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Hi Cullen,

Last week Ben Carlson did a piece on the early retirement movement (FIRE et al) and provided his assessment (http://awealthofcommonsense.com/2017/07/some-thoughts-on-the-extreme-early-retirement-movement/).

What are your thoughts on the matter concerning both yourself and of those embedded in the movement, and the effects such a movement can/will have on both macro and micro, on as many levels as you can provide — economic, social, psychological, policy, etc. (whew!) Thanks a bundle.

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Posted by Scott
Posted on 07/15/2017 7:47 PM
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Great question. Probably worth a full post.

Ben did a really nice job covering the topic. I’m a weird FIRE case. I’ve been self employed for most of my adult life and that road hasn’t always been great. I’ve gone years without making money during the ride. But I always knew what I was doing – I was building equity in a business that I probably would never retire from. So I always knew what the income trajectory would look like over time if I succeeded. Then again, my wife is a SUPER version of FIRE. She’s always had a very high income and saved about 75% of it. She’s the brains in my family. We’re both cheap as hell and don’t have crazy needs. But we’re a real team. We’ve been together since college and so this tag team approach only works if you find someone who you’re really able to be true partners with. But our work/life partnership works great because I am the entrepreneur trying to hit the home runs and she is the steady eddie hitting singles and doubles. And as the home runs become more consistent we need fewer and fewer singles and doubles from her. Honestly, I don't think FIRE works unless you get to the retire part and just want to maintain that lifestyle. That wouldn't work for me or my wife so one of us was always going to work. but if she wanted to step aside then it meant I needed to pull more of the weight. So we kinda knew all along that I would never retire and as my income outpaces hers by more and more then she can relax more and more. And honestly, I don't want to retire so the whole FIRE thing would never work for me anyhow, but it works for her and that means it works for US.

Then again, we've been lucky along the way. In order for this tag team approach to work you need the entrepreneur to actually be successful and I've been really lucky along the way. I was born on second base and even though I probably stole third and home I still know I was born in the USA, male, white, educated, had dedicated parents and an amazing support network all along the way. I bust my ass working and I always have, but hard work only takes you so far. My business wouldn't have succeeded if I'd started it in 2008. I would have almost certainly failed and gone back to work for some big shitty firm. And my wife would have ended up working much longer. So maybe this is not such a great example of how to plan your financial life….

As for the macro ramifications….well, I don’t think we’re really seeing much. The people implementing something like FIRE are the minority by a wide margin. Personal savings rates are super low. The average American doens't even have 3 months of emergency money. I think financial competence of this sort (which, FIRE requires a very high degree of financial competence) is unusual….

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Cullen Roche Posted by Cullen Roche
Answered on 07/16/2017 3:49 PM
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    “The people implementing something like FIRE are the minority by a wide margin.”

    In the aggregate I would agree, yet they seem to dominate the overly popular ‘Personal Finance’ blogosphere. I find it disparaging that the majority of FIRE instigators are, as Carlson pointed out, driven by a “I Hate My Job!” mentality, and dutifully propagate this throughout the land as truth (they are a bit Trumpian, in a way). And almost none will admit, as you just did, that luck played a big part in their success. Messes with the narrative, I guess.

    One rather large negative I can see is that these people leave the workforce within a short timeframe (e.g. 10-15 years), thus if all workers did this, there would be no one left to develop and amass the mastery which requires multiple decades of work experience. A dangerous void develops.
    (Secondly, isn’t the term ‘financial independence’ a misnomer, in the same league as ‘passive investing’, simply because no financial instrument (or income) is independent. Cash might be the closest thing and ‘financial optionality’ might be a better term.)

    But, as you said, those engaging in FIRE are a rather minute fraction of the workforce, thus their impact as a whole is rather moot. And I might even suspect that as time goes on, the ability/methods/instruments for those seeking to achieve FIRE may dwindle (e.g. lower market returns, employment structures, etc.). Thanks.

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    Posted by Scott
    Answered on 07/17/2017 9:26 PM
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      Yeah, well it’s an obvious fallacy of composition. We know from the paradox of thrift that people cannot save that much of their income in the aggregate without huge expansions in debt.

      Additionally, I started thinking about this and I realized that this strategy really only works if you have a high income (6 figures) and very low needs. For instance, a 35 year old with 200K in savings earning 100K a year and saving 60% of their income can retire at 45 and needs to earn over 7% per year on their portfolio to continue living off it. But their living standards will stagnate for 30 years and the odds of hitting 7% are not 100%. Oh yeah, they also need to die before 93. So something’s gotta give there. You either need to make a lot more than 100K, you need to save more than 60% or you need to earn more than 7%. I suspect that a lot of these people think they’re going to earn better than 7% forever and once we hit a 5 year bear market they’re all gonna go back to work and find out that getting a job after 10 years out of the workforce is not fun….

      But more interestingly, I just don’t see it being that viable. Who wants to be retired for 30-40 years? Seriously? Even super rich people end up working. We need a purpose in life. Work gives us meaning. Even if you have gobs of money I still think most of us want to do something meaningful for other people. So that’s why you see the super wealthy become philanthropists or venture capitalists.

      In other words, this is not a strategy that you should be implementing unless you have a very high income, low living standard needs or plan on inheriting a shit load of money. 🙂

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      Cullen Roche Posted by Cullen Roche
      Answered on 07/18/2017 1:35 PM
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        I can definitely sympathize with those people who hate their jobs; it much easier to try and earn/save as much money as possible for an escape than it is to stay and cultivate meaning in your work. Hopefully they manage to develop that purpose after they retire, without the “burden” of work upon them.

        I’ve also notice that the popular FIRE blog examples I’ve read are highly contextual — flipped 12 houses in a row during the run-up to 2008 and cashed out; bet the farm on a risky long-shot stock and won; worked 100-hour weeks in IT making $250,000 and slept under my desk, etc. — and not a reproducible system as they would have us believe (in order to pump their readership/ad numbers).

        From your twitter: “What % of working people do you think are actually implementing this FIRE (financial independence retire early) strategy?”
        I would say almost 100%, it’s just that 99% are doing an exceptionally terrible job at it. Ha ha.

        Thanks for your thoughts on the matter.

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        Posted by Scott
        Answered on 07/18/2017 8:51 PM
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