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Q: I’m hearing lots of talk about FIRE, which stands for Financial Independence, Retire Early. I’ve been wondering about this concept for a while. I love my job, so I don’t really see early retirement as a goal. To me, life without work while I’m still in my physical prime is boring and meaningless. But how can so many popular influencers be wrong? 

A: While it sounds like a dream to be able to retire before you hit 40 and to be financially secure enough to walk away from your job without worrying about paying the bills, early retirement is not all sunshine and butterflies. There are many challenges and pitfalls associated with early retirement that you won’t read about in the romanticized accounts of popular bloggers who have achieved their goal of FIRE.

Also, as you correctly assume, early retirement is not for everyone. Here’s why: 

FIRE may breed discontent due to boredom

There are some personality types that loathe the corporate world and a typical 9-5 job. These people hate being told what to do and feel stifled or constricted by a traditional work setting. They have many outside interests they’d pursue if most of their waking hours weren’t spent at work. For these employees, a responsible early retirement can indeed be a path that leads to fulfillment and happiness. 

Many people, though, are content with their jobs and feel fulfilled and productive when working. For them, leaving the workplace in their prime can lead to depression and a physical decline well before old age arrives. 

Where do you stand? Early retirement might be an interesting idea if you’re a highly creative and independent sort who feels stifled at work. Similarly, if you have dozens of interests you would pursue without the structure of a typical workday, early retirement may be an attractive path. But, if you know you’d be bored after a few months of retirement, you’d be best sticking around your job as long as you can. 

FIRE means missing your years of peak earning potential 

Why bail out of your career just when you’re hitting your peak earning potential? 

The biggest jump in salary across all levels of income earners happens between ages 30 and 40, with those who are pulling in higher salaries seeing the greatest increase closer to age 40. If you leave the workforce in your early 30s, you stand to miss out on the years in which you reach your peak earning potential. Also, even if you retire at age 40 or 50, each year you are out of the workplace means a higher loss since you’ll likely have reached your highest income level during that time. And, if your employer has a 401(K) match, that means missing out on a lot of free money.  

Where do you stand? If you’ve already hit your peak earning potential, and you have enough stashed away to keep you going, this may not concern you. However, if you feel you haven’t yet hit your best earning years, you may want to stick around the workplace for a while longer. 

You likely don’t have enough money for FIRE

Some financial bloggers like to boast about their frugal post-retirement lifestyle, but how many of us can honestly look forward to off-the-grid living for more than a few years or even a few months? If you can’t hack the super-cheap life for long, can you really afford to retire early? 

Consider these numbers: According to the Bureau of Labor Statistics, the average person spends nearly $46,000 a year post-retirement. A survey by GOBankingRates found that 42 percent of Americans have less than $10,000 saved for retirement. A surprising 14 percent have nothing saved at all. Even if you have a handsome retirement fund, it may not be enough to sustain you.

Keep these two factors in mind when you crunch the numbers: 

  • You won’t be eligible for Medicare until you turn 65. Walking away from your job can mean losing out on your health coverage. If you incur a sizable medical expense before you find coverage, you may need to drain your savings to cover it.
  • You may have to pay an early withdrawal fee on your retirement funds. If you take out funds from your 401(K), traditional IRA, or Roth IRA before age 59 1/2, prepare to pay a 10% penalty.

Lots of early retirees earn money through a hobby they enjoy, such as blogging, selling on Etsy, or YouTubing. This can be a great way to keep those retirement funds from running dry. 

Where do you stand? If you’ve worked out the numbers and you know you’re financially secure enough to retire early, you can keep the option on the table. However, if you’re not sure you have enough retirement money, you may want to delay until you can afford to retire comfortably. Once you leave the workforce, it will be that much harder to re-enter. 

You won’t be contributing to society 

Life is most meaningful when we’re working to make the world a better place. Your job is likely helping to change people’s lives for the better. Once you exit the workforce, you’re no longer impacted the same way. Like boredom, living selfishly can ultimately lead to dissatisfaction and unhappiness. 

Where do you stand? If you have a plan in place for volunteer work, or for contributing to your community in a meaningful way once you’ve retired, this may not affect you. However, if you plan to indulge in years of pure pleasure and relaxation, you may come to regret FIRE.  

Your Turn: Do you believe that early retirement is a good idea? Why, or why not? Share your thoughts with us in the comments.

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