SECURE Act? How about FIRE and the Retire Early Movement

As government workers or members of the uniformed services, we’ve gotten used to acronyms. In fact, you will sometimes run into an acronym that was created prior to the naming of a program or piece of legislation. One of the more strained acronyms of the last few years describes a topic that you will frequently read about in FEDweek’s TSP Investment Report – the SECURE Act (and its progeny, SECURE 2.0). Security sounds like something that we’re all looking forward to in retirement, so why not use the acronym SECURE for some of the most important retirement legislation in recent memory. But you’ll have to agree that it’s a bit of a stretch to come up with Setting Every Community Up for Retirement Enhancement.

Well, here’s a non-government acronym that describes something that might appeal to many of our younger readers – FIRE. Financial Independence, Retire Early. The FIRE movement is not just a financial movement, but a lifestyle movement as well.

FIRE ignited in the 2010s and encourages individuals to intentionally maximize their savings rate by finding ways to: 1) Increase income; and 2) Decrease expenses. Many FIRE folks follow the traditional 4% withdrawal “rule” (a not infrequent topic in our articles), which would suggest a goal of having at least 25 years of living expenses set aside by the time of retirement. If one were to save 50% of their income, it would take one year of work to save for one year of living expenses. In other words, 25 years of work would provide for 25 years of retirement living expenses.

Critics of FIRE say that it is only feasible for those who are highly compensated. While I’m stashing money away, maybe I could live on 50% of a GS-15 salary but could I do so on 50% of a GS-9 paycheck.

Does FIRE make sense for a federal employee or member of the uniformed services? The overall concept is appealing, but there are special things we should think about.

Thing 1: The FIRE formula ignores the fact that we will be entitled to a FERS (or BRS) benefit when we retire. I’m not considering those who are covered by CSRS or the Legacy Retirement System, as they are far enough along in their careers that they likely will not be interested in FIRE. The fact that we will have these sources of guaranteed retirement income will significantly reduce the amount of money we need to save to reach financial independence.

Thing 2: There are both age and length of service requirements for federal civilian retirement (and length of service requirements for military retirement) that must be met before we can retire. If a civilian employee leaves at an age prior to retirement eligibility, their annuity will be either deferred or reduced. Plus, we’re not eligible for Social Security until we are age 62.

But there’s something appealing about being financially able to retire as soon as you are eligible. To do that, you do have to sock extra money aside in savings vehicles like the TSP or IRAs. You may not be able to put 50%, or even 25%, of your salary away for retirement, but you can try to set aside the max ($22,500 in 2023). If you can’t do that, you should set aside as much as you can.

Financial independence does not come from spontaneous combustion – you must set yourself on FIRE.

John Grobe, President of Federal Career Experts, is an expert in the area of federal employee retirement and benefits. This expertise comes from his 26 year federal career in which he managed the retirement program in a 3,500-employee office of a large federal agency.

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