Does the FIRE Movement Work? – Episode 372

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[00:00] Kim, lately, we’ve been starting the podcast, asking about some of the favorite books that you’ve read. We’ve talked about the alpacas. There’s one thing that we can talk about, and it’s this. I’m going to ask you, what is the thing that you are most grateful for right now at this second? The ability to live out in the country, and more importantly, to have work I love that I will do until I am six feet under. Ooh, I love that. So for listeners, maybe you want to take a second, ask yourself the same thing. What is something that you are so grateful for right now? And if you have to hit pause for a second, then do that. Now we have an incredible topic. We’re going to be talking about the FIRE movement.

[00:46] Now if you’ve studied finances or you read things online, on social media, you may have heard about this. The FIRE movement stands for Financially Independent Retired Early. I know there’s a swear word in there, Kim, retired. We won’t go there. But the essence of the conversation is if you save 4%, then you can live off that for the rest of your life. We are here to take this apart and give a different side to the conversation. So we’d love for you to take it away. Well, part of the reason that retirement is a swear word are two financial factors that people just have no clue about, even though it’s around us every day. And maybe that’s why we have no clue about it. So the first is inflation and the second is longevity.

[01:38] So let’s break these down. So inflation, unless you were born yesterday, inflation has already impacted you, but we forget. We forget so quickly. So if you’re in the older set, think back to how much you spent on your first car, $600. How much you bought your first home for, $40,000. I mean, they’re just numbers that don’t even sound like they’re in the right ballpark. And that’s what inflation does. The homes and the cars, you could argue there’s some technological change, et cetera. But essentially, the cars still get us to work or not, and the homes we still live in or not. And so inflation is something that just keeps marching on. And it’s a bit of a stealth tax, if you will, not a literal tax, of course,

[02:29] but it does take our money away in that it steals purchasing power from us. And dollars, whatever it takes you to live today, double that in 10 years. Double it again for 20 years. And if you’re young, probably better double it again for 30 years. Now, at some point, you could argue that your travel and your whatever is going to taper off and you’re not going to need as much to live. OK, fine. But let’s have that be a choice, not a requirement, because you don’t have enough money, because you forgot what inflation is doing to your dollars. You know, I love that term stealth tax. That is so visceral to be able to realize what’s going on, especially with the feds talking about printing additional stimulus

[03:22] tax checks of trillions of dollars. Yeah, has to come from somewhere. Absolutely. And inflation is a big part of what is going to help get those dollars in our hands. And, you know, we could talk some fiscal policy, which is boring. But it’s something that we must be aware of. And something to also remember is what the feds say inflation is, is not always what inflation is. So things inflate at different values and something like medical costs inflate in a crazy pace right now. Who knows? Maybe that will change in the future. Other things may not have literal inflation, but they have what is known as lifestyle inflation. In other words, the trip that you went on when you were 30, where you didn’t mind being squished in a middle seat and you slept in a seedy hotel

[04:22] and you ate bread and cheese for a week. When you’re 60, you don’t want to sit in a middle seat. You absolutely don’t want to sleep in a seedy hotel, nor do you want to eat bread and cheese for a week. So that’s lifestyle inflation. You get accustomed to, or you desire a nicer experience. And so you have to have more money in order for that to happen. My favorite saying is money isn’t everything, but money affects everything that is everything. So any, any type of experience that you want to have money impacts that experience. So we, we just must remember that inflation is always pounding on our money and so we can only do two things to offset that. And the first is men at work, people, human beings, continuing

[05:10] to work, and then of course the other is money at work, but it’s really tough to get money to work, especially in any certain way. And the older we get typically, the more certainty we want whereby our dollars are overcoming inflation and overcoming taxes and overcoming. Now we’ll hit our second problem. Longevity. Longevity. It’s even changed on the actuarial table. So help us understand where you see longevity in the future. Yeah. So when I was first in the business, all life insurance policies ended at age 100. I’m thinking it was four or five years ago. I could be wrong on my timeframe. The life insurance industry as a whole shifted all life insurance policies to end at 121. Well, I mean, there are clients still today that thought

[06:04] 100 was ridiculous and 121 just seems utterly fantastic and impossible. Um, not the case. All you got to do is just a little bit of digging. There’s a Forbes magazine cover that shows a baby. And this is like from 2008 or something. Uh, this baby just born is going to live to 142. I mean, the 140 range has been listed by numerous physicians and other people that really feel like if we can get some of the medical issues solved and sometimes maybe if we don’t get them solved, cause sometimes even the doctors say that the people that don’t go the medical route actually have better chances of longevity than those that do. But 140 is going to become more and more normal. And I get it. That’s really, really hard to think about unless you spend some time

