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Where’s There FIRE, There’s Some Smoke Too

Category: Financial and taxes in retirement

January 29, 2019 — Perhaps you have heard of the FIRE movement, which stands for Financial Independence, Retire Early. The idea is to retire in one’s late 30s or early 40s by a combination of aggressively cutting down on spending and amassing retirement savings. There are hundreds of thousands of millenials, many of them in the hi-tech sector, who are enthralled with this idea. In many ways the movement is an outgrowth of the old “What is your number” question – as in how much money do you have to have in the bank before you think you can tell your boss to take this and sh*ve it! But for all of its devotees, there are many financial experts who warn that FIRE is not either feasible or safe. Here is what that smoke is all about.

One expert believes that is just not possible to accumulate a large enough pile of savings to be able to safely pull off an early retirement. Suze Orman, the popular financial guru, thinks you need $5 million to be able to pull off retirement. She thinks FIRE could be “the biggest (financial) mistake” of a lifetime. Mitch Tutman dismisses her figure as too high, saying you can do it with $1 million. Either way, it is the rare person who can scrimp and save enough to get to any one of those levels by the age of 40.

If you can amass $5 million in savings it certainly looks like you could live on that amount. Using the old 4% withdrawal method, a nest egg of that size throws off $200,000 per year. If your savings are $1 million, that generates $40,000 per annum. Without Social Security, that is not much to live on.

For someone who wants to get out of the workforce and enjoy a life of leisure, follow their hobbies, or do volunteer work, the advantages of retiring 25 or more years before the normal retirement age of 65 are plain. There is no annoying boss or client to tell you what to do, and you get to do what you want. If you can make it happen, it might be ideal.

But let’s look at some the problems with the FIRE approach to retirement:

  • Hard to save enough money that quickly. Say you start working at 22. To retire with $5 million by age 42 you need to save and get cumulative returns in the realm of $250,000 a year. To get to a $1 million nest egg you need savings and returns of $50,000/year. The latter is possible, but only if you are making a lot of money in the first place.
  • Ofen encourages risky investment strategies. In pursuit of high enough returns to generate enough capital, some experts like Mark Hurlbut of MarketWatch warn that investors often take on excessive risk, thus jeopardizing retirement in even the normal timeframe.
  • No turning back. People spend more money in retirement than they think they will. Let’s say you think you have enough to retire at age 45, but have a big financial setback five years later. It could be health crisis or a parent or child who needs help. Or, you discover that you are not happy doing nothing, and would like to return to the workforce. Unfortunately, millions of Americans in their 50s and 60s have learned that once out of the workforce, it is really hard to get back in. Their skills are outmoded, and intrinsic ageism is real. You might be very disappointed in the kind of job, if any, you can get.
  • Social Security penalty. Your Social Security benefit is determined by the highest 35 years of your contributions to the system. But if you only work 20 years, SS puts in a zero for all the missing years. Result: a very small Social Security payment for 20 or even more years.

Not to say that the goal of cutting down expenses and saving aggressively for retirement isn’t a smart one. Early retirement might be worth trying, particularly if you have goals for retirement that will make you happy. We are just suggesting that you should have reasonable expectations.

Some amazing FIRE savings strategies:
The folks who are FIRE advocates have generated all kinds of interesting ways to save money and raise extra income

  • Own a car, but don’t drive it. Ride a bike and rent out the car online
  • Live in the spare bedroom, rent out the Master on Airbnb
  • Cut the cable cord
  • Get an extra job
  • Never pay retail
  • Do your own home repairs
  • Buy multiple rental properties

Your comments? What do you think – are you interested in or pursuing a FIRE strategy? Let us know your experience in the Comments section below.

For further reading:

Posted by Admin on January 28th, 2019


  1. I’ve been aware of FIRE for a number of years and have followed a couple of the internet discussions. Having retired at 55, we qualify as “early retirees”, though certainly not FIRE “members”, but some of the ideas also fit our circumstance. One thing that I noticed in the discussion is that many of the prime adherents assume some post-FIRE-retirement or “alternate” source of income such as blogs, writing, or part-time employment. So, retire from your (perhaps) high stress, working-for-the-man job, but continue “working” and call it fun or hobby. As the article states, that’s potentially hazardous and could be truly stressful at some future point when it maybe is less desirable.

