Maybe today isn’t the ideal time to take the early retirement you planned. But the day is fast approaching. The pandemic will pass, economic activity will increase and the market will travel to new highs. Beginning retirement when the economy is at the beginning stages of a bull market allows for the longest period of growth before your budget is seriously challenged with declining asset prices.
Once I digested that it was only a number I decided to do what I always did. I try lots of things, grow my business and expand my sources of income, much of it passive.
You see, I learned the most important step of all: It’s the journey that matters, not the destination. And I had the best mate in the world along for the ride.
It was that day when I was a 32 year old man that I learned to live life for the first time. Live, for Real.
It didn’t exactly start with Mr. Money Mustache, but the FIRE community solidified around Pete and his work. Pete retired at the ripe old age of 30 and set a new standard in early retirement.
News feeds have a litany of stories of 30-somethings living the good life as they travel abroad. Coupled with the stories of people paying off a gazillion dollars in debt in four and a half minutes and it starts to look easy.
Except it isn’t that easy! It’s actually damn hard. Personal circumstances play a vital role. Where you live, your health and education opportunities determine at least a part of the outcome.
A common question in the FIRE (financial independence, retire early) community involves how much money you need to retire. Before I became a card-carrying member of the community I would hear the question something short of a dozen times per year. This blog means I hear the question a lot more these days. And people still don’t believe my answer.
There is a great misperception over how much money is needed to cash a check and walk your own path. I’ve consulted with 70 year old men worried they don’t have enough to retire. In the FIRE community younger people are more interested in the same question with a different set of rules.
Social Security changes all the rules. The 4% rule is wildly off the mark because they forget two simple facts; facts we will cover right now.
It’s hard to see when watching at the speed of life, but there is no doubt it keeps getting easier to reach financial independence. Some in the crowd might disagree with me. The statistics are clear, however. As the hand of time ticks by the human race is finding greater and greater opportunity at every turn until now when it is laughably easy to reach virtually any financial goal.
But we need to start at the beginning.
The FIRE community has been educating the public in attaining financial independence and early retirement for a decade or so now. Whenever the topic arises it is sure to be followed by the exasperated rebuke, “We can’t all do this! Who will do the work if we all retire at 30? The economy will fail.”
The argument has a sort of logic on the surface. If everyone retired by their 30th birthday there could be a problem. A 50% savings rate could crush the economy! Right?
Or maybe not. A high national savings rate doesn’t harm the economy! The United States had a double digit savings rate in the 1950s and the economy roared. China and many other nations with vibrant economies have high savings rates. A low savings rate seems to be the real problem. In the U.S. we struggled more as our savings rate declined to its current low single digit home.
Anyone who has been around the FIRE, leanfire, FI blogosphere, podcasts and book tours know the demographic is heavily invested in index funds and for good reason. Active management’s record tends to be unflattering compared to index peers and with a heavier expense ratio for opportunity to enjoy underperformance.
People serious about building wealth as quickly as possible learn the index fund trick early on. But there are times when index funds are not an option.