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Ready, Aim, FIRE! How Early Can You Retire?

Many people think about retiring early and just enjoying themselves. This is the 100-mile view of the FIRE (Financial Independence, Retire Early) movement, which focuses on a goal of retiring very early—in your 30s or 40s. Financial blogs, podcasts and internet message boards have sprung up to educate wannabes about this movement.

Over the past five years, Google searches for “Financial Independence Retire Early” have increased by 94 percent.

Retiring so early sounds fantastic, but this approach isn’t something most people can achieve. We want to present both the pros and cons of this approach here. We strongly advise that you meet with a financial planner as you plan your retirement—at whatever age you retire.

What it Takes to Use the FIRE Approach to Retiring

Those seeking to attain FIRE intentionally maximize their savings rate by finding ways to increase their income or decrease their expenses. The objective is to accumulate assets until the resulting passive income provides enough money for living expenses in perpetuity.

Proponents of the FIRE movement suggest a withdrawal rate of 3 to 4 percent as a guide. Based on this guideline, you must save 25 to 33 times your anticipated living expense. Upon reaching financial independence, paid work becomes optional, and you can retire from traditional work decades earlier than the standard retirement age.

According to MarketWatch, “Many of the FIRE movement’s vocal advocates either earn substantial incomes from blogging, writing books and other endeavors, or they have a spouse who still works full time. In other words, they really aren’t living off the savings they amassed during extraordinarily brief working careers.”

There is a debate raging in the FIRE community about how much a person needs to have set aside before quitting his or her 9-to-5 job:

  • One side, known as Fat FIRE, believes retirees should have enough saved so they have a $75,000 annual budget in retirement.
  • The other side, Lean FIRE, maintains that a $40,000-per-year budget will do. To generate $75,000 per year with a 3 percent withdrawal rate, someone would have to save $2.5 million—something that is not easy to do by the age of 30 or 40. To have $40,000 per year available, someone would need to save $1,333,000. To do so with other current obligations takes a very frugal lifestyle with most normal earnings. Then, once you “retire” living on $40,000 per year, that doesn’t leave much money for emergencies or many luxuries.

We believe there is a balance to enjoying life both while we are working and then when we retire. Those who are a part of the FIRE movement often maintain austere lifestyles to save for very early retirement and then to be able to live.

Some FIRE proponents use public assistance such as food stamps, Medicaid and other welfare programs to live on. We do not believe that using welfare is a great standard of living. Even those who do manage to save enough to retire early and live today, might not have enough money to live on in the future.

The Downsides of the FIRE Approach

Although the FIRE approach is a godsend for those people who can make it happen, most people cannot do so.

One MarketWatch senior analyst believes FIRE proponents are doing pre-retirees a disservice by even offering it as an option. He says, “Only a very small minority of individuals have sufficient assets to retire early at more than a subsistence level. And when they realize how much smaller their 401(k)s are from what would be needed, they may very well decide to incur far riskier strategies than they would have otherwise — and end up worse off than they would have been had the movement never existed.”

This analyst notes that, according to Vanguard figures, investors in the 35-to-44 age group have, on average, just $68,935. The median account size—the level for which half have larger balances and half smaller—is $25,800. And some pre-retirees have no 401(k) account at all. He concludes, “An investor who retired with a 401(k) balance this size and who used the so-called 4 percent spending rule would therefore have to retire on a yearly income between $1,032 and $2,757. Good luck with that.”

A 2018 TD Ameritrade study revealed that the “RE” in the “FIRE” acronym — retire early — isn’t really what most people intend to do. They do want financial independence — the “FI” portion of the acronym — but they don’t have visions of lying on a beach, doing nothing, for the rest of their lives. They want to stay active and productive, even in retirement.

The survey revealed that three-quarters of financially independent respondents claimed that achieving that independence was more important than actually bowing out permanently from the workforce. In fact, more than 4 in 10 of both the financially independent and non-independent respondents plan to continue working after they “retire,” both because they enjoy what they do and because they don’t want to live frugally in retirement.