    Having retired at 55 with only a small reserve of savings, we did fit some of the FIRE description. However, first of all, we got lucky with the markets and have doubled our reserve, though now growth appears stalled. Today, even those with normal retirements and especially FIRE adherents potentially face a far more difficult path if the markets stall or drop for an extended period. A good friend (an even earlier, recent retiree) is facing that and is fortunate to have a good private “part-time” business that keeps him involved AT LEAST 40 hours a week. (Some call that a second career!) While $5M may carry you through a long-term down market, today a $1M FIRE adherent already faces those minimal market conditions (some have for years been predicting a 10-20 year “flat” market.) A recession followed by flat market returns is another possibility.

    I’m not opposed to FIRE — but just as I used to counsel my employees who were considering a different job, perhaps you may want to hold on to what you have if you get enjoyment from it unless the pay increase is life changing. (Some FIRE adherents become so fixed on the goal that they ignore the enjoyment or other benefits they get from a traditional job.)

    Today’s world is fraught with pitfalls. Almost anyone could find themselves in FIRE-like circumstances due to unemployment without real options. When I saw the government employees out of work due to the shutdown who said they live paycheck to paycheck, my first thought is to find a way out of THAT circumstance as soon as possible (find a way to cutback and save). But studies today show that may be the norm — the majority of those approaching retirement age, have little or no savings. FIRE as an option actually only relates to only a few. Those of us in “traditional” retirement mode may have a LOT to be thankful for.

    by RichPB — January 29, 2019

  2. WOW and LOL! I never heard of FIRE and probably a good thing. How tempting would that have been especially after a nerve wracking week in the office? I cant see how someone in their 30s could accumulate the nest egg not only to cover known future known expenses but the unknown like inflation and the costs of new as-yet unimagined technology. Also, there’s something about work beyond the paycheck that is good.
    While in grad school back in the 1970s I did some coursework in gerontology, an emering field back then. At that itme there was a suggestion that people might do well to totally change careers midlife including differnt going back to school to learn something entirely different and starting out fresh. That I could see, save enough to take a few years off to return to school and then start up again. The benefits would be to keep the brain young 😉
    Also the research into the Blue Zones ( seems to indicate that people in those super long lived populations dont look at life as having a stop date for being productive.
    I did retire at 55 to help my 91 yr old mother and stay very active but would not be adverse to picking up a part time jobs doing something I think would be fun. Unfortunatley the one job I always thought about no longer exists – working behind the counter in a Soda Fountain mixing up egg creams and root beer floats.

    by Jean — January 29, 2019

  3. Frankly I think S Orman is nuts & lives in La La Land!
    A lot of these financial gurus make millions selling books,
    CD’s , boot camps & ad revenue from their programs & their advice is ok but also very generalized.

    If you’re a frugal person you definitely don’t need $5 mil retirement account!! If your house & car are paid off all you really need is food on the table (manageable If you don’t eat out daily) & taxes ( big hit if you live in CA).
    That’s is why many boomers are leaving CA in droves. So the thing that’s left is travel & entertaiment, which is manageable if you hit a rough spot, you can pull back..

    The idea also that you have to keep working cuz of the ‘what if’ scenario has a lot of people tied to a job they might detest!

    If you exercise (biking/ hiking/walking/ going to gym),
    eat a healthy ‘whole food plant based diet’, your odds of avoiding the ‘what if’ health scenario is mitigated!

    So enjoy life & if the ‘what if’hits then you deal with it!

    Push comes to shove if you retire in 30’s/40’s & ‘something happens’ if you have marketable skills you can go always go back to some type of work.

    I retired at 57, after 23 years as a financial advisor, 3 years now & haven’t looked back. Exotic Adventure Travel Is currently our thing & also considering moving out of CA in the next few years which is why I follow this website. The only problem is with the amount of boomers out there, a lot of ‘Top 20 places to retire’ are getting over crowded & with the usual problems of congestion, high real estate prices etc. from the place we want to leave:)

    Becoming an Expat is another option to keep costs down & NOT needing 5 $mil as S Orman talks about.

