By now, you’ve probably heard of the FIRE movement, short for “financial independence, retire early.” If not, it showcases how to replace your 9-5 salary with passive income from investments (like, say, rental properties!). Because when you can cover your living expenses with passive income, working becomes optional.
The FIRE movement gets plenty of accolades — and plenty of criticisms. I would argue that both are often mischaracterizations, or outright wrong.
Below are nine of the most common criticisms of the FIRE movement, and why they’re either valid concerns or miss the point entirely.
1. Healthcare Is Too Expensive Without a Job
Healthcare in the US is outrageously expensive, and still rising faster than incomes.
The Kaiser Family Foundation’s Health System Tracker notes that over the last four decades, healthcare costs have increased 31-fold, from $353 per person in 1970 to $11,582 in 2019. In inflation-adjusted dollars, they rose sixfold from $1,848 In 1970 to $11,582 in 2019.
That’s nothing to scoff at. And without a job that provides health insurance, Americans have to pay out of pocket for those expenses.
Which, in retirement, means saving an enormous amount of extra money, just to generate enough passive income to cover those medical costs. If you follow the 4% Rule, you need to save and invest $25 for every $1 spent in retirement. That would mean saving up an extra $300,000, just to cover that $12,000 per year in healthcare costs. (Of course, you can cheat the 4% Rule with rentals, but that’s another story.)
My Response: Healthcare costs are a legitimate concern and something retirees need to plan for — regardless of when they retire.
Granted, retirees over 65 have access to Medicare… and still often end up paying extra for Medicare Part C and D.
So yes, you need to plan for medical costs. And you have plenty of options to do so, from HSAs to moving abroad (like I did) to picking up a fun part-time job that provides health insurance. For that matter, go work full-time doing something you love, something that fulfills you, that changes the world for the better, and that provides you with health insurance.
Focusing on the “retire early” side of FIRE is to miss the point. The point is to create your ideal life, and the freedom that comes with enough passive income to live on. If you worry about health insurance, read up on these healthcare options for early retirees.
2. Sacrifice: Living an “Ascetic” Lifestyle
My wife Katie came from this camp. She would argue “What’s the point of having money if you can’t spend it?”
The average savings rate is between 3-8% in the US, depending on your source. In other words, most Americans spend nearly every dollar they earn. They live the most expensive lifestyle they can get away with, and save little for retirement, helping their kids with college expenses, or building true wealth.
So, if you ask them to save 20%, 30%, 40%, 50% of their income rather than 5%, they buck. They look at you in shock: “Are you crazy!? I’d have to move to a hovel, sell my SUV, never go out to eat, and live on ramen noodles!”
They’re not entirely wrong, but they’re not right either.
My Response: A higher savings rate does mean spending less money.
Some of that you can make up with hacks, like house hacking to eliminate your housing payment. But some of it does have to come from tightening your budget.
You can think of it as sacrifice if you want. As spending less than you could today, so that you have complete freedom to do whatever work you want tomorrow.
That’s not how I think of it. I think of it as lifestyle design: over the course of several years, I have created my ideal life. My family and I live overseas, walk or bike or Uber everywhere, and I get to do work I love.
And I’m not even financially independent yet. Once you reach financial independence, you can do whatever you want with the many decades remaining in your life.
As a final thought on “sacrifice,” people unthinkingly spend more as they earn more. It’s called lifestyle creep, and it’s insidious. Think back to five or ten years ago, when you probably earned less and spent less. Were you miserable? Was every day a “sacrifice?” Probably not. You’ve just continued spending more and more and more as you earn more, and you’ve gotten spoiled (a process known as hedonic adaptation).
Unspoil yourself, and design your perfect life instead. Or don’t, and keep working a job you simply tolerate until you’re old.
3. Bear Markets & Recessions Will Bankrupt You
If you live on investment income, or by slowly selling off investments through a withdrawal rate, what happens with investment markets tumble?
My Response: Yes, markets sometimes dip. And then they recover.
