make sacrifices along the way?
“There are corporate executives who have come into my office paying a mortgage, have kids in private school, and they’re exhausted in their 60s and want to retire,” says Josh Fein, a certified financial planner who works in Los Angeles and New York. “There have been a few times when it just wasn’t feasible, and they hadn’t thought about it their whole life. If FIRE can bring awareness to that earlier on, I’m all for it.”
Why FIRE is taking hold
For all its newfound popularity, FIRE is really just a new way of talking about an old concept, says Ed, a 50-year-old who hasn’t worked a full-time job since he was 36. (He doesn’t use his last name online or when speaking to the media because “talking about how much money you have is tacky.”)
Ed runs the Early Retirement Dude blog. He says information about how to retire early is so readily available now because so many people are documenting their journeys online.
“People don’t have to come up with it on their own in a vacuum,” he says.
Before financial independence got the “FIRE” branding, books such as Vicki Robin’s “Your Money or Your Life,” published in 1992, addressed the same frugality and freedom virtues, says Tanja Hester, 39, an early retiree and author of the Our Next Life blog and a book titled “Work Optional.”
It makes sense that FIRE is growing, says Emrys Westacott, author of the book “The Wisdom of Frugality” and a professor at Alfred University in Alfred, N.Y.
Computers and smartphones have accelerated the pace of work and life, he says. Constantly adapting to new technologies is difficult for older workers, who fear they’ll become obsolete, he says. “It’s like the joke in ‘Alice Through the Looking Glass,’ ” Westacott says. “You have to run really fast to stay in the same place.”
A bull-market tailwind
The growth of the movement has coincided with a bull market in U.S. stocks that began 10 years ago. The 2010s have produced an annual average return of 13.2%, observes the financial company Convoy Investments, compared with the long-term average of 9.6%. Weaker returns or stock-market crashes, as occurred in 2000 and 2008, could limit or scuttle FIRE fans’ plans.
Ed, the Early Retirement Dude, says that shouldn’t be a cause for concern. Since he has been retired for 15 years, he has faced and survived financial, and other, downturns, he says. His wife had breast cancer early in their retirement, but they had saved enough that they were able to pay for her treatment, he says.
“I have tried to teach people from the very beginning that stock-market volatility is just as irrelevant as the daily weather to your long-term investing success,” Adeney, of the Mr. Money Mustache blog, says. “As long as you aren’t trying to dance in and out of the market with the current mood of the news headlines, a little bit of stock volatility will actually help an early retirement saver along the way, because stock-market crashes are just a temporary sale on stocks.”
The sacrifices people make
For many, FIRE is predicated on significant sacrifice. Adeney advocates against owning a car, and suggests moving to an area with a lower cost of living and practicing other frugal habits, such as cooking at home and becoming adept at DIY projects instead of hiring others.
Hester, of the Our Next Life blog, says talk of ruthless thriftiness is overblown.
“This idea that you have to earn six figures, not have kids, that it has to be all or nothing — I think that’s silly,” she says. “Most people doing it are actually living normal lives. If you can maintain a middle-class lifestyle and grow your earnings, you can save for it pretty fast.”
The FIRE movement’s wider impact
FIRE is likely to remain a niche lifestyle, Adeney concedes. Most people will continue “the same path toward material abundance,” he says.
But FIRE will spark new thinking in some about what they need to be happy, he says. “At some point, people are going to realize that we reached the point of ‘more than enough to be happy’ long ago, and they will start seeing that you can choose three-day weekends forever, just by giving up things like a thousand-dollar iPhone and a 300-horsepower pickup truck.”
In the next two decades, concern about material excess and climate change could drive structural changes, says Westacott, the Alfred University professor.
The popularity of Marie Kondo’s “KonMari” method — essentially getting rid of things you don’t love or even need — shows that things might be changing.
“People are looking around and saying, ‘I don’t need all this crap,’ ” Westacott says. “You can really live a very pleasant life on quite a lot less.”
Read more of the Best New Ideas in Retirement
• This is how much you need to save for retirement
• Long-term care insurance is a dying industry. Here are new ways the high costs of aging
• How robots and your smart fridge can help keep you out of a nursing home
• You’re probably not ready to retire — psychologically
• Retirement is an emotionally and financially charged life stage — ignore it at your peril