    In our case we have a small condo on Athens coastline, where it’s very affordable (private health care ~200€/m!! property taxes about ~300€/yr, assoc/dues also ~300€) Healthy food from Farmers markets & fresh fish is abundant & cheap.
    The life style is friendly & relaxed even though Greece is suffering severe austerity. Real easte prices are currently a bargain & public transportation is abundant & affordable.

    We plan to spend 3-6 months a year going forward & if we move out of CA we can cut our time & expense of flying there!

    So go ahead, live a minimalist life (under your earnings, get rid of debt & enjoy earl..ier retirement!

    by Socrates A — January 30, 2019

  4. There is a FIRE blog called “Mr. Money Moustache”. The idea is that once you start working, you would live on 50% of your income and bank the rest of it by living frugally. Once you have banked your yearly income times 20, then you can retire. The saved funds are invested in Vanguard Index Funds for the most part. He advocates living close to your office and riding a bicycle for most trips and not following the typical American materialistic mindset. He owns a rental property free and clear which provides income. Most of the people on the blog are IT workers with great six figures who can well afford to live on half of their income. Mr. Money Mustache himself is Canadian by birth and chooses to live in Longmont, Colorado. He feels living in a place with a low cost of living is an advantage.

    Check out the blog–many people follow it–even Wall Street Moguls contact him for advice. He has been retired since he was 30 or so and has a wife and son–all onboard with the philosophy. He claims to live a luxurious lifestyle on a family income of $26,000 a year.

    by Jennifer — January 30, 2019

  5. Socrates, could you tell me where on the coastline of Athens you own a condo? Also, you state private healthcare is $200.00 a month. Is that because you are a citizen of Greece? I have looked at different countries to retire to or reside in for a few months out of the year, but not being able to obtain good, reasonable healthcare coverage because one is not a citizen stops me. Thanks for your reply.

    by Charlotte — February 1, 2019

  6. I’ve been retired since 59, so I don’t quite qualify to say that I retired early. On the other hand, I’ve been following several FIRE blogs for several years: and among others. There’s also an online calculator that many FIRE people use:

    Your article mentioned that most people in the FIRE movement try to retire in their 30s and 40s. While there certainly are those groups of people in the movement, there are far more people who are in their 40s and 50s.

    Also, Suz Orman has since recanted part of her original FIRE-related statements. She has since posted that she now understands that the FIRE movement is more about getting to a place where you work when and where you want in a way that brings pleasure, instead of simply needing to work for money. That would include people who never work once they retire, as well as people who find fulfilling part-time and/or second careers.

    The FIRE movement is FAR more inclusive than your article made it out to be.

    by John — February 12, 2019

  7. Hey Charlotte, Sorry for the delay I was in Sri Lanka for a few weeks:) Not many Americans but plenty of Europeans, Chinese & Russians. Highly recommend, but I digress..
    Condo is in Glyfada where the old airport used to be until they moved it just prior to 2004 Olympics. It’s part of what they call the Athens Riviera:) The 200€/m is for getting into a private hospital to avoid the public overburdened hospital system.
    Not just for Greek citizens although many of them opt to have to avoid the ‘Free’ ‘LOL’ Social Medical system in place.
    The deductible is 1500€ or €750 in one of 5 private Athens hospitals (like in network) +all 5 had pretty decent ratings.
    You can change the parameters & also add features like outpatient, wellness etc. Since we travel a lot to far-away quirky destinations we are also considering a Global insurance policy that goes beyond 20-30 days of travel ideal for expat living. We’re just beginning to look at that & considering Aetna International & Cigna (quotes available online). It is more expensive than the AXA coverage provided in Greece but still cheaper than what we pay in US (since we’re not 65 yet.
    Hope that helps:)

    by Socrates — March 13, 2019

  8. The coronavirus has thrown a big monkey wrench into the spokes of many FIRE advocates’ retirement plans, unfortunately. With a 20-30% drop in the market, withdrawing at the 4% rate is going to mean a big drop in disposable income. Some folks are better off than others, of course, but it does show the perils of the movement. This article from the NY Times has some interesting insights into what is happening in the FIRE world right now.

    by Admin — April 4, 2020

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