Economic turmoil challenges FIRE followers

For many leaders of the penny-pinching FIRE crowd, ambitious projects are suddenly on hold.

FIRE stands for “financial independence/retire early,” but even if the goal is to get out of the 9-to-5 grind, spreading the word is a business of its own — and like almost every other business in the U.S., the coronavirus has brought things to a screeching halt.

Grant Sabatier, who writes the “Millennial Money” blog, had to postpone a 1,000-plus attendee “Financial Freedom Summit.” Joshua Fields Millburn and Ryan Nicodemus, who dub themselves the Minimalists, had to postpone a West Coast speaking tour, as well as production on a Netflix film.

It’s a tough moment for some FIRE followers, too. The movement is based largely on the idea that you can live on less and save more through intensive financial planning, and an 11-year bull market made the possibility of hitting their numbers seem well within reach. That’s gone now.

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The market turmoil and an economic downturn that could send unemployment as high as 30% by some estimates will cut the legs out from under many careful calculations of how to achieve financial independence. Early retirees may find finances strained, and efforts to rekindle former careers frustrated. Those who benefited from a growing economy offering myriad ways to cobble together income streams may find those avenues shutting down.

“I’m sure there are people who retired in the past six months who are freaking out, and I feel truly bad for them,” said Tanja Hester, a former political consultant who retired about two years ago at age 38 and writes the “Our Next Life” blog. “This will bring hardship to the FIRE community like it does to everyone else, but far less because by and large we have insulation.”

‘Own terms’

Sabatier, 35, sheltering with his wife in upstate New York about 150 miles away from their Brooklyn home, said these unsettled times could swell, rather than shrink, FIRE’s ranks.

“FIRE to me has always meant living life on your own terms,” he said. “From that perspective, the core philosophies and values and principles of FIRE are more important than ever.”

Still, for those finding themselves suddenly short of money, that rhetoric may not be very comforting.

“Many people that were close to or already considered themselves FIRE may suddenly find themselves not able to consider themselves financially independent,” said New York-based financial planner Roger Ma. “That may be especially painful.”

The FIRE movement has become trendy, particularly among millennials. Blogs on the topic have exploded to more than 100 since 2011. Reddit’s FI thread has about 719,000 followers.

Save, invest

The basic idea is to save and invest as much as possible early in one’s career and amass at least 25 times annual expenses. The goal is to accumulate a big enough nest egg to be able to retire early and live on annual withdrawals of about 4% of the value of their portfolio.

Hester said she worries about some FIRE followers, especially those that just retired, and a younger, aggressive contingent who have never experienced a down market and advocate holding a portfolio made up almost exclusively of stocks. Having lived through the last financial crisis, Hester keeps 70% in equities and the rest in bonds and cash.

“There’s been this attitude of ‘It’s OK to wing it because things will work out,’ and for the last decade that’s been true,” said Hester, author of “Work Optional: Retire Early the Non-Penny-Pinching Way.” “No one was getting laid off, no bad things were halting people’s progress. People could get away with that attitude even if it wasn’t a good idea.”

Hester hopes for a “cleansing” moment that will tone down or get rid of some FIRE rhetoric, including the idea that a 4% withdrawal rate is safe for everyone or the belief that, if you fall short, you can always just go back to work, which could be hard in a recession.

‘Biggest spike’

At the same time, she also sees the potential for some aspects of the FIRE movement to grow in popularity as a result of economic turmoil. “What about the biggest spike in unemployment will have people saying, ‘I want to rely more on my job?” she asked.

Mary Snow, 37, and her partner Chase Martin, 33, are confronting the dangers of relying on one’s job — even a part-time one. The Durham, N.C.-based couple saved and invested heavily for three years before switching from full-time positions — she worked in an office, he was a school teacher — to part-time jobs in mid-2018.

Their current income covers weekly expenses. But Snow was recently furloughed from her job at a thrift store, and is awaiting unemployment checks, while Martin continues to do deliveries for Jimmy John’s. They’re not ready to give up on their goal yet: the target is $750,000 by 2038, which they say they can meet if they continue part-time work for the next 20 years.

“A big drop in the market was in the plan, but it also has kind of given us the opportunity to say, well, if the stock markets don’t bounce back in the way they always have historically, we’ll just keep working,” Snow said.

Stock bargains

Among wealthier FIRE followers on Reddit, much of the talk is of buying stocks, not selling. Travis Shakespeare, 52, who directed the 2019 film “Playing With FIRE: The Documentary,” has noticed some people trying to time the bottom. He said he’s been deploying cash into equities gradually.

“I’ve been around the FIRE community long enough that this doesn’t scare me,” Shakespeare said. “If people pursuing financial independence get lucky, we’ll have something of a prolonged downturn, which will allow us to invest more money into a discounted market.”

He’s not wishing ill will on the global economy, he said, “but from a personal standpoint it would be a great benefit. I’m investing for a 30- or 40-year period.”

Sabatier, meanwhile, has reduced his overexposure to Inc. shares in his portfolio and put that money into Vanguard Total Stock Market exchange-traded funds. The shares have since dropped in price, but he said he’s not concerned because he doesn’t expect to need the money for 20 years.

“This is the perfect moment to reflect on our lives and what we want to do,” said Sabatier, who is working on a book about how to thrive in uncertain times. “A larger subset of people will be in fear of this happening again, and will have a need for more security and will be more intentional about their finances.”

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