According to Suze Orman, I made a mistake by retiring early at age 50. I also erred by continuing to manage my investments and side businesses instead of opting out. And besides, she feels that people like me are candidates for financial ruin.
Well, jeez.
Now, it is not as if she wrote me a letter and told me I was an idiot. But, it was the next best thing. She has come out against the retire-early movement known as FIRE (Financial Independence Retire Early) in a very public way. As an early retiree, I am an unofficial member of that group.
Her pronouncements made me think. After all, she is a credible source. Suze Orman is one of the foremost financial experts in the country. So, why does she have that opinion?
THE FEUD BETWEEN SUZE ORMAN AND FIRE
In a nutshell, a FIRE adherent’s strategy is to save huge portions of their income (50-70%) early in their careers by living very frugally. Once they save about 25 times their yearly expenses, they quit working a regular job, and turn to other things. Retirement can occur as early as age 30.
In fact retirement at age 50 makes me a laggard.
The three main objections Orman has to FIRE are:
- Early retirement heightens your risk of eventually running out of money.
- Retirement means you should goof off 24/7 (based on Suze’ example).
- Unexpected one-time expenses (like health problems etc.) can sink you. She argues that guarding against those risks mean you may need about $10 million in the bank. You certainly need $5 million.
Each one of those points is debatable. The most obvious issue is that most people have no chance to save $10 million. If that is a real goal, 99% of people should never retire.
I mean, really Suze?
Now, please understand, I do not love everything that the FIRE movement says either. I worry about social isolation caused when people obsess on saving money at the expense of relationships. I worry that retired FIRE people who retire on autopilot may eventually create problems for themselves through lack of attention. And while the math is convincing, I have been through several experiences that make me cautious of the financial projections that tell FIRE people when it is time to opt out.
However, whether Suze likes it or not, FIRE is based on many sound financial ideas. People should save as much as possible early on. And financial independence does help when with dealing with many stressful life situations. Moreover, the ultra-competitive work environment at some employers makes retiring early a good idea–after all, how much is your good health worth?
My fundamental disagreement with Suze is this: she should not assume that those who opt for early retirement automatically become passive. Most stay active and keep earning too. And, they adapt. Many FIRE people don’t believe early retirement allows them to put their feet up and go on autopilot. And most don’t.
EIGHT OTHER REASONS WHY FIRE STRATEGIES TEND TO WORK
The FIRE movement is about far more than the basic principles I covered above.
There are many financial and lifestyle reasons why FIRE devotees succeed that Suze does not mention; their:
- Businesses interests (and income) continue– if you have taken note of the hundreds of Financial Independence (FI) blogs out there, you know that many early retirees also operate blogs as profit-making businesses. For those that don’t, many work on other kinds of side ventures.
- There are often multiple sources of retirement income—to save 25 times yearly expenditures in the first place, it often takes more than one source of income, and more than one business venture. That diversification of income makes retirement safer and more feasible.
- Many have the “one house, one spouse” philosophy. Avoiding major expenses can be a key to maintaining a long retirement.
- Debt is minimal. Many FIRE people do not have any debt at all.
- Retirement interests also align with engagement, social activities and the search for an opportunity—for instance, you might not think that having a hobby keeps a person engaged and ready to take advantage of an opportunity, but it does.
- Asset management is not on autopilot—it is not as if the FIRE people put all their money into a bank account and forget about it. Many FIRE devotees diversify investments, maintain reserves, and practice good money management. That kind of attention to detail helps make retirement feasible. People who have the discipline to achieve lofty savings goals usually do not leave their money management to chance.
- Expenditures are not on autopilot either—FIRE people have more practice than anyone on living on a shoestring. That makes retirement more feasible.
- Many choose to live in a cheaper place. There is a whole group of FIRE devotees who use travel and low-cost residency as a pillar of their life plan.
I could go on, but you get the point. And let’s be honest here: are these common-sense practices less attainable than saving $5-10 million?
After all, the alternatives are not very encouraging. The proof? The existing system is not working well, even for people who make reasonable incomes.
MY OWN EARLY RETIREMENT EXPERIENCE
I decided to tell you what it is like for me to be retired. It is just one real-world example and by no means a perfect one. However, it gives you an idea of how things actually work and how pre and post lifestyle choices can make early retirement feasible. In one way or another, I practice all eight of the post-retirement strategies noted above.
And, for the record, I do not have a private island to retreat to as Suze does (no, not a joke).
In general, retired life is busy but fun. The main takeaway is: a successful early retirement is not passive either before it occurs, or afterward. And it is not just about finances. Early retirement incorporates elements that encourage wealth creation, social interaction, and health and wellness. If you have been reading other posts here, you know that it all works together as one cohesive strategy.
So, no, the daytime TV is not usually on. There is no rocking chair on the porch. And I don’t putter in the garden all day.
Instead, here are my own early retirement initiatives. They allow me to:
Be my own CEO—we always aim to keep growing our net worth through investments and engagement. Unlike many FIRE adherents who use blogs for ongoing income, I use investments and rental real estate.
Run a Side Business—MMH is just a hobby for me at this point. My primary side business is real estate and investment.
Expand horizons—yes, I love to travel and spend a lot of time overseas.
Why? Travel is always a learning experience. Renewing your perspective is necessary for success and happiness.
The latest trip was a three-week journey to Bhutan and Nepal.
And yes, travel abroad also allows us to preview cheaper places we may want to live later on.
Help family—My own experience may be unique because family finances are intertwined with my own. For instance, I just completed a joint real estate sale with one of my kids.
And assisting parents and kids is a key part of my life. I am in the sandwich generation. Sometimes the family takes a lot of time; mostly it does not. An early retirement gives you a chance to step in if you are needed, and stay away if that is a better option.
Help others— I am fortunate. I volunteer at a nonprofit agency that assists low income and homeless people. You are your brother’s keeper.
If MMH ever makes money, I would like to donate a lot of it to charity.
Be Creative—a standard job sometimes leaves little time for “optional” personal activities like artwork and writing. Early retirement gives me the chance to circle back and try things that I could not get to earlier in my life.
And taking the time to pursue the road I did not travel gives me a chance to evaluate too. I have learned something along the way: it was probably a good thing that I did not quit my day job.
Pursue Fitness—ALL FI bloggers claim to do this. If you believe them, they are the fittest people on the planet. And yes I exercise a lot more than I used to—but probably still not enough. Unlike those other bloggers, I admit that I want to be alone with that extra-large bag of Doritos.
The real point is this: if your health is poor the rest of your life suffers. So, I try to stay healthy.
Engage in Continuous learning—many early retirees do this. And I am a fanatic. The pursuit of knowledge is one of the most enjoyable things I do. With early retirement, I get to do it as much or as little as I want. Again, there is an indirect financial benefit to this activity.
SUZE ORMAN’S RETIREMENT
In MMH I always recommend that people come to their own conclusions, and question conventional wisdom.
Therefore, it is essential to watch what people do, not what they say. So, I also read how Suze Orman handled her own retirement at age 65.
It does not look like mine.
To summarize: her main retirement activity was to pare down. She got rid of her five houses, sold all five cars, retreated to her own private island and began to spend time entering fishing tournaments (among other activities).
Here is the surprise ending: Suze’ retirement lasted only three years, and now she is back doing what she loves—advising people on financial matters on a national stage at age 67 (at this writing).
She is happy, and that is good.
However, she continues to complain about the financial dangers of retiring early.
Draw your own conclusions.
Disclaimer: consult with a financial professional before taking any steps outlined here. Not all advice is suitable for your circumstances or investment style.