Don’t Forget to Consider Cost-of-Living Increases

We don’t want to take the fun out of considering FIRE as an option for your future, but we want you to weigh all the factors wisely. Cost-of-living increases can erode your nest egg faster than many people realize.

If you have a portfolio of relatively passive investments and draw 3 to 4 percent today, you would need the portfolio to grow significantly so that your income can keep up with inflation. Those who decide to have children or have larger medical expenses will likely see their cost of living go up substantially.

If we assume a relatively low increase in cost of living, such as 4 percent per year, then your cost of living will double every 18 years. This might not sound like much, but if you retire at age 35 and live to be 90, then your cost of living will be more than eight times what it is today! If you save $1 million and draw 4 percent per year, you would have $40,000 (before tax) to live on. That isn’t much in today’s world. By the time you are 60, your cost of living will be $87,303 per year.

Enjoy Your Life Now and Later

We believe you can enjoy your life today and have the retirement you dream of. This takes good planning, a little balance and knowing what is important to you. We can help you live the life you want now and enjoy the retirement you dream of in the future. Contact us without cost or obligation to discuss your personal vision and how we can help you achieve it.

This information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Randy Carver named to Forbes’ 2019 Best-In-State List of Top Wealth Advisors

February 26, 2019 – Randy Carver, RJFS Financial Advisor was recognized on Forbes list of Best-In-State Wealth Advisors, as one of the top advisors in Ohio. There were more than 29,000 nominations received, 120 were recognized in Ohio, with Randy Carver being ranked #5. This is the third year in a row that Randy has been included on this prestigious list of top wealth advisors from national, regional and independent firms.

The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research is based on an algorithm of qualitative criteria and quantitative data. Those advisors that are considered have a minimum of 7 years of experience, and the algorithm weighs factors like revenue trends, AUM, compliance records, industry experience and those that encompass best practices in their practices and approach to working with clients. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Out of 29,334 advisors nominated by their firms, 3,477 received the award. This ranking is not indicative of an advisor’s future performance, is not an endorsement, and may not be representative of individual clients’ experience. Neither Raymond James nor any of its Financial Advisors or RIA firms pay a fee in exchange for this award/rating. Raymond James is not affiliated with Forbes or Shook Research, LLC.

Case Western Reserve names Carver Financial Services, Inc. to 2018 Weatherhead 100

September 2018 Carver Financial Services Inc. was recognized by Case Western University as a 2018 Weatherhead 100 company. The Weatherhead companies are recognized for their percent of revenue growth over the past five years.

The rankings are based on data from the following: 12-month period of net sales from 2013 – 2017, 2013 net sales must be at least $100,000, headquartered in Ashland, Ashtabula, Cuyahoga, Erie, Geauga, Huron, Lake, Lorain, Mahoning, Medina, Portage, Richland, Stark, Summit, Trumbull or Wayne County, not a franchise or subsidiary of another company between 2013 – 2017 and must be a for-profit organization. Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award/rating. Case Western University / Weatherhead 100 is not affiliated with Raymond James.

12th Year in a Row, Carver Financial Services wins Fast Track 50 Award for Lake & Geauga Counties

September 2018, Carver Financial was once again recognized as one of the Lake-Geauga Fast Track 50 winners. The Fast Track 50 recognizes the contribution of local companies to Lake and Geauga county economies. The Fast Track 50 Committee compiles a list of the fastest-growing companies in Ohio’s Lake and Geauga counties. Companies are ranked by sales and employment growth over the previous five-year period and the top 50 are recognized. Carver Financial Services Inc. has consistently been recognized on this list for the last nine years.

