A shorter version of this post originally appeared on the HumbleDollar, a blog I have long admired and one which I am honored to have had an article published on. You can read that version here.
A Better Way to FIRE
FIRE stands for Financial Independence, Retire Early. The idea is to get yourself to a point where you don’t have to work anymore at a younger age the traditional retiree. There is a wide spectrum, with a lot of the FIRE community relying on extreme frugality to supersize their savings to achieve FIRE.
Others gun for something called FatFIRE. Think successful startup exits at a young age with millions in the bank.
I spent most of my twenties pursuing something in the middle. I never intended to retire before 50, but I certainly didn’t plan on working too long after age 50 either. Pursuing this strategy meant saving as much as we could and paying down debt at an aggressive rate. My wife and I both worked so we were able to do this and still live a fairly nice lifestyle.
Then we had our first child. I now know that children are “budget busters” and that not having kids is a sure-fire way to boost your free cash flow. But the financial impact of having children isn’t the only reason I’m no longer pursuing FIRE. There was also the realization that I have 18 summers with each of my kids before they become independent. This crystallized the way I wanted to spend my time.
Thus began my transition from FIRE to the concept I am introducing now: FIRR™, which stands for Financial Independence, Redistribute Retirement™.
What does it mean to redistribute retirement? I guess we have to start by defining retirement. The best way I’ve heard it put is that it is not freedom from responsibility, but rather the freedom to choose responsibility. Retirement planning becomes figuring out how you’re going to spend your time and then figuring out how to pay for it.
Think about what you envision your retirement to be if done well. What do you look forward to about retiring? It probably involves spending your time doing more of some things and less of others. There will be various activities you’re passionate about and more time spent with people that are important to you.
Traditionally, retirement was a 30-year period following a 40-year working career. But what if you were able to redistribute some of those 30 years? What if you could pull forward those future activities that you’re excited about and enjoy them now or in the near future? For me, what if I could borrow some time from retirement to spend those 18 summers with my kids? This can apply to people of all ages, those nearing traditional retirement or those with decades left of working.
Perhaps the most obvious way to do this is to take a sabbatical. More and more companies seem to be offering this as a perk, and even more would probably be open to a negotiated sabbatical.
Another strategy would be negotiating more vacation time. Ask your employer for more vacation time instead of a raise. It could even mean “buying” more vacation time by taking a corresponding pay cut.
As the layers of the onion peel off, you can imagine even more ways to redistribute retirement™. Maybe you don’t need more vacation or you already have a pretty flexible schedule. Why not skip retirement savings one year (still get the match though!) and take that dream trip?
You’ve heard the cliche that if you love what you do you’ll never work a day in your life. Too often we (me included) follow a pattern of doing things that make us unhappy so later we can do things that make us happy. Can you redistribute retirement by switching careers/companies/roles? I love the question popularized by Tim Ferris, “What would you do if retirement wasn’t an option?”
Financial Planning Implications
A key component of FIRR™ is working longer. There are some well documented benefits to working longer both from a health standpoint and life satisfaction standpoint. Think about how much higher lifespans are now than in the 1930s, when Social Security started. Age 65 seemed to make more sense then than it does now. Also think about how the nature of work has changed. Many more people are in careers that allow them to physically work longer than they could in decades past.
There are obviously serious career considerations when contemplating many of these strategies. Remember, we are talking about redistributing retirement, not early retirement. You’ll still have to work the proverbial 40 years, which means you’ll work to a higher age. Once that is the plan, you can work for lower pay if the tradeoff is worth it for you. Perhaps you could negotiate a 4-day work-week.
Determining Your Redistribution
I recently shared the parable of the Mexican Fisherman. Reading that story was one early stepping stone on my transition from FIRE to FIRR™. Questions like the one from Tim Ferris was another.
There is also a well-known life planning coach in the financial services industry that has a three-question framework. Paraphrasing, it essentially asks you what you would do if you had all the money you ever needed. You can imagine some profound answers here, but you can also imagine visions along the lines of “sit on the beach all day.”
This leads to the next question. The question is the same, but puts a time limit on it. What would you do if you had all the money you ever needed but would die in 5-10 years?
The answers become a little starker. This leads to the last question, which has a time limit of 24 hours. What would you do with one day left on Earth?
I actually like thinking about these questions in reverse. The point is that there are a ton of different ways you can determine what is important to you and how you actually want to live your life. Another great one is to write your ideal eulogy. This allows you to essentially create your bucket list. People talk about bucket lists all the time, but not many actually have one. Once done, begin taking steps to make it reality.
The question “What would you do?” is essentially asking “How would you spend your time?” That’s what retirement boils down to anyway: How are you going to spend your time and how are you going to pay for it?
There were many other points along the way that led me to the concept of FIRR™, but these should illustrate the general idea.
This concept may sound like a typical millennial pie-in-the-sky lifestyle without responsibility. But, if think about it, FIRR™ actually requires more planning. It requires more preparation, more flexibility and more focused savings than someone anticipating a traditional retirement.
Financial Responsibility Still Required
The first part is still Financial Independence, because the financial planner in me still believes the Redistribute Retirement part can only come after at least being on the right track towards financial independence.
There are good financial reasons for this. Compound interest comes to mind. There are other good reasons to pursue independence first. I’ve personally experienced the Financial Peace that Dave Ramsey talks about. Many people spend lackadaisically in their 20s to “enjoy” life. For me, it is enjoyable to be financially responsible, and at the very least I don’t have that particular stress in my life now because of decisions I made in my 20s. Redistributing retirement without being on track would be no different from the millions of Americans putting off the responsibility of saving.
You may not be able to redistribute retirement right now. Maybe your career doesn’t allow it, or your finances aren’t to that point yet. But you can begin to make little changes that redistribute retirement, but you have to know what that looks like to work towards it. It’s amazing how people are able to “pull” forward some aspect of retirement they’re looking forward to without making drastic changes and continuing to work.
Ask yourself some of the questions we’ve talked about in this article. Read Essentialism, a great book by Greg McKeown. Just know that your answers will probably change over time. I wanted FIRE 10 years ago and now I don’t. I may want something else in 10 years. Just like a financial plan, you’ll have to revisit this periodically and make adjustments along the way. However, it’s never too early to begin defining what is important to you.