Show Notes for In Defense of FIRE
- Our topic is inspired by an article from Emily Guy Birkin titled “Don’t Set Your Happiness on FIRE”. Claire and I take up several points in defense of fire.
- FYI, Emily appeared in episode 29 of the now defunct Retirement Journeys podcast. You can listen to that episode using this link: RJ 029 Emily Guy Birkin
Point 1: One of the underlying assumptions of the 4% safe withdrawal rule is based on an average annual market gain of 10%.
- Emily’s concerns are that markets don’t always grow at 10% a year and there are years with steep declines which can seriously wound a person’s retirement nest egg. So the rule is risky to base retirement on.
- Claire’s clarifies that the 4% rule is not based only on stocks (e.g. 50% bonds too) and annual withdrawals allow for increases due to inflation. The 4% rule is a great place to start.
- Ted mentions that the Sequence of Returns risk affects everyone who retires not just those pursuing FIRE.
- The 4% rule is based on the Trinity study and uses actual historic market data. It has been successfully back tested numerous times.
- Ted has posted a video on Financial Independence in which he goes into more depth on the 4% rule. He also points out that we believe the 4% rule is best used to establish a goal early on. As retirement draws closer, we advocate moving to use a detailed retirement planning calculator in order to customize results.
Point 2: Potential mindless focus on accumulating savings can lead to unhappiness.
- Claire says that we’ve met many people who understand the effect of spending on their lifestyle and future goals. They are very intentional of their choices. You have to prioritize your spending and make tradeoffs because we can’t have it all.
- Ted counters with even if you’re mindlessly accumulating money at least you’re not accumulating debt. People shouldn’t be pressured into overspending because of FOMO – Fear Of Missing Out. He’s always taken satisfaction in watching his bank balance grow because it reinforces his spending and savings decisions.
Point 3: Lack of goals other the FIRE
- Claire recommends looking for sites and examples of people looking forward, who do have goals other than financial
- Some goals include wanting to spend more time with family and traveling. It’s about doing something more with your life than what you were doing before. It’s about doing what you want to do.
- Ted offers the example of Mrs. WoW (WafflesOnWednesday) who’s a physical therapist. She joins teams of medical professionals who travel to underdeveloped countries to provide free medical services. When she achieves FI, she wants to do more of this.
- We haven’t encountered people who are only pursuing FIRE for the sake of achieving a savings target.
- Having goals doesn’t apply only to people who retire early. It applies to everyone who retires.
- Transitioning to retirement is smoother if you develop interests while working and carry them over into retirement.
Point 4: it’s easier to achieve FI if you earn more money.
- Claire says that retirement hits us all and it may seem more difficult if you make less. Regardless, you still need to travel the road to retirement.
- Ted points out that any progress is a good thing.
- We believe it’s a misconception that you need to be privileged to achieve FI.
- Ted mentions a latestartertofire.com where there are interviews of people who join the FIRE movement later in life. Many of the stories feature people with modest incomes.
- FIRE provides a framework to talk about money, improve financial literacy and practices to follow to build wealth. FIRE helps people across the income spectrum. If not FIRE, then what?
- It’s easy for people to find reasons to say no. Looking at examples at the margins supports a negative attitude towards FIRE.
Point 5: In order for FIRE to work, it has to be intentional.
- Claire wishes that message was the subject of Emily’s article. Life needs to be intentional.
- Emily mentions sacrificing now in exchange for happiness later.
- Neither of us had a lot growing up, but we were happy. We don’t see sacrifice as a requirement of FIRE or happiness. It’s about discovering what matters, living life accordingly and practicing gratitude.
- Role models in the FIRE movement are not spending lavishly.
- Claire comments about Emily’s statement that people have a right to happiness.
- We believe that happiness is earned.
- It comes from within. It’s not about things.
- Once you learn about the principles of FIRE, you’ll make more intelligent financial decisions because you’ll understand the tradeoffs.
To strengthen our case In Defense of FIRE, we invite you to listen to L2F 014 The 6 Practices to Achieve FIRE