FIRE: Will the early retirement craze catch on?

Jason Prowd  |  19 November 2018  |  7 min read

Key Points
  • Borrowing elements of the FIRE approach can do wonders for your finances.
  • A modest salary or debts can seriously stand in the way of becoming FIRE-ready.
  • FIRE sounds like a fun outcome, but might make you miserable in the meantime.

If the boom in blogs from 30-something retirees is anything to go by, FIRE–or Financial Independence, Retire Early–is really catching on. If you’re an avid follower of Financial Samurai, Mr. Money Mustache or maybe the original FIRE poster girl Vicki Robin, then you’ve probably already locked into the dream of being footloose and fancy-free by 40 (even if it means eating two-minute noodles to get you there).

If I sound cynical, I am. I’m inclined to see all those FIRE sermons as a big humblebrag from high-income earners who learned to spend less than they earned, then used it to dabble in the investing world. They dismiss the rest of us for buying into the comforts of modern life – dining out, a new car, getting an education. One blogger suggests you can simply “earn more merit scholarships to get through even an Ivy League school for free.” 

The fuel and the spark

But before we pour water on the FIRE, let’s take a look at how our affluent (and mostly male) FIRE disciples think you can stop working.

First up, you’ll hear time and again that FIRE works for everyone, regardless of how much you earn. It’s just a matter of reining in your expenses enough to spend significantly less than your pay packet. You can think of those savings as the fuel for your FIRE.

And second, they discuss the spark needed to ignite the blaze–investing those savings. All it takes are some easy, low-fee, no-frills investing moves and you’ll be living off your passive income. And those savings habits will stand you in good stead when you’re living off your retirement nest egg. 


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Take it with a pinch of salt

Look, you don’t have to read much of our Insights content to discover we’re all about saving and investing at Morningstar. It definitely doesn’t hurt to stop spending as if there was no tomorrow and save for your future instead. And, in our view, there are few better things you can do with savings than invest them. Indeed, Morningstar is named after the final line in Thoreau’s Walden—the proto example of self-reliance and minimalism.

We believe financial wellness is centred on living within your means, and investing the difference. No argument there.

But on the other hand, I’m not convinced that living uncomfortably for 20+ years, with the shaky promise of future happiness, is a good trade-off. And if you’ve got debts to pay off, or your income is modest, then it’s likely not realistic to think that financial independence is around the corner if you can tighten your belt that little bit more.

Taking a look at the FIRE formula for the wealth you’ll need to cut loose from a paying job can give you some perspective on the whole movement. According to Jonathan Mendonsa, co-host of the ChooseFI podcast, the magic number is your $annual expenses x 25. With the annual average cost of living in Australia sitting at around $75k according to ASIC data, you’re going to need almost $2 million in the pot to make early retirement dreams come true. When you consider that the average super balance at retirement age is $270,710 for men and $157,050 for women, amassing a cool two million by the age of 30+ is about as likely as winning the lottery.

When plans go up in flames

My other concern with FIRE is that it assumes we get to call the shots, all the time. As John Lennon said, “life is what happens while you’re busy making other plans”. Planning for the unexpected isn’t built into FIRE. Health problems, divorce and death are just some things that could mess with your life plan.

Like many other movements making their mark in the blogosphere, FIRE has its merits. But it isn’t new, and it probably demands more Scrooge-like behaviour and a bigger income than our FIRE bloggers care to admit. So my much more moderate FIRE stance could be summed up as “live well now, but save and invest to keep living well for longer.” LWNBSAITKLWFL – doesn’t make for a catchy acronym though, does it?


Jason Prowd leads Morningstar Next: ready-made investment portfolios.

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