What’s FIRE and Why Does Suze Orman Hate it?
For those who are not aware, the acronym FIRE stands for Financial Independence, Retire Early. FIRE has existed for decades, but the movement has become very popular with Millennials in the last 3-4 years. Nonetheless, financial expert Suze Orman detests the FIRE movement. Why? In a nutshell, she believes that anything less than $5 million in savings will not be enough to retire early. By retiring early, she means 35 years old (not 55). She claims that, even if you have $2 million when you retire and withdraw $80,000/year (using the 4% withdrawal rate), this isn’t enough to protect you “when the floods come.”
Problem with Ms. Orman’s Position
The Reality of Savings in America
Most Americans do not have the savings amount advocated by FIRE proponents ($2 million), much less the $5 million that Ms. Orman contends is necessary to avoid a horrible life According to Vanguard, the average 401(k) balances in 2017 were:
Age 55 to 64
Average 401(k) account balance: $190,505
Average 401(k) savings rate: 8.3 percent
Age 65 plus
Average 401(k) account balance: $209,984
Average 401(k) savings rate: 9 percent
Another survey found that 51% of workers over the age of 55 have less than $50,000 saved for retirement. And 39% in that same age group have less than $25,000 in retirement savings.
Whose Lifestyle are We Talking About?
Ms. Orman foresees tragedy if you retire early without millions in savings. She warns about lacking sufficient funds “when the floods come.” I assume by “floods” she means if you have multiple children and need to pay their college tuition, and/or have elderly parents who may need to attend an assisted living facility or nursing home. But, what if you don’t have that? Or, what if your children work to put themselves through school (like I did), or take out loans, or qualify for scholarships (like my son)? Further, what if your parents have sufficient funds for their own retirement or you have multiple siblings to assist in the care of your parents? What if your parents are deceased (like mine)?
Also, apologies to Ms. Orman, but what regular person lives her lifestyle?
I love this perspective stated in an article advocating for FIRE and opposing Ms. Orman:
As a society, we’ve been trained to assume that having a bigger budget is always better, and cutting back always means some sort of compromise. The Suze Orman interview is just dripping with that assumption. The amazing news in this department, which will save you millions of dollars, is that this is complete bulls—!
Happiness is your goal in life, and it comes from meeting certain core human needs. The thing is, that there are many ways to meet each of these needs — some of them free and some of them shockingly expensive.
For example, improving your physical health is one proven way to be happier. But you can accomplish this with a $2,500 a month personal trainer or a $100 set of barbells from Craigslist. Same happiness, vastly different cost.