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The Problem with Financial Independence Retire Early

Jake - Author/Founder

Hi. I'm Jake, a frugal Canadian Engineer. I believe you can build a great life through frugal living and index investing.

Imagine that you reach Financial Independence (FI) at age 40, where your investment income covers lifestyle expenses. 

You never have to work for money again, so you decide to spend your remaining days relaxing on a beach. 

But after two months of chilling on the beach, boredom takes hold. You’re not living up to your potential. You begin to feel depressed. 

Eventually, you start looking for other forms of work, either paid or voluntary. Naturally, you reintroduce hardship into your life. 

A few months later you are adding value to the lives of others. Structure and meaning has been laced into your daily activities.    

Your depression has disappeared.

There are many great reasons for pursuing Financial Independence and Retire Early (FIRE). But I argue that there are some downsides to the FIRE movement, In particular, pursuing freedom from all responsibility is a losing game. 

Table of Contents

Motives Behind The "Retire Early" Part of FIRE

My aim is to have you think about your motives behind the “Retire Early” part of the FIRE movement. 

What is it that you want to do with your free time once you reach financial independence? 

Answering this question can help you balance today’s spending with saving for the future. 

It will help you balance present you with future you.

What is Financial Independence Retire Early (FIRE)?

You are financially independent when your investment nest egg produces enough investment income to cover your lifestyle expenses forever.

The size of this nest egg is called your financial independence number. This is how large your portfolio needs to be to provide enough investment income to cover your expenses.

The amount of time it takes to grow this nest egg depends on four things:

  • Your expected expenses in the financial independence stage
  • Your savings rate leading up to FI 
  • Your investment returns 

I love the idea of early Financial Impendence (FI). By achieving FI, you no longer depend on a business or government to meet your financial needs. That’s a form of freedom. 

Once you’ve hit financial independence, you can retire. If you do this early, that’s “Financial Independence Retire Early”  – FIRE.

I think early financial independence is a worthy goal. I am taking action to accelerate my journey to financial independence, intending to reach FI by age 45. 

What is Retirement?

The problem with the FIRE centers around the definition of retirement. 

The Merriam-Webster dictionary defines retirement as “A withdrawal from one’s position or occupation from active working life“.

Here are some examples of removal from active working life. 

Examples of Retirement Activities

  • My grandfather spends his days reading and gardening. He has limited responsibilities other than keeping Oma happy.
  • Traveling the world for leisure. 
  • Relaxing on your boat fishing daily. 
  • Woodworking, where you are not selling your work to others. 
  • Volunteering at your local homeless shelter. 

Examples That Are Not Retirement

  • Monetizing a hobby that naturally turns into a business. This requires active work and engagement of your human capital. 
  • Entering a new job with lower pay that better aligns with your purpose and interests. 
  • Starting a blog with the intent to grow traffic to improve the lives of others through education. 

The Case For Work In The Financial Independence Stage

There is a big difference between retiring early (say at age 40) and later (say age 65). 

The difference is that the early retiree has tons of potential. 

I believe it’s in the best interest of an early retiree to live up to their full potential. Doing so is referred to as “flourishing” or self-actualization, and it is critical to your wellbeing. 

Flourishing occurs when you apply your unique skillsets to improve the lives of others. This isn’t just good for you. It’s good for society. 

Use of your potential is a win-win for you and society. 

Work and Wellbeing

I notice that nearly all wealthy people continue to grind on work they find meaningful long after their financial independence point. 

What’s with that? 

Work brings engagement and accomplishment. Plus it’s a source of strong human relationships.

Engagement, accomplishment, and relationships happen to be core elements of human well-being. They are all facets of the academic PERMA model of well-being. I cover this in more detail in Money, Wellbeing, and Happiness: An Ultimate Guide.  

Work brings many a sense of purpose and belongingness. Here are two examples:

Warren Buffett is still working in his 90s as the Berkshire Hathaway Chairman. He spends over 70% of his day reading. His day is scheduled and structured.

Bill Gates could have easily “retired” when he left Microsoft in 2006, but instead decided to head the Bill and Melinda Gates Foundation.  His day is structured within five-minute blocks. 

