The FIRE movement, otherwise known as "Financial Independence, Retire Early", evolved from a hidden subculture to a mainstream idea during the late 2010s. The notion that people should strive for financial independence to spend their time as they wish naturally appealed to a wide audience. But after a global pandemic and its widespread aftereffects, the concept of quitting work in your 30s or 40s has become tenuous at best. Still, the underlying principles behind FIRE are worth knowing even if you aren't making a million dollars every year.
Here, we'll revisit the FIRE movement and examine why it still holds water as a philosophy.
Another look at FIRE
In practice, FIRE adherents seek to save as much money as possible as soon as possible. The hope is to take advantage of compound interest early on in life, thus growing an unusually large portfolio balance and making work optional at a young age. Many FIRE believers also follow the 4% rule around portfolio withdrawals: by taking out only 4% of your portfolio every year (with future adjustments for inflation), it's exceedingly unlikely that you'll ever run out of money.
On a base level, early retirees believe that their time is worth more than their money; that is, they'd rather use their 30s, 40s, and 50s to travel, raise a family, or take on personal development projects instead of spending those years working. From this perspective, they have a point: you really don't know what tomorrow will bring, so making the most of every day in your youth is a no-brainer. The key is making it work financially, which can come from saving a ton of money or from aggressively cutting your expenses.
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The current threats to FIRE
Many aspects of our current economic scenario have made critics especially skeptical of those who think the FIRE movement will survive the 2020s. First, inflation is roaring at levels not seen since the 1970s, which means every dollar saved now buys fewer goods and services than it did a year ago. Couple persistent inflation with declining stock prices, and you have a perfect storm that can torpedo any early retirement plan. Simply put, rising costs and smaller portfolios have made it that much harder to make FIRE possible.
Next, by leaving the workforce early, you lose valuable earning years for Social Security, which, with annual cost-of-living-adjustments ("COLAs"), can provide a durable spending floor in retirement. In other words, the less you pay into the Social Security system when you're young, the less you can expect to receive when you go to claim benefits in retirement. If you have the ability to defer your Social Security claim until age 70, you can receive an inflation-adjusted benefit that's even greater in proportion to what you've paid in. FIRE purists lose this opportunity.
Answering the critics
The math behind being able to retire early is one thing, but the underlying philosophies are worth understanding. For one, carefully evaluating how you spend your time is necessary at any age or income level. Even if you don't plan to retire at any particular time, keeping a healthy balance between work and personal is essential to a happy life overall. FIRE adherents perhaps take this to an extreme, but the prevailing message is to be a bit more aware of how you're allocating your time.
Next, it's possible you've heard of someone who worked for five decades only to retire in their 60s and face health issues shortly thereafter. While we can't predict if that will happen to us, we do know that time is limited and life can be fragile. With that said, making money work for you and spending time doing what you truly love almost feels obvious. The trick is making it work financially, which, now more than ever, can be a real challenge.
Even if you decide that retiring early isn't for you, striving for financial independence is almost certainly going to improve your life.
FIRE is still worth it
Many people who decide that retiring early isn't for them simply focus on the first half of FIRE, or "FI". Becoming financially independent to the point where you no longer need to rely on an employer for a paycheck is a goal that I'd imagine most people have, though saving enough is a perpetual challenge for the vast majority of workers. Even just spending less than you earn and being cognizant of how you spend your time is a step forward in the FIRE journey -- it's definitely something worth learning about.
