Playing with F.I.R.E?
Don't Get Burned!
stands for Financial Independence/Retire Early. It is a movement, mostly popu-
lar among Millennials, that has been gaining traction recently, and it’s not hard
to understand the appeal. Financial Independence? Sounds terrifi c! Retiring Early? Sign me up!
Jeffrey M. Orth is a
Consultant, a Certified
Advisor in Senior Living,
and an Investment Advisor
Representative, with over
15 years of experience as
a business and personal
and wealth management
specialist. Jeff is available for
group lectures and private
consultations. Visit integrated-
financialbenefits.com or call
Jeffrey M. Orth is a registered
Representative of, and Securi-
ties and Investment Advisory
services offered through Homor,
Townsend & Kent, Inc. (HTK).
Registered Investment Advisor
Von Karman Ave, Ste. 225
lrvine, CA 92606 (949)754-
1700. I Fit is unaffiliated with
HTK. CA Insurance License
So how does F.I.R.E. work?
When most people think about retirement
age, they think about their 50s, 60s or maybe
even waiting until their 70s. While this is
the standard age for most people, those who
follow the F.I.R.E. lifestyle retire much earlier,
usually in their 40s, 30s and sometimes,
even in their 20s. For these people, fi nancial
independence seems to be the primary goal
that is driving them. Having the ability to
pursue personal interests or causes without
being constrained by the need for active
income seems to be the attraction. Financial
independence doesn’t always mean that you
have to quit your job. It often means that
you no longer feel tied to the income your
job provides. And if this is the case, it creates
leverage at work when negotiating benefi ts
like pay increases and vacation time. You are
working because you WANT to, not because
you NEED to.
Financial independence requires
discipline in your spending. It means cutting
back on expenses and living a much simpler,
more frugal, lifestyle. It also requires a
decent income at a relatively young age. The
math behind F.I.R.E. is really simple: Spend
less then you earn and invest the difference.
And if you have learned to live on less, it is
assumed that you will also need less money
saved when you retire because you will only
need to have enough to support that more
How can you use time to your advantage?
For example, if you invested $522 at the
beginning of every month for 40 years, or
$1,021 at the beginning of every month
for 30 years, and assumed a 6% growth,
you would accumulate one million dollars!
(Keep in mind that these calculations ignore
the impact of taxes or infl ation, and do not
refl ect any specifi c investment.) The point
of this illustration is that there is value in
starting early when it comes to saving
GILROY • MORGAN HILL • SAN MARTIN
What’s the problem?
As a Chartered Financial Consultant, you
would think that I would enthusiastically
support a plan that has young people
starting to save early in life! And, in fact, I
do. I believe the goal of creating fi nancial
independence as soon as possible is a worth-
while goal. But the F.I.R.E. approach not only
requires a great deal of work and discipline, it
overlooks some major challenges to its
Here are some things that can upset the
Retire Early plan:
How about healthcare? If you retire early,
you will be responsible for 100% of your
healthcare costs, and these costs increase
dramatically as you get older.
• What about education costs? How will
you be able to fi nance your children’s
education on a modest fi xed income?
• Will one million dollars be enough to last
for all your retirement years—maybe
40 years or longer?
• What if there is an economic downturn or
fi nancial crisis and your investments don’t
have the return you planned on?
Why shouldn’t you retire really early, even
if you can?
• The F.I.R.E. lifestyle isn’t always easy and
it’s not for everyone.
• So much of who we are is tied to what we
do, so that some really early retirees suffer
a loss of identity. Also, losing the social
interaction that is part of the work environ-
ment is often an unexpected consequence.
• For most Americans, wages tend to peak
in their 50s and 60s. Individuals who
retire early are choosing to terminate their
earned income, often before they reach
their peak earning potential. This is the
primary defense against the predictable
increase in life expenses that comes with
time. And they are not just cutting off