Our work provides structure, responsibility, and a sense of belongingness. Your source of meaning and fulfillment disappear if you take work away at a young age with no replacement.

Let’s consider some ways you can “flourish” in the financial independence stage. 

Semi-Retired Work

Financial Independence gives you the freedom to limit work hours as you see fit. 

Maybe you want to do freelance website design, or sell custom made furniture while you spend more time with loved ones. Or perhaps you want to spend more time mountain biking.

That’s great, but spending 100% of your time with loved ones and fitness is unrealistic. You will naturally pursue engaging work,  perhaps a hobby.

So let’s say you expand that hobby to provide value to society. The hobby will naturally sprout into a business.

Starting A Business

Your investments in the Financial Independence stage buy you time. This time can be used to start a business, plus you may have a financial buffer. 

Both factors provide a stable environment to start a business. This is awesome. 

But it’s a double-edged sword. A safety net provided by FI may sound great, but it can also suppress motivation by reducing the cost of failure. 

A fire is lit under your ass when you know success is needed for financial survival. 

Volunteer Work

Maybe you want to use your FI time to cook food for the homeless, build schools in Africa or start a personal finance group. 

Volunteer work is an easy way to gain structure, engagement, and build relationships by helping others. 

Creative Work & Hobbies

Financial Independence can give you the freedom to focus on creative work. Such work permits a state of flow, where you are 100% focused and immersed in a task. Hobbies permit a similar state. 

This state is great for well-being. 

Flow increases emotional regulation and fulfillment. My sources of flow, for example, include making personal finance infographics, mountain biking, and writing these articles.

I like this article to learn more about flow and its relationship to well-being.

To work on consistently entering a flow state, you can read the book Deep Work by Cal Newport. It’s one of the best “productivity” books I’ve read. Deep work allows you to align incentives between work and well-being. 

Capitalism Rewards Those Who Provide Value

Our capitalist system does a pretty good job at rewarding competent people who provide value to others. 

When one person begins providing value to others, they tend to use the money to scale their purpose, often by hiring others. Now we have a business. 

  • Heavily engaged in volunteering? This will naturally tend towards employment.
  • Enjoy writing to help others? People will buy your books. 
  • Enjoy installing solar systems to improve clean energy? People will buy your installation services and you will hire others to grow your ability to influence the world. 

By solving problems and providing value to others, you will tend to get compensated financially.

The Path To Financial Independence: Balance

Financial Independence makes going to work a choice, not a requirement. I think that’s awesome.

However, it can become a problem when you continue unfulfilling high-paying work to eliminate responsibility as early as possible in life.

Consider two options:

  • A high-income job that you hate, but you stay in the job to achieve FIRE; or
  • You leave the high-income job for an engaging, fulfilling job, with a delay in your early retirement (it takes longer to reach FI).

I’d pick #2. Why delay the opportunity to find fulfilling work?

Sure, you won’t reach FI for a bit longer. But at least you won’t hate life while building wealth.

Your work is a critical component of human well-being. This truth can be leveraged to ensure that the journey to FIRE is rewarding.

It is possible to find fulfilling work that pays well on the journey to FIRE. Likewise, there is balance when it comes to how much you spend on the path to FIRE.

Luckily, many of the most fulfilling things are free after you have enough income to cover shelter, transport, and food. 

Conclusion: The Problem With the FIRE Movement

I hope to encourage deep thinking about your FIRE goals. It all boils down to what retirement means to you and how you want to get there. 

I believe the pursuit of FIRE can be amazing, as long as we acknowledge these two problematic truths: 

  • Elimination of all responsibility in early retirement can be damaging to your well-being if you still have a runway of potential. 
  • Life will be better if you work a fulfilling lower-paying job rather than grinding hard on a high-paying job that you hate.  

The science and wisdom on well-being say the same thing – life is best lived by applying your abilities to further a meaningful purpose. Doing so will also minimize long-term regret. 

A wealthy life is not an easy life. Instead, wealthy life is a fulfilling life. Self-discipline is a requirement. 

Work may look different to different people. That’s okay. I hope you will ponder the importance of work to your well-being. 

Jake out.