- Based on how my life has played out,
there is no way that anyone could ever become
financially independent, or retire early.
This video is not meant to trigger you.
The point is to get a healthy discussion going on
around the FIRE movement.
In this video, I'm gonna go through why everyone
seems to hate financial independence, retire early,
and then I'm gonna do my best to uncover
how the FIRE community you would plan on getting around
some of those reasons.
Hey, I'm Jarrad, and on this channel
we like to talk about all things personal finance,
from paying off debt, to investing, and building wealth,
to managing your money, to even making more money,
and increasing your income.
If you can find it in your heart,
I would greatly appreciate it if your Hulk Smash
that thumbs up button so my mom doesn't think
that I'm wasting my life away,
making videos on the Internet for awesome people like you.
I've noticed that even mentioning the topic
of financial independence,
or early retirement brings up one of two responses.
The first set of responses are from people who get it,
people who are pursuing it, or people who are intrigued,
and want to know more.
Now, the second set of responses you get
are from people who are completely against it,
no matter what.
They just don't understand the meaning behind it,
or don't understand the details of how it can actually work.
Let me first say that I am not someone
who is officially pursuing financial independence
at this point in time.
Am I essentially doing everything that I need
to be able to achieve FIRE if I want to in the future?
Yes, I am.
I completely agree
that some people who are pursuing FIRE
can be reckless with their planning,
but just like every other area in life,
there are outliers who aren't prepared,
and planning as they should be,
but after diving really deep into this community,
the majority of these people
are about as prepared as it gets.
I would even go as far as saying that they are more prepared
than the larger part of the population.
FIRE Movement people are kind of like
Zombie Apocalypse preppers if you think about it.
Except the zombies of retirement
is something we can all agree is going to happen.
If you are still getting up to speed
on what financial independence retire early is,
or if you want to learn just a little bit more
than feel free to check out the videos
that I've already made on this topic.
Links are in the description to a FIRE playlist
that I put together for you,
or I'll throw some links around my head.
The first thing we need to get out of the way
is the fact that anyone pursuing financial independence,
or early retirement
is going to have a different journey along the way.
Yes, there are some basic ground rules
that most of them will need to follow
when it comes to cutting costs, investing,
and increasing their income,
but how each person goes about it
is not always gonna be the same.
Because of this, it's important
not to throw blanket statements around like...
The FIRE movement is so dumb.
These kids aren't in touch with how the real world works.
Based on how my life has played out,
there is no way that anyone could become
financially independent, or retire early!
It's easy to hit the dislike button,
or hate on anyone who has a different view than you.
What's even more difficult is to go into learning about it
with a little bit of an open mind,
and try to understand their thought process
to push the discussion forward just a little bit,
and actually have a constructive conversation.
You still don't have to agree with it,
but my thought process is that
if what they're doing isn't hurting you,
or anyone else around them, then who cares?
I honestly think that we get smarter
if we take the time to listen to the other side,
and opposing views in general.
Leave a comment down below asking any questions
about the FIRE movement in general,
or let me know your thoughts on the whole thing.
I'm actually extremely interested
to hear your point of view.
The first reason many people dislike the FIRE movement
is because once you declare financial independence,
you don't have any more active income.
Technically, a person who is financially independent
could still work if they wanted to.
Financial Independence means having enough money
to cover your expenses that's generated through investments,
or other areas.
Now this will give you the ability to quit your job,
work at a lower paying job that makes you happy.
Take some time off work,
or anything else that you can think of,
but I'll agree that not having any more active income
is a valid argument if you're only looking at it
from one side of the coin.
There are two things that individuals in the FIRE community
are most likely, and by most likely,
I mean hopefully doing to help prevent
this potential problem in the future.
Even though a lot of people pursuing FIRE
will most likely be earning some sort of income
through their investments,
some will be doing their best
to pursue some sort of passive income.
These people are looking for a little bit of a safety net
to ensure that they have at least some money
coming in to help them offset any unforeseen money issues.
Since there's endless ways to do this,
some of the more popular ones are starting a side business
that's either completely hands off,
or only taking a small amount of their time.
