Maybe it’s your dream—accumulate enough money to retire early and live happily ever after. You never have to work again and can do whatever you want whenever you want. That’s the basis of the FIRE Movement—Financial Independence, Retire Early.
There’s lots of chatter all over social media about FIRE. Conversation threads run deep. Online communities search for every possible suggestion to save and invest. Some people are so intent on FIRE they cut out all non-essential expenses, downsize, work extra jobs and as much overtime as they can get. Eating out almost never happens. They don’t go on vacations. They almost become hermits in order to reach their FIRE goal.
But there are several downsides to FIRE other than sacrifice. According to Brad Klontz, author of Mind Over Money, and co-founder of the Financial Psychology Institute, anxiety is one of the lesser-known aspects of FIRE and plays a prominent role in this movement. “So, while retiring early with hundreds of thousands of dollars (or more) saved sounds great, it’s common for anxiety to creep in when you don’t have too many people retiring around you.”
Anxiety often leads to self-doubt and a battery of questions that should have been asked before deciding to retire early: Do I really have enough money saved? What happens if the stock market tanks? What happens if I get sick and I’m not old enough for Medicare?
Loss of identity can be another hazard of FIRE. For a person who has been known by their profession or what they do, how will they handle being an ordinary citizen, losing the title, honor, or respect that came with that position?
Loss of purpose. So, you’ve got enough money to live out the rest of your days. You have lots of time on your hands. You probably have a to-do list that will fill 6 months or a year. Every retiree I’ve ever talked to said there’s only so many fish you can catch and so much golf you can play. Then what? Preparing for early retirement is not just a financial decision but also psychological. You need to decide what your purpose in life is going forward. Whether you begin a new profession or volunteer, having made that decision will help you avoid a feeling of uselessness.
The hazard for FIRE followers, says Brad Klontz, is the tendency to focus more on financial security instead of planning what their lives will look like when they have financial independence—the psychological security.
Here are some tips on preparation for early retirement:
- Start early thinking about ways to replace the feeling of belonging and the social engagement you find at work.
- Decide what passion and purpose will drive your life after the early retirement honeymoon period ends.
- Create a detailed vision for those retirement years. Klontz suggests a 5, 10, and 25 year plan.
- Be disciplined. It was discipline that got you to early retirement. Use focus and discipline to find your identity and purpose for the future.