‘I just quit FIRE. It was ruining my life.’ When early retirement doesn’t live up to the hype.

OK, so I’m simplifying. (These days the movement has split into various subgroups, such as “Fat FIRE,” “Lean Fire,” and so on. Don’t ask.)

I’m sure this works for some people. I’m sure it works for many people. But there’s an issue. “Financial Independence” and “Retire Early” are two very different things. 

One of my favorite personal finance books of all time, Steven Pollan’s “Die Broke,” was very much about fighting for your financial independence.

But Pollan didn’t suggest retiring early. He said people should never retire. 

Cue this confession by a former FIRE fan on Reddit. 

“I did FIRE hard-core for many years, saving 70% at the peak,” writes the Former Firee (my name, not his). But the COVID-19 crisis didn’t just blow a hole in his finances; it also made him confront his priorities. “I realize now after three years of missing out on friends and family that by putting off my personal life to save more money, I’m making a bigger sacrifce (sic) than just skipping lattes…I just cannot justify continuing down this road, working the hardest jobs I can get to add another X% to my portfolio and retire one year earlier. I just don’t care anymore.”

So he’s pulled the plug. “I think I’m done aside from contributing to retirement through my 401k. I have almost 27 years until traditional retirement age, so I’m just going to settle for that, and try to enjoy the ride. I figured out how I can have a more comfortable life and I’m taking steps to do that early next year.”

Instead, he is going to use the money he’s saved to keep working but live his best life.

“At this point I really expect to work for the rest of my life,” he writes. “The times I’ve been out of work were not relaxing at all. Rather, they were depressing and I felt bored and useless. I like working and doing something useful for society, and with my savings I could afford to take a pay cut and choose jobs based on something other than how much money I can save for FIRE.”

(This sort of approach is now called “Coast FIRE”.)

Before the FIRE movement, “financial independence” used to be called “—- you money,” because it was the amount of money you needed to say that to your boss, pull a Johnny Paycheck, and walk out the door.

It’s the amount that leaves you free from corporate tyranny, bureaucrats, incompetent and sociopathic bosses, and allows you to pursue your dreams if you want to.

How much is that? Everyone will have a different number, depending on their age and what sort of income they need to keep them fed, safe and happy. The Former Firee, who seems to be in his late 30s and 27 years from “normal retirement age,” says he has accumulated $960,000 but owns no home. 

With that amount of money and at his age, he probably doesn’t have to save another nickel for retirement. The average long-term return from global equities is about 5% “real” (meaning above inflation, which is the return that matters), and inflation-protected Treasury bonds currently yield about 2% real, so a low-risk portfolio of 60% Vanguard Total World Stock VT and 40% Schwab U.S. Tips SCHP should reasonably be expected to earn around 3.8% real over time. At that rate, $960,000 today would be worth $2.6 million in 27 years time — measured in “2023 dollars,” ie today’s money.

If you’re a 65-year-old man, and you convert that money to an immediate annuity, that’s enough to generate monthly income of $16,600 for life. 

That sounds pretty good to me.

On the other hand, that $960,000 probably isn’t enough to live on now. Converted into an annuity at his age it would generate $4,500 a month, which sounds OK — until you realize he owns no home, and that income isn’t going to be indexed to inflation. Yikes.

As for housing: Those who have equity in their homes, and who locked in long-term mortgages at 2.5% or 3% are sitting pretty. But those who do not own homes could hardly have found a worse time to buy than right now. U.S. home prices, as measured by the benchmark S&P/Case-Shiller National Home Price Index have risen 50% since just before the pandemic and housing affordability is now worse than it was at the peak of the housing bubble in 2007. This isn’t a great time to rent, but it’s an even worse time to buy.

Which, of course, leaves you more flexible to find your best life. Win-win?