There's endless types of side business is out there
that if you put the extra work in up front,
you can usually take your foot off the pedal,
if you hire some people to manage a lot of the work
later down the line.
Another very popular strategy to earn more passive income,
is through investing in rental properties
that kind of give you a pretty consistent stream of money
every single month.
The second way a lot of people are ensuring
that they can earn income during a time of need
is by building skills for themselves
while they're on the path to financial independence,
retire early.
For some careers, if you are not active in the workforce
for a certain amount of time,
that it could be a little bit harder for you
to hop back into that type of work
really quickly if you needed to.
Knowing this, it's important to become proficient
in a skill that is highly marketable.
A lot of people in the FIRE movement
are spending their free time learning skills
that they can take with them, basically forever.
I honestly think that everyone should be doing this,
whether you're pursuing FIRE, or not.
Anyone could lose their job tomorrow
if they worked for someone else,
so it's always kind of good to have a backup plan
no matter what.
I mean, let's be honest with the Internet,
it is easier than ever to find work,
to even make just a little bit of cash on the side.
I would suggest learning any kind of skill
that has to do with the Internet
to help make you more valuable to a larger amount of people.
With the insane number of online courses out there,
you can basically get a college degree
in any field that you want for the cost of almost nothing.
Unlike most college classes,
you'll be able to actually apply
literally everything you learn.
FIRE people know this,
and understand the importance of it
to kind of mitigate some of the risks
when it comes to leaving your full time job.
Plus you got to think that
if they find that they need some more cash,
for whatever reason,
that they most likely won't need the same high salary,
and if they had before they left their full time job,
if they planned correctly,
they mostly only need just a little bit
to kind of help supplement them for however long they need.
Next up we have the opposing view of,
FIRE people will catch FIRE during a time
where the stock market is very volatile.
If there's one thing people in the FIRE community understand
is that the stock market is constantly going up,
and down in the short term.
As of today, the stock market has been on an absolute tear
over the past 10 years.
We've had one of the longest running bull markets
in history,
so I can absolutely understand why people out there
are cautioning about pursuing FIRE.
If you're pursuing financial independence retire early,
then you are basing your investment withdrawal strategy
on the 4% rule, which is based on the Trinity Study.
Now, I won't bore you with all the details of the study,
but you can Google it,
and read a lot more about it if you're interested.
To give you a quick summary of the original study
was conducted in 1998
by three professors of finance at Trinity University.
Now it's since been updated to take into account data
through 2009,
it states that a person has sufficient savings,
and assets if 4% of his, or her assets are sufficient
to cover one year worth of expenses.
So essentially if you have $1 million invested
in a mix of stocks, or index funds, and bonds,
then you can safely withdraw $40,000 per year,
and there is a high likelihood
that you will never run out of money.
They do mention that during times
when the stock market is down,
it's likely that the person
may have to lower their withdrawal rate from 4% to 3%.
So instead of withdrawing $40,000 per year,
the person in early retirement
could only withdraw $30,000 per year.
Another thing people pursue financial independence,
retire early, are doing to combat this possibility
is to always keep the door open to going back to work,
to earn some extra cash
to get them through those times where the stock market
might be down, if that's our main source of income.
It goes back to the last part we talked about
with learning marketable skills,
and creating passive income.
One thing to note is that even though some people
may have to reduce their withdrawal rate,
it most likely won't be that big of a deal.
People pursuing FIRE have most likely
have already been living frugally,
and know how to live on less,
since that's kind of what they were doing on their path,
and their journey to achieving financial independence,
or early retirement.
Many, many, many people opposed to FIRE
mention the issues surrounding health insurance,
if you leave a company
that offers some sort of health insurance plan,
the cost of medical expenses
is outrageous in the United States.
It's probably one of the biggest unknowns
when it comes to this whole FIRE thing,
especially if you were planning on doing it
with the whole family.
I wanted to play a little game of pretend
to see how much health insurance would run me
if I decided to declare financial independence today.