You can protect yourself in retirement — regardless of your age when you retire — by diversifying your investments so that you don’t depend solely on stocks. Don’t get me wrong, I love stocks, and they historically offer strong returns: since the 1920s, the S&P has produced around 10% in average annual returns, including dividends.
Too many people think in terms of real estate versus stocks for early retirement. Invest in both! They complement each other perfectly. Stocks offer strong average appreciation, instant liquidity, and easy diversification through index funds. Real estate offers ongoing income, rental property tax deductions, a hedge against inflation, and predictable returns (see our free rental income calculator).
4. The FIRE Movement Encourages Reckless Behavior
This FIRE criticism comes in several flavors.
First, critics argue that telling young people they can retire early inspires them to retire without enough money set aside in investments. To upend their cubicle and storm out of the office in a blaze of glory, without enough passive income to support themselves.
A second variation asserts that in the pursuit of FIRE, investors chase high returns and get-rich-quick schemes in order to achieve it, without understanding the risk they take in chasing those high returns.
My Response: It’s true: fools and their money are soon parted.
No one of any age should retire without planning their income and expenses in retirement. No one should retire without reducing risk in their portfolio to an acceptable level.
The FIRE movement isn’t a get-rich-quick scheme. It’s a path to build wealth faster than the average sleepwalking consumer, mindlessly buying into the notion that you should spend as much as you can to show off your wealth.
A path that you walk by doing all the things you should be doing anyway: spending less, saving more, diversifying your investments, building passive income. And most of all, educating yourself about personal finance and investing. Becoming not just financially literate, but financially savvy.
Want to retire at 40? You can do it, if you start young enough and develop the skills and mindset needed. Plus earn a decent salary; that always helps.
5. Only People Without Kids Can Achieve FIRE
According to a study by the USDA, it costs an average of $284,570 to raise a child, with inflation costs factored in. That does not include the cost of college education.
Let’s be honest: most middle- and upper-class families spend significantly more than that on each child. So yes, children are expensive.
My Response: Kids are an investment, not an expense.
An investment that pays returns in many ways, starting with happiness and fulfillment. But your children also offer an insurance policy against superannuation: the risk of running out money in retirement.
I plan on leaving behind a large sum to my daughter Millie (and any other future children I sire). Yet if something unforeseen happens and I end up running out of money later in life, guess who I’m moving in with?
I joke to my infant daughter every time I change her diaper: just you wait 50 years, and you’ll be doing this for me!
Which says nothing of the fact that you can always find ways to raise children less expensively. You can buy secondhand clothes, for example. And if you reach financial independence and retire early, you don’t even need to pay for childcare — you can do it yourself.
6. Only Married Couples Can Achieve FIRE
They say that two people can live as inexpensively as one. This isn’t technically true; just ask your health insurer to cover both of you for the cost of a single premium. Or try sharing a single-serving meal.
Even so, couples who live together can live on less than two single people living separately. Some anti-FIRE haters posit that it takes two earners to make FIRE possible.
My Response: As someone married to a heavy spender, I can tell you firsthand that married couples don’t have any inherent advantages.
Left to her own devices, Katie would spend every penny we earn on clothes, shoes, accessories, jewelry, massages, manicures, and any other indulgence that caught her eye. Which means that reigning in her spending is a constant battle in our household.
It’s the same in my sister’s household; her husband spends uncontrollably. Try telling her that only married couples can achieve FIRE and she’ll laugh you out the door.
Few couples are perfectly aligned in their financial habits and goals. If you can reach that perfect alignment with your spouse in building wealth quickly, you might be able to reach FIRE faster. But more often, misalignment between spouses counterbalances any advantages in budgeting.
7. Only Single People Can Achieve FIRE
Likewise, single people don’t have to worry about that alignment with their spouse. They can live with three roommates, eat ramen noodles every night for dinner, and live on the cheap with no one to squawk at them about it!
My Response: Seeing a pattern here?
Sure, single people have their own advantages when it comes to saving money. Just like married couples have some advantages, such as sharing one apartment rather than each person renting their own.