[06:58] thinking about it. Because if you do, it’s something that becomes more and more normal in your thought because it’s something that starts to become kind of fun to play with. However, we’re talking about the fire movement here. Okay. So if you truly think that at age 40 is an example, I call it 65. I mean, that’s just as ridiculous when you think of possibly living 240. Okay. So you’ve saved money for call it 20 to 40 years, right? 20 to 40 or 20 to 60, I guess that would be 45 years, 20, 65. Now you’re going to live off that money for another 70, 80 years. Like, how is that going to work? And so this quote movement, I love parts of it because it’s getting people to get super serious about saving money, which is fabulous.

[07:55] And I think they use the word retirement, um, in a very misleading way because many, many, many of them have side jobs and gigs and all kinds of things, which is awesome. You know, if you want to say you’re retired and you’re doing a gig, that’s fine. You know, whatever you want to use the definition as my favorite definition is that retirement takes people out of service. And that is not a good thing. We were put on earth to serve. And when we become super selfish and we’re not serving, we don’t live our best life. And so to think that one can kind of hunker down, uh, buckle in, you know, whatever visual image you want and just sort of live for themselves and not be active in the community and serving and, you know, community

[08:41] can have lots of different, different, different definitions. The fact is if we’re going to live to even a hundred or especially 120 or 140, it’s mathematically impossible to overcome inflation and overcome longevity for 99.9% of America. Of course, there’s a few families that can pull it off. Uh, none of them are my clients. What we’re looking at on this fire movement is overall, they’re saying have enough money so you can live off 4% they back out the math. And on this thread right here, now they go down and it’s all 3%. Well, hold on. That doesn’t back out. That’s 2%. Now it’s 1%. It’s kind of like getting into a game, enjoying the game. And then all of a sudden the person’s losing. So they changed the rules.

[09:32] That’s what it feels like to me. Yep. Well, and the 4% rule, um, which was from the Trinity study has literally been changed to the 3% rule and, and it wasn’t saved the 4%. It was built up enough of a nest egg so that you could then spend the 4%. But they’re not taking into consideration taxes and inflation. And so we didn’t even talk about the fact that taxes are probably going to go up in order to deal with the trillions of dollars that our government is printing. And so we have a triple whammy going on there with longevity taxes and inflation. And I feel really bad for those people. You know, I think they’re being horribly misled and it is not fun to be quote retired for a period of time.

[10:22] And then to try to get back into the workforce. I mean, your brain is turned off. You’re not in the habits that you need to be in of getting up and being ready to serve and, you know, going forth in the morning to help. And so, uh, I think a lot of people, uh, diluted, uh, what’s the word I’m looking for? Disillusioned they’re really confused that they can pull this off and I just don’t see it working. You mentioned something that is tied in perfectly to other episodes, which is this you’re taking the good that is from that movement, meaning people that are wanting and willing to save their money, people that can create side hustles and they’re way aware, I should say of lifestyle creep and their expenses getting out of control.

[11:14] So they’re doing some of the hard things that most others aren’t willing to do. They just might be a little bit misguided of what they can’t truly see coming at them in the future. Yes. Really, really well said. And of course, pulling the good out of things is part of my lifelong mantra, so I always try to find some good, even when I hear or see something that makes me want to scream. And so, yeah, that’s awesome. Take the good, toss the bad and keep working. Yeah, absolutely. So listeners, if you happen to be following this fire movement and it’s working for you, but you’re uncertain about what’s going to happen in the future, or if you’ve know someone that, that is, you know, on course and they’ve been responsible with their money and their saving, then

[12:07] understanding what’s going to happen next, or at least protecting yourself or prospering yourself is the next step to take. So send an email to hello at partnersforprosperity.com and that way you’ve already done most of the hard work and now those habits will pay off with great, great dividends of happiness and a lot of just prosperity feelings in there. So send that email to hello at partnersforprosperity.com. Any final pieces, Kim? No, thank you for helping me define that because your wisdom and perspective on it is always awesome. And I know our listeners are just as grateful to you as they are to the whole podcast. Thanks, Kim. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit

[13:02] us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.