The 2018 Lake-Geauga Fast Track 50 honors companies and individuals in Lake and Geauga counties who have shown growth. The Fast Track 50 Committee compiles a list of the fastest-growing companies in Ohio’s Lake and Geauga counties. Companies can nominate themselves. To be eligible for the award, companies must be located within the two-county region, be organized as a for-profit business, and must meet a minimum sales profit. Companies are ranked by sales and employment growth over the previous five-year period and the top 50 are recognized. Winners are chosen by a math formula: 80% of weight is given to sales growth and 20% of weight is given to employee growth. To more fairly compare larger and smaller companies, the Fast Track 50 is divided into Established and Emerging categories. For 2018, Established companies must report revenue of at least $2.75 million in 2017, the baseline year for all evaluations. Emerging companies are required to have 2017 sales of between $250,000 and $2.75 million. There are 25 companies on each list. Out of 100 firms nominated, 50 received the award. This ranking is not indicative of future performance, is not an endorsement, and may not be representative of individual clients’ experience. Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award/rating. Raymond James is not affiliated with The Fast Track 50 Award.

Randy Carver Named to 2018 Financial Times 400 Top Financial Advisers

March 22, 2018 – Mentor OH – Randy Carver has been named to the 2018 edition of the Financial Times 400 Top Financial Advisers. The list recognizes top financial advisers at national, independent, regional and bank broker-dealers from across the U.S.

This is the sixth annual FT 400 list, produced independently by the Financial Times in collaboration with Ignites Research, a subsidiary of the FT that provides business intelligence on investment management.

Financial advisers from across the brokerage industry applied for consideration, having met a set of minimum requirements. The applicants were then graded on six criteria: assets under management (AUM); AUM growth rate; experience; advanced industry credentials; online  ccessibility; and compliance records. There are no fees or other considerations required of advisers who apply for the FT 400.

The final FT 400 represents an impressive cohort of elite advisers, as the “average” adviser in this year’s FT 400 has 28 years’ experience and  manages $1.4 billion in assets. The FT 400 advisers hail from 38 states and Washington, D.C.

The FT 400 was developed in collaboration with Ignites Research, a subsidiary of the FT that provides specialized content on asset management. To qualify for the list, advisers had to have 10 years of experience and at least $300 million in assets under management (AUM) and no more than 60% of the AUM with institutional clients. The FT reaches out to some of the largest brokerages in the U.S. and asks them to provide a list of advisors who meet the minimum criteria outlined above. These advisors are then invited to apply for the ranking. Only advisors who submit an online application can be considered for the ranking. In 2018, roughly 880 applications were received and 400 were selected to the final list (45.5%). The 400 qualified advisers were then scored on six attributes: AUM, AUM growth rate, compliance record, years of experience, industry certifications, and online accessibility. AUM is the top factor, accounting for roughly 60-70 percent of the applicant’s score. Additionally, to provide a diversity of advisors, the FT placed a cap on the number of advisors from any one state that’s roughly correlated to the distribution of millionaires across the U.S. The ranking may not be representative of any one client’s experience, is not an endorsement, and is not indicative of advisor’s future performance. Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award/rating. The FT is not affiliated with Raymond James.

Barron’s again names Randy Carver to Top State By State Advisor Ranking list, Nationally and Ohio

March 12, 2018  Randy Carver was again named to Barron’s Top State By State Advisor Rankings list nationally and for Ohio. Randy  was ranked as one of the top five advisors in Ohio.   According to Reuters (February 11, 2015) there are roughly 285,000 financial advisors in the United States. Barron’s listed their top 1,200 putting Randy in top  4/10ths of 1% of all advisors.

To see full listing click here.

Raymond James is not affiliated with Barron’s. Neither Raymond James nor any of its Financial Advisors have paid a fee in exchange for this recognition.  Barron’s is a registered trademark of Dow Jones & Company, L.P. All rights reserved. This recognition is not indicative of future investment performance and may not be representative of individual clients’ experience. .  Rankings are based on data provided by the nation’s 4,000 most productive advisors. Factors included in the rankings: assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. Investment performance isn’t an explicit component because not all advisors have audited results and because performance figures often are influenced more by clients’ risk tolerance than by an advisor’s investment-picking abilities.