The Problem with Financial Independence Retire Early

Jake - Wealthy Corner Author/Founder

Jake - Wealthy Corner Author/Founder

Hi, I'm Jake. I help people under 40 reduce money stress and grow wealth.

I love the idea of Financial Independence and pursue it myself. But I think there is one big issue with the FIRE movement.

So, you’ve reached Financial Independence (FI). Your investment income covers your lifestyle expenses, and you’re ready to quit working for the rest of your life. You’re finally free, and can retire early (RE). You are excited to spend your remaining days relaxing on a beach. 

But after two months of chilling on the beach, you become consumed by boredom. Self-discipline has dwindled and you’re starting to feel depressed. You’re not living up to your potential. Naturally, you start to reintroduce hardship into your life. Eventually, you start looking for other forms of work, either paid or voluntary. A few months later you’re contributing to society again. You have structure in your life, and depression has disappeared.

Responsibility, belongingness, and a sense of purpose are critical to wellbeing. The “Retire Early” component of the Financial  Independence Retire Early (FIRE) movement is often taken as an elimination of all responsibility. Retiring early can hijack wellbeing. 

Infographic: The Problem with the FIRE Movement

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What is Financial Independence Retire Early (FIRE)

The FIRE movement advocates for a high savings rate and aggressive investing. When investment cashflows cover your lifestyle expenses, you have reached FI.

Once you’ve hit FI, it’s time to retire. That’s FIRE.

I love the idea of early Financial Impendence (FI). By achieving FI, you’re no longer directly dependent on a business or government to meet your financial needs. I emphasize directly, because you still depend on businesses, as a shareholder, for investment income.

I think an early FI goal is great, and I myself aggressively invest with a savings rate of over 50%. I even have a post here on how to accelerate your journey to FI.

But I believe the goal of retiring early can be misleading. So, it needs to be thought about carefully.

What is Retirement?

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

Let’s assume you reach early FI, withdraw from your normal job and start a business. Because it takes immense work and dedication to start a business, you’re actively working and employing your human capital. This as active work, not retirement.

Maybe your goal is to “retire early” so you can seek fulfilling and engaging work that happens to have limited pay. Again, I see this as active work, not retirement.

My grandfather is an example of someone who is retired. He spends his days reading and gardening. He has limited responsibilities, other than keeping my Oma happy. 

The Value of Work

You’ll notice that nearly all wealthy people continue to grind on work they find meaningful long after their FI point. That may be a day job, or a business. They enjoy their work. It brings them a sense of purpose and belongingness. Here are two examples:

Warren Buffett is still working in his 80’s as the Berkshire Hathaway Chairman. He spends over 70% of his day reading. His day is scheduled and structured. 

Bill Gates: The man 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 evaporate if you take work away at a young age with no replacement. You’re good, as long as you’re providing value to society and improving lives. 

So, be careful if the goal is to eliminate all responsibility upon retirement. Think about this with depth and caution. One helpful exercise is to think about yourself at 80 years old. When you look back, ask: Will I have regrets?

Financial Independence: Work Examples

Semi-Retired

FI gives you the freedom to limit work hours as you see fit. Maybe you want to 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, hobbies or fitness is unrealistic. You’ll still need to find some form of engaging work.

Say you increase the time spent on a hobby. You’ll eventually expand that hobby to provide value to society. The hobby will naturally sprout into a business.

Starting A Business

Early FI provides a safety net to start your own business. The income stream from investments covers your lifestyle expenses. No pressure if the business fails. 

However, you now have a cap on your motivation because you can fail and be still be ok. On the other hand, starting a business becomes a no-fail mission if success is needed for financial survival. Waiting until your FI  point to start a business is a double-edged sword.

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 fulfillment while giving back to society. 

If you’re heavily engaged in volunteering, it will naturally tend towards employment. You’ll be able to expand your circle of influence at a not-for-profit organization. And if you’re solving problems in the world, you will tend to get compensated financially.  

Creative Work

FI 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. 

This state is great for well-being,. Flow increases emotional regulation and fulfillment. My sources of flow include making Instagram personal finance infographics, mountain biking, and writing these articles. Read this article to learn more about flow. Or you can read the book Deep Work by Cal Newport – a great book. 

Financial Independence and Switching Jobs

FI makes going to work a choice, not a requirement. That freedom is what drives me to aggressively save and invest, even though I love my job.

Consider two options:

  1. A high-income job that you hate, but you’re staying to achieve FIRE; or
  2. Leaving the high-income job for an engaging, fulfilling job, with delay in your FI point.

I’d pick #2. Why delay the opportunity to find fulfilling work? Sure, you won’t reach FI for a bit longer, but I’ll be fulfilled in engaging work, becoming the best that you can be. That’s what matters for your wellbeing. Especially in your younger years.  

The central theme here? The retention of responsibility to improve the lives of others.

A Moral Stance

I believe it is in our best interest to provide value to society for as long as we are still able to do so. Eliminating responsibility sounds great, but it will come at cost of long-term regret.

Conclusion: The Problem With the FIRE Movement

My aim is to motivate you to think deeply about your FIRE goals.  It all boils down to your definition of retirement. If retirement means eliminating responsibility, it may be a problem. Aiming to retire in this way looks great on paper, but will leave you unfulfilled in practice. 

It is an odd strategy to continue unfulfilling high-paying work to eliminate responsibility as early as possible in life. 

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