Based on how my life has played out, there is no way that anyone could ever become financially independent or retire early…. The point is to get a healthy discussion going on around the FIRE movement.. 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. 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.. 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. 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 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 Don’t forget to Hulk Smash that thumbs up button just like this one that hit that subscribe button and the notification bell I’ll see you in the next one friends, adios