Pouring water on the FIRE movement: Experts say retiring at 35 is impossible for most – and even if you can, the cost is steep

When Mississauga-based CPA Danish Ghazi first heard about FIRE, the movement to achieve financial independence and early retirement, he was intrigued.

Ghazi grew up in an immigrant family where money was always tight, so as his friend explained the concept, he was inspired. He started researching FIRE, stumbling across blogs from people who had retired in their 30s and wanted to help others do the same.

While some FIRE followers take frugality and investing to the extreme – with the goal of retiring much earlier than others and living off their investments for decades to come – Ghazi said his plan was not necessarily to retire early, but to achieve financial independence. He wants his investments to provide a safety net and offer the flexibility to do things like travel with his family.

Ghazi loves his job as a CPA and also has a personal finance YouTube channel, so he won’t be quitting his job anytime soon.

“It’s about giving me that option if I ever need it,” he said.

There are many stories of people who scrimped, saved, invested and retired early, some as young as 35. These stories sound idyllic and their storytellers are an inspiration – do what I did, and you too can have this life. But it is not that simple. Financial experts say the concept has both advantages and pitfalls.

Ian Calvert, vice president and director of HighView Financial Group, said there are different interpretations of the FIRE model, from moderate to extreme.

There are success stories of those who have taken the most extreme route, Calvert said, but it’s important to remember that there are certain prerequisites for this way of life.

“You have to have… super aggressive savings from the start,” he said. In other words, if you finish college with debt, or don’t have financial support from your parents, you start with a disability which likely means you won’t be able to retire at 35. , no matter how aggressively you save.

Jason Heath, Managing Director of Objective Financial Partners, agreed.

“It is not achievable for a large part of the population,” said Heath. No matter how many times you turn down the avocado latte or toast, you can’t make up for big financial setbacks in just a few years.

Another misconception about FIRE is the idea that once you reach retirement, the rest of your life will be a breeze financially.

While this may be the case for the lucky few, for the most part, the discipline that brought them there must continue as they primarily rely on a fixed income for the foreseeable future.

Those who retire much earlier will not be able to contribute to pension plans, Calvert noted, which means they will not get the pensions later in life than others. They will also miss out on their best earning years, as many people see their wages and bonuses increase towards the middle or end of their careers.

Heath said the more retired people are, the more likely it is that things will go wrong, whether it’s a drop in the stock markets or a medical emergency.

Some millennials have been lucky so far in the market or in real estate, but they cannot assume that growth will continue unchecked, he said.

Jessica Moorhouse, financial educator and host of the More Money podcast, said it can also be difficult for people’s sanity to be extremely frugal, even for just a few years. His advice? Plan for tomorrow, but live for today.

Heath fears that when people choose “frugality at all costs” to achieve certain milestones, they are making lifestyle sacrifices they will later regret. He knows people who managed to retire early, got bored and returned to work. Financial independence does not have to be linked to retirement; it can help people change careers or go back to school.

As FIRE becomes more and more popular, more and more of its followers are realizing it.

Graeme Falco, CPA and author of the self-published book “Building Wealth and Being Happy: A Practical Guide to Financial Independence” – and the friend who introduced Ghazi to FIRE – said the community has changed and grown. was widened for the better.

Ten years ago, some FIRE bloggers were like “cult leaders,” he said, and followers have taken the lifestyle to the extreme. The community could mock or judge anyone who did not have the discipline to make FIRE in a specific way. Now people are more receptive to different interpretations, he said.

Falco doesn’t stop himself from traveling or spending money on things that bring him joy in the short term. His mindset is about finding balance and building a life that he can support for a long time.

Falco’s first tip for people who want to realistically implement FIRE is to be consistent with their savings. Rather than saving without a plan, Falco said it’s best to save a small amount each month as the savings accumulate over time. He also recommends prioritizing bills and saving or investing before setting money aside for discretionary spending, as opposed to spending on bills and having fun before investing money. money in investments.

He also allows himself to be flexible and advises people not to be “emotionally tied” to saving a specific percentage each month.

“Just thinking about these things will give you a head start on what you would be otherwise,” Falco said.

Falco recommends thinking long term about investments, including ETFs, index funds and other diversified investments. He is not in favor of relying on stock selection or focusing only on dividend-paying stocks.

Moorhouse said early retirement is elusive and does not guarantee a “happy forever” ending.

The simple calculations some FIRE evangelists advocate aren’t always the best way, Moorhouse said. People need flexibility and an emergency buffer, not a hard and fast rule, when it comes to saving and investing.

“You’re more likely to be successful regardless of your goal if you can be flexible and make changes and pivot when you need to. “

Heath said what the average person can learn from FIRE is the principle of setting financial goals and aiming to spend less than what they earn to achieve them.

“Much of the motivation behind FIRE is really good and can help anyone reach their financial goals.”

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