openpolitics.com

A group of younger workers, devotees of the FIRE movement, are seeking ways to duck mistakes made by prior generations

They’re also watching the generation entering retirement struggle with many of the same problems. About 10,000 people turn 65 every day and many are unprepared for the years ahead. Older Americans have high average debt. Their 401(k)-type retirement funds will bring in a median income of under $8,000 a year for a 65-year-old couple.

The younger generation’s radical solution—dubbed Financial Independence, Retire Early—has spawned an ecosystem of podcasts, blogs, books, conferences and informal discussion groups. One online forum dedicated to the concept, known to its followers by the acronym “FIRE,” has more than 450,000 subscribers.

FIRE adherents are often millennials and younger members of Generation X who have college degrees, above-average incomes and the discipline to adopt a strict do-it-yourself approach to retirement. Some say they are saving as much as three-quarters of their income, or five times the 15% savings rate conventional financial advisers often recommend, and growing their own food. Others are taking more modest measures such as living in smaller houses and driving older cars.

.. The downside of FIRE is its inherent paradox: For those seeking financial security, early retirement can be risky. Since many early retirees rely solely on income from stocks, bonds or real estate for living expenses, sudden market downturns can pose a threat to their plans. At the same time, these people have to forecast their cost of living for decades. This means prolonged periods of high inflation can wreck their forecasts and budgets.

.. The self-reliance and thrift embodied by FIRE have roots in American history. Elements of the philosophy can be found in Ben Franklin’s 1758 classic “The Way to Wealth,” Ralph Waldo Emerson’s 1841 essay “Self-Reliance” and Henry David Thoreau’s “Walden,” an 1854 book about living simply in a cabin he built near Concord, Mass.

Many FIRE boosters cite a more recent work: the 1992 book “Your Money or Your Life” by Vicki Robin and Joe Dominguez. This paean to financial independence and anti-consumerism, a business best seller in the ‘90s, found a new audience after the 2008 financial crisis.

.. FIRE enthusiasts gather around the country to discuss ways to save more, spend less, and manage investments. A recent meet-up in Manhattan attracted close to 30 people to an office conference room. The attendees—mostly men in their 20s and 30s, several with backgrounds in engineering—discussed taxes, index funds and real-estate investing over beer and potato chips.

.. “We are surrounded by consumerism, advertisements and marketing, and there are a lot of easy ways to spend,” said David Rodriguez, 33, a mechanical engineer who helped organize the meeting. “It is important to have a place to find like-minded people.”The interest in thrift is flourishing most visibly online where frugality evangelists amass large followings via podcasts, blogs and conferences. One of the most popular FIRE blogs, Mr. Money Mustache, started in 2011, has attracted about 2.5 million page views in the past 30 days, according to Google Analytics data. A podcast devoted to the topic, ChooseFI, has been downloaded 5.2 million times and been played in 190 countries since its inception in early 2017, according to podcast hosting service Liberated Syndication. This puts it in the top 2% of the more than 50,000 podcasts the service hosts.

.. Some who have tried the path of early retirement say it isn’t always as idyllic as it sounds. Socializing with people who still have conventional jobs can be awkward, said Ed Ditto, 49, who retired at 36 as an energy trader and now writes the Early Retirement Dude blog. His solution is to invite friends and neighbors to backyard potlucks.“I don’t bring up the fact that I don’t have a job,” he said. “If someone is interested, I’ll talk about it, but I don’t want to run the risk of stirring up resentment.”

.. One complaint from readers was that the 33-year-old author and her husband still earn sizable incomes. Nate Thames works for a nonprofit and was paid about $270,000 in 2016,

.. “Now I understand why even with cutting everything to the bone, that we haven’t been able to save like they do,” a reader posted in an online review of the book.

Mr. Sabatier, 33, says his Millennial Money website made $401,000 last year. Blogger Joe Udo, 44, recently disclosed he has made almost $350,000 since starting “Retire by 40” in 2010.

.. “It was hard to go from working every day in an office full of people to sitting in a tiny apartment by myself,” she said. “It is very isolating.”Recently she began taking on more freelance work as a copywriter. “I got a lot more meaning from my work than I had realized,” she said. “It is a lot harder to find meaning than to save 70% of your income.”

.. FIRE proponents say they account for the danger of fluctuating markets by adhering to a rule-of-thumb pioneered by financial planner William Bengen, who concluded retirees should spend no more than 4.5% of their initial nest egg, adjusted annually for inflation, to ensure a high probability of supporting themselves over decades.

.. It took a Category 5 catastrophe for Sylvia Hall to start thinking of changing her approach to her finances. When Hurricane Katrina struck the Gulf Coast in 2005, Ms. Hall, then a New Orleans resident, temporarily lost a home and a paycheck as the first payments were due on $101,600 in law-school debt.