Recently, I attended FinCon17 in Dallas. If you read Easy Does It FI regularly, you saw my pre-game analysis and thoughts leading up to the event. Overall, the conference was amazing, and I highly recommend it for anyone who might want to retire early (or retire at all). There were lots of great panels with lots of great information, and I feel a renewed sense of inspiration about my journey toward early retirement.
One session, the “FIRE panel” was particularly great for aspiring early retirees. The panel consisted of Tanja from Our Next Life, Doug from The Military Guide, Gwen from Fiery Millennials, and Scott Trench from Bigger Pockets. These panelists are established thought leaders in the FIRE movement. Doug and Tanja are even early retired. Through the conversation, these panelists did a great job touching on important topics and raising questions that probably don’t get asked enough within the early retirement community. The attendees were exceptional as well, and through the open forum, the group was able to explore some topics in depth. Of the topics, here are 6 of the most important.
Define Your Retirement Now
Retirement is a vision and goal for your future self. Define what that life looks like and start working toward. While preparing for early retirement definitely involves a lot saving and frugal living, you can also use the time to start building bridges to your future, retired self. Maximize your chance of successfully executing the life transition by preparing for all aspects of early retirement.
If you feel like early retirement is about running from something (that’s fine, the best of us have been there), realize that financial freedom will require you to define yourself as what you are not what you are not. Take an “opt-in mentality” and find that purpose or identity that you want to opt in to. Ask yourself “What is your why?” If you need help finding your adventure, the Get-a-Life Tree is a great exercise in identifying yourself from the unconscious decisions you already make every day.
Measure costs in time
An audience member asked the question, “Will I be able to retire early if I want to pay for my children’s retirement?” Another great question might be “Will I be able to early retire if I decide to have only one child… or any children at all?”
These are great questions and really these are questions that you must answer for yourself because they are questions of priority. If you value having a family or even paying for those kiddos’ college yourself, then you must understand the tradeoffs that will create in the rest of your life. If you can afford to do those things and also retire, that’s great. However, many people borrow from their retirement, from their future selves to pay for things (like kids’ college) they value today.
To make the correct decision for yourself, you must understand all the options and their costs. A great way to do this, per Nords, is “Measure cost in time.” If you want to buy something, like college, determine how many extra years you will need to sit at your desk. If that’s really a tradeoff you’re willing to make, then there’s your answer.
Don’t let society, parent-friends, or FI bloggers tell you what the right answer is. They made their decisions based on what’s right for them, but you must make the right decisions for you. Approach decisions critically, find what best aligns with your priorities, and you will be much happier in the long run.
There are many types of wealth, do what’s best for you
Building on the theme from Tip 2, there are many different ways to build personal wealth. There are people getting rich slowly through diligent saving and index investing. There are real estate investors, making huge money with leverage and endless scouring of deals. There are “wealth creators” starting with nothing and engaging in serial entrepreneurship. While it’s great to observe these tribe-leaders and try to learn from them, don’t try to be someone you’re not. Don’t do anything you’re not comfortable with. Know yourself, build your own path to wealth, and steer your own ship. Chasing some other example that you’re either not comfortable with, or worse, don’t understand won’t lead you to recreate the wealth of the success stories, it could much more easily lead you to ruin.
Safe Withdrawal Rates are for computers, retirement is about real-life
(Note that tip “4” is on safe withdrawal rates.)
For anyone studying the math of early retirement, the 4% SWR is a cornerstone for determining when you’ve mathematically “made it”. (If you aren’t familiar, here’s a great post by Madfientist to get you started.) In digging into the math, almost everyone comes away with a different perspective and very strong feelings. For many, this is the math that needs to work, in order for them to retire. But guess what, the math is actually the easy part.
As mentioned in Tip 1, early retirement is really about life. This same rule applies to the math. The math can tell you how likelihood your plan is to succeed given your particular set of assumptions (learn the math of your own situation at cfiresim). However, the math cannot account for the psychology, the flexibility, and all the other contingencies that real life actually offers. This actually works out in your favor.
While the math can tell you (assuming history is a reasonable indicator of future,) that a 4% withdrawal might still have a 20% failure rate (i.e. bankruptcy) over 20 years, your personal psychology will have to determine what that means for you in practice. You might judge this to be too risky, and therefore not retire until you can get to a 3% or even 2% withdrawal. (If you are considering this option, see Tip 2 and calculate how many more years those fractions of a percent will actually cost.)
In reality, any risk estimated by a withdrawal rate calculator is probably overstated for early retirees. The real-life risk is actually much lower because you have all sorts of contingencies available. You could cut your spending, find a side-hustle, spend down your e-fund (until the market recovers), or rent out your house. For the first 10 years of early retirement, the most important years for sequence of return risk, you always have the option of going back to your old job. In fact, this was Nords’ principle plan B for the initial years of his early retirement. If you think that the contingencies are still not enough, check out William Bernstein’s Retirement Calculator from Hell for some additional perspective on what failure could look like. But overall, use the math as a tool. Consider the math, but also consider life. You have many plan B’s to mitigate the risk that the math just can’t resolve.
Saving is an extraordinary privilege
Money Mustache likes to talk about how the modern world lives in a time of never-before-seen plenty. Thanks to this plenty, we have the extraordinary opportunity to save for the future and not worry about whether we will be able to feed ourselves when we are physically unable to work. Just being able to save, just wanting to save, makes you exceptional.
The audience at the panel was a great reminder of how exceptional the early retirement community is. There were many brilliant people, from ivy league colleges, many who got full scholarships to their college. There were individuals and families who overcame great obstacles, sometimes self-inflicted and sometimes just bad luck in life, to be sitting in the audience. All of these people have stories to tell and something to share about life. They all share a common goal of wanting greater purpose and happiness in their life.
If you are reading this article, you are part of this community. Even if you never make it all the way to achieving financial independence or early retirement, you too are exceptional. It takes an exceptional perspective and life just to start (or even want to start) the journey. If you don’t feel like you are part of the community, get more engaged: comment on posts, join forums, attend meetups. If you are one of the experts, share your wisdom with others. Social engagement can be one of the most rewarding experiences in life. Whoever you are, feel gratitude for the great fortune life has brought you, and go find your purpose.