A few weeks ago, there was a great MarketWatch article about retiring early: How much does financial independence cost? It depends on your retirement philosophy
The article profiles four bloggers, two of which regular readers will recognize: Justin from Root of Good and Tanja from Our Next Life. I’m not as familiar with Jillian from Montana Money Adventure or J from Millennial Boss who were also highlighted.
I was interviewed for the article. I couldn’t connect with a phone call as the author had another deadline, so I offered to answer any questions I could over email. Unfortunately, my story didn’t make the cut. I’m disappointed, but at the same time I realize that not everyone can be included. You win some, you lose some. I’ll get it next time. (Am I missing any other cliches here?)
Since I put significant time and thought into my responses, I’m sharing it here. It’s not MarketWatch, but I have green, white, and black in my logo, so it will have to be good enough.
First the reporter wanted some basic profile information. (I provided a full name if she wanted it. Sometimes they need that.) Other than that, the questions and answers are exactly as outlined here (I’m don’t want to put so much text into a quote box as it would be difficult to read):
Website: Lazy Man and Money
How much do you think is enough to accomplish FIRE?
I don’t think there’s a firm number to accomplish FIRE.
It depends on expenses which can vary greatly depending on where you live or life choices you make such as to have kids or not. If I needed to give a number, I would say $2 million. That’s based on $2 million being reasonably able to provide $80,000 a year using the famous “rule of 4%.”
Why do you think that’s enough?
It’s not enough for everyone, but I think it’s enough for most people in most cases.
Why do you think there’s a spectrum of FIRE, such as “fatFIRE vs leanFIRE”?
I don’t know if it’s a spectrum. It’s usually only those two different types.
The leanFIRE people seem to want to get to FIRE earlier. There are tax benefits and health care subsidies for those who keep their income low(leanFIRE). The fatFIRE crowd seems to have more high-income earners who could be used to living off a 6-figure income. I think you find more doctors and lawyers in the fatFIRE group.
What advice do you have for people looking to accomplish FIRE in the same way as you?
Save money and invest it… the earlier the better as it will give time for compound interest to work for you. For example, if you have a portfolio of $1 million invested in stocks and the market goes up 10%, you’ve made $100,000 doing nothing.
For us, personally, my wife is nearing 20 years of active duty service where she’ll get a pension. Because of that, we are going to be in the fatFIRE camp with the rest of our savings and investments. It’s a bit of a unique situation and I understand others can’t do it the same way.
And that was the end of my answers. The author thanked me for the responses and I let her know I was happy to do any follow-ups. I never heard from her again.
Two weeks after the responses, I saw some people tweeting about the article that seemed to be a result of the interview. Naturally, I was curious to see if I was included, but I was also curious what other people had to say about the topic.
It seems that the FIRE is surprisingly standard. It’s so standard that I essentially covered almost everything in the article in about 17 sentences. Let’s dig into the MarketWatch article and see what new things we can learn. (This time I will use quotes.)
“One side, known as Fat FIRE, believes retirees should have enough saved so they have a $75,000 annual budget in retirement, the other side, Lean FIRE, maintains that a $40,000 a year budget will do.”
I suppose it really is just the two different types and not really a spectrum.
[Justin at Root of Good] said one rule of thumb people could use is multiplying your expenses by 25.
This is the mathematical inverse of the 4% rule.
Jillian Johnsrud from Montana Money Adventure, 32, took a frugal approach to her financial independence. She and her husband looked at their expenses and cash flow and saw they had enough passive income through a military pension and investments, as well as cash, to cover all their basic needs.
The military pension and investments sounds exactly like our plan as I wrote in the last paragraph. Again, I don’t know Jillian’s story, but when I get some time I’ll have to look on her site some more or maybe try to talk to her at Fincon. I thought my wife getting her pension at 43 was early due to the 20 years of service that is necessary. (My wife joined right after pharmacy school.) I imagine Jillian has a unique situation within a unique situation. I’m guessing that there aren’t many 32 year olds retiring with a military pension, unless it’s due to a disability. That’s something that I don’t want to think about or wish on anyone.
Financial independence ultimately relies on a very personal strategy — what people want in their lives, how much they need to fund those goals and a dedication to save enough to do so. …everyone is coming at early retirement from different points in their lives — some are younger with more years to accrue returns and interest on their assets, others might be living in very economical cities (not expensive hubs like New York City and Los Angeles)…
This seems to come very close to my first answer where I mentioned where you live and life choices you make (such as choosing to have kids or not). Quite a few of the commenters mentioned that some of the profiled people don’t have kids which makes their journey easier. Justin and Jillian have multiple children and were able to pull it off.
J, the personal finance blogger behind Millennial Boss and the podcast FIRE Drill, said she believes $2 million is enough, and she and her husband have incomes high enough to reach that goal. Using the so-called 4% rule, where you withdraw that much of your assets every year to live on, would be more than enough for the average person, especially if they pay off their home like they plan to do.
This happens to be the exact number, $2 million based on the 4% rule that I mentioned. Am I psychic? Hardly. The $2 million number based on the 4% rule goes back a long time. For instance, I had been reading 2million’s Personal Finance Blog since 2006. You can literally follow 13 years of nearly monthly net worth updates in his archives as it goes from $184,000 to $1.8M.
At first when I read the Marketwatch article, I was frustrated. Why didn’t any of my answers make it? Then as thought more about it, it’s because there really aren’t a lot of ingredients in the secret sauce of FIRE.
Perhaps more importantly, the author focused on people in their 30s (though Millennnial Boss is in her 20s from the website). Maybe because I’m an ancient 42, I missed the cut.
I also noticed that while leanFire and fatFire were mentioned, it doesn’t seem like fatFire was represented among the bloggers. Justin and Jillian are forward about their frugal lifestyles. I think Tanja is as well, but with some of the financial numbers a secret I can only make an educated guess that she’s leanFire as well. J from Millennial Boss writes of paying off $100,000 of debt and being in her 20s, so I can’t imagine she currently has the millions to be fatFire. (Maybe there was a big lottery win that I missed.)
I’ve seen a lot of chatter in the FIRE community that “you can’t frugal your way to FIRE.” Yet, when you look at the people who are FIRE, it seems that frugality is a very noticeable trait.
On the other hand, it’s extraordinarily difficult to get to fatFire in your 30s. You almost certainly need a combination of a very high paying job (such as doctor or lawyer) and a very frugal background. Or you could be extraordinarily talented like a professional athlete or famous entertainer. It’s typically going to be a very unlikely situation that few readers could use as a blueprint.
Just like snowflakes and fingerprints everyone has their own unique financial journey. While no two are exactly alike, it seems to me that there’s are many common practices and plans.