The ‘Radical Saving’ Trend Is Based on Fantasy
The “Financial Independence, Retire Early” advocates are using assumptions about future market returns that are unrealistic.
Retiring early sounds appealing but isn’t very pragmatic.
Photographer: Cedrick Isham Calvados/AFP/Getty Images
For as much as people have complained about the astonishingly low savings rate in the U.S., nobody has done much about it. But now there is a new movement called “FIRE,” which stands for “Financial Independence, Retire Early” that encourages people to do just that. It has turned out to be surprisingly controversial.
The FIRE folks say you should engage in “radical saving” during the early part of your career—about 50 percent of your paycheck—until about age 35 or 40, at which point that is pretty much the end of your career because you can then retire. The FIRE folks have done the math and figured out that if you save that 50 percent and invest it in the stock market, using generous actuarial assumptions,1 that pile of money will grow even as you sell assets over time to finance consumption. The goal is for you to bounce the last check you write.