Is FIRE the goal for everyone?
Q: I’m hearing lots of talk about early retirement and I’ve been wondering about this concept for a while. I love my job, so I don’t really see early retirement as a goal. To me, life without work while I’m still in my physical prime is boring and meaningless. Is Fire the goal for everyone?
A: While it sounds like a dream to be able to retire before you hit 40 and to be financially secure enough to walk away from your job without worrying about paying the bills, early retirement is not all sunshine and butterflies. There are many challenges and pitfalls associated with early retirement that you won’t read about in the romanticized accounts of popular bloggers who have achieved their goal of FIRE (Financially Independent, Retire Early).
Also, as you correctly assume, early retirement is not for everyone. Here’s why:
1. Boredom breeds discontent
Some people loathe typical work settings. They have other interests they’d pursue if they didn’t spend most of their waking hours at the office. For them, a responsible early retirement may be a path toward true happiness.
However, many people feel fulfilled by their work. For these employees, leaving the workplace structure while they are still in their productive prime can lead to depression and a physical decline well before old age sets in.
2. You’ll miss years of peak earning potential
Business and investing website Visual Capitalist found that the most significant jump in salary generally happens between ages 30 and 40. Those pulling in higher salaries see the greatest increase closer to age 40. If you leave the workforce in your early 30s, you stand to miss reaching your peak earning potential. And, if you retire at age 40 or 50, each year you are out of the workplace means more loss since you likely would have reached your highest income level during that time.
3. You likely don’t have enough money to retire early
According to the Bureau of Labor Statistics, the average person spends nearly $46,000 a year post-retirement. A survey by GOBankingRates found that 42 percent of Americans have less than $10,000 saved for retirement. Many folks have nothing saved. Even if you have a handsome retirement fund, it may not be enough to keep you going for half a century or more.
Keep these factors in mind when you crunch the numbers:
- You won’t be eligible for Medicare until age 65. Leaving your job can mean losing health coverage. If you get hit with a considerable medical expense before you find adequate coverage, you may need to drain your retirement savings to cover it.
- You may be required to pay an early withdrawal fee on your retirement funds. If you withdraw funds from your 401(k) or IRA before age 59 1/2, you’ll get a 10% penalty.
4. You won’t be contributing to society
Once you bow out of the workforce and spend your days chasing thrills or pursuing the ultimate in relaxation, you’re less likely to be impacting the world positively. Like boredom, living selfishly can ultimately lead to dissatisfaction and unhappiness.
It would be great if FIRE was the goal for everyone and we could all just take the time off and relax, but many of us find joy in our work. Another question you might want to ask is if you should consider a job change. If you do not love the field you working in maybe it is time for a career change. Find something that brings you joy. If you like this post, check out our other posts on our MoneySmart Tips Blog.