Single, married, kids, no kids; these are all just excuses people tell themselves about why saving more money is possible for someone else, but not for them. It’s a justification to keep spending what you feel like spending.
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8. Only People Earning 6-Figure Salaries Can Reach FIRE
It’s harder to live on 50% of your income when you earn $20,000 compared to $100,000 per year. No one would argue otherwise.
My Response: First, that doesn’t mean you can’t save more than you do, regardless of your earnings.
Second, my income has been all over the scale over the course of my career. In my first job out of college, I earned $10/hour, which comes to $20,800 per year. Before taxes.
And I managed a savings rate of around 15%. As I bumped that up to $30,000, I pushed that savings rate to around 30%. A year later, I managed a savings rate of 40%, earning around $35,000.
At the peak of my earnings as an employee, I earned around $110,000. My savings rate at that point in my life was only 10%.
Why? Because of lifestyle creep of course. At a certain point I succumbed to the voice of temptation: “You work so hard… you deserve to live a little… you deserve to live in a nicer home… you deserve to go out to dinner more often…” and so on.
Today, as an entrepreneur and freelance writer, I don’t earn six figures. Deni and I put a huge portion of SparkRental’s earnings back into the business, to keep improving our online landlord software.
Yet my personal savings rate is the highest it’s ever been, around 60%.
9. Only “Privileged” People Can Achieve FIRE
To hear dismissive, self-righteous people go on about the FIRE movement, only white men who attended Ivy League schools and work in the tech industry wearing square glasses can achieve FIRE.
My Response: The problem with buzzwords like “privilege” is that you can bend them to mean “anyone who isn’t me.” Women use it to refer to men. People of color use it to refer to white people. Non-college-educated people use it to refer to college-educated people. Poor people use it to refer to, well, anyone with more money than they have. The Irish use it to refer to the English. And so on.
I grew up middle-class. My parents had me when they were young, then got divorced, which took them years to recover from. I attended a public state university on a scholarship.
Eventually, both my parents built wealth — but I was long gone from the house by that point. (Incidentally, my mother built wealth as an educator, who never earned a high salary. She did it through, drum roll… saving a high percentage of her income!)
Did I grow up “privileged”? Maybe, if you compare me to a crack baby whose parents beat him. But it’s an irrelevant question posed by people more interested in making political statements than designing their ideal life.
A Secret: FIRE Isn’t About Retiring Early
As a FIRE blogger, I have a confession.
The “retire early” portion of the FIRE movement is a marketing gimmick. The real meat lies in financial independence and lifestyle design: creating your perfect life and separating your work from your paycheck. In other words, cutting away the golden handcuff of high-stress, low-fulfillment work.
Except the average sleepwalking consumer doesn’t know what the terms “financial independence” or “lifestyle design” mean. It takes time to learn and internalize these concepts.
But everyone knows what “retire early” means. Everyone can imagine planting themselves on a tropical beach and sipping a margarita, having quit their job at 40 or 50.
So the FIRE movement has to lead with that, to pique people’s interest.
I have no intention of retiring. Ever. I plan to reach financial independence within the next 2-5 years… and then keep working.
The difference is that I do work I love. And the closer I get to financial freedom, the less I worry about doing any work that doesn’t “spark joy.”
The naysayers aren’t necessarily wrong in all of their critiques outlined above. But they often miss the point.
When you reach financial independence, you no longer have to work. That doesn’t mean you should stop working and go become a beach bum alcoholic.
It means you should start thinking more holistically about your life and work. You were put on this earth to do something meaningful. What is it? What’s your unique gift to make this world a better place?
Admittedly, it may not pay very well. Which is precisely why you should set aside a hefty percentage of your income when you’re young and still figuring out your life’s purpose — and then start designing your life around that purpose.
The more passive income you have from investments, the easier your life will be.♦
What are your greatest fears or concerns about FIRE? What’s holding you back from pursuing it more aggressively?
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About the Author
G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.