So I headed over to healthcare.gov
to see what my options were.
I'm a very healthy male who only needs coverage for myself
since I don't have a wife, and kids.
They have three different levels to choose from
based on the monthly premiums that you'd like to pay.
Just to get an idea of the most,
someone who have to pay in a year,
you would want to add the monthly premium times 12 months,
plus the yearly deductible, plus any copays.
For the cheapest monthly premium,
the maximum who chose this plan could have to pay,
is a little bit over $10,000.
For the most expensive monthly premium,
and the lowest deductible.
Someone with this plan could have to pay a little over
$6,500 in a year.
Keep in mind that this is just for a single person,
who is pretty physically active and healthy.
This is something someone pursuing financial independence
retire early is going to have to calculate
into their numbers.
I don't want to say the health coverage is a deal breaker,
but it is definitely something
that everyone should be thinking about
whether you're going to retire early,
or whether you're gonna retire on time.
Another option is some sort of group health insurance plan
where a bunch of people kind of get together
to pay a monthly premium.
Whenever an individual needs money,
it's taken from the larger pot that's shared among everyone.
This is definitely a viable option,
but they usually come with a lot more restrictions,
and other option for someone who has left work
is to do something called medical tourism.
This is where an individual would travel
to a completely different country
to pursue some sort of medical procedure
for an extremely low cost.
If someone pursuing financial independence,
retire early is maxing out all of their retirement accounts,
that how is it possible to access those accounts early?
One of the ways is by using a backdoor roth.
Now, it would take me a whole video to explain it,
but it's basically allows you
to convert your traditional IRA to a Roth IRA
so you can access that Roth IRA money
a lot sooner than 59 and a half.
There are limits when it comes to investing in a Roth IRA,
which is $6,000 per year at this point in time,
but there is no limit to how much you can convert
into a backdoor Roth IRA.
There's a lot of rules to make sure
that you do this correctly,
so I wouldn't recommend that someone
just go into the whole thing without understanding the ins,
and outs of the whole process,
and of course talking to some sort of tax professional.
But this will be one way to access the retirement accounts
a lot earlier than 59, and a half.
Another way would be to invest in taxable accounts
along with your retirement accounts as well.
This would give you money to spend every year,
until the five year window passed
when you were able to access the backdoor Roth IRA money
that you converted.
If you're interested in what a backdoor Roth IRA is,
and how it kind of works,
then I'll throw a link down in the description
to a website that does a really good job
of kind of laying it all out for you,
or maybe I'll make a video about it
at some point in the future.
And finally,
the last opposing view of financial independence,
retire early is a fear of the unknown in general.
None of us can predict how the rest of our lives
are going to play out.
For some, it's gonna work out as planned.
For others, it's gonna be a little bit more of a bumpy ride.
One thing to always keep in mind is to make sure
that we're not allowing the fear of the unknown
to prevent us from doing something that we truly believe in.
I like the whole concept,
and everything behind what it means to pursue
financial independence, retire early.
I especially appreciate what they're doing,
because I've had firsthand experience
with how precious life is,
and how important it is to make sure you were living life
to its fullest, and doing things that you actually love,
and enjoy.
I personally lost my little brother suddenly
at the age of 19.
My mom has a genetic incurable disease.
Both of those horrible experiences
have taught me to do more things that make me happy,
and squeeze more out of life
while I still have the opportunity.
Financial independence retire early
is about choosing to be more intentional
about how you live your life,
and what you really want out of your future.
It's about going against the grain of society,
to ask the tough questions that aren't normal,
like why do I have to do it that way?
Why do I have to work at jobs that I don't like
to be able to retire at an age,
when I can't really enjoy life?
Why can't I speed up the process
so that I can truly pursue things that make me happy,
but don't pay very well, or pay anything at all?
Even if you don't agree with the FIRE movement in general,
I think there's a little piece of the movement
that everyone can take away, and use for themselves.
I've released more financial independence,
and retire early videos
that I'll link somewhere around the head,
and also link up down in the description.
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I'll see you in the next one, friends, adios.