I told my husband about the now infamous interview between Suze Orman and Paula Pant on the Afford Anything show, and started playing it for him. After Suzes opening proclamation he laughed out loud and said “she’s right”.
Our families perspective on financial independence and early retirement is unique among 30-somethings. We know bad things can happen, out of the blue, to good, ordinary people. It happened to us. They happened to friends. And it can happen to you.
All About The Interview
In case you haven’t heard it, seen the news, or seen it online, Paula Pant of Afford Anything interviewed Suze Orman, the self-proclaimed “Money matriarch” on Monday. In the interview Paula asked Suze about her thoughts on the FIRE (financial independence, retire early) movement.
“I hate it, I hate it, I hate it. And let me tell you why!”
That was Suzes opening to an introduction to all the things that can go wrong, that the folks who retire at 30-something aren’t thinking about (from her point of view, anyway).
Bad things happen to good people, and they can happen to you, she warns. Even $2 million, which sounds like a lot, won’t be enough. $5 million won’t be enough. Long term care is expensive, and getting more expensive every day. It’s not something people in their 20’s and 30’s typically spend much time thinking about. Permanent disability could not only impact your ability to ever earn money again, but also your family will need to support/care for you
“If you play with FIRE, you’re going to get burned”.
Our Experiences With Bad Things Happening
This, specifically, is the part we both agree with. Some of you already know this, but when I was 32 and my husband was 37, he almost died of septic shock.
What was supposed to be an easy, laparoscopic surgery with a few days recovery in the hospital turned instead into an ongoing nightmare. He was in the ICU on a ventilator for a week, away from home for over a month in the hospital and rehabilitation, and has had multiple surgeries since.
We’re not alone. When I was in my 20’s, I didn’t know anyone that bad things happened to. Heck, all my grandparents were alive and healthy back then. But now that I’m 38, I know:
- A very young brand new father who Died of a devastating brain cancer in their early 30’s, only months after their first daughter was born. They underwent months of expensive treatment, surgeries, and time in the ICU before passing away
- A young single mom of two who Died of blood cancer. This was after several years of expensive treatments, including months of hospitalization
- A former co-worker of my husbands who died of colon cancer after a years-long struggle, leaving behind a teenage son. During the years long battle, they could not work.
- Several former co-workers lost family in 9/11. A twin sister trapped in the towers, and a brother-in-law who was a police officer
- My former endocrinologist had his entire family brutally murdered in a home invasion. They even made an HBO movie about it which I cannot watch. He has never worked as a doctor since.
- I know multiple people who either battled or are currently battling colon cancer.
- People whose children have been diagnosed with cancer
- Of my grandparents, I saw one pass away after a lengthy battle with Parkinson’s with Lewy Body Dementia, including months in a skilled nursing facility. One passed after battling Mesothelioma, and one from heart disease. All required expensive care, particularly in their final months.
Even if not ultimately fatal, unexpected medical issues can take a huge financial toll. There are the direct medical costs, of surgeries/hospitalization/
I had health insurance on all of us, but my husband had lost his disability insurance when he was laid off in the Great Recession (his factory closed).
We didn’t have a 50% savings rate back then, but we saved a good portion of each paycheck. We had some debt, but not much. And so when everything went to hell, and we had to pay for crushing bills, daycare costs, remodeling costs, lost his unemployment with no disability for him- we were able to cover the bills by tapping our emergency fund and decreasing our savings for a year.
Once he was recovered, we went into financial overdrive. We got rid of our debt, slashed our expenses, and focus today on getting rid of the mortgage ASAP.
It’s precisely because something may go wrong that it’s important to pursue the FIRE life. The RE part doesn’t need to mean retirement. That’s why I call it “retirement elective” and not “retire early”.
What Else Suze Doesn’t Get Right
When listening to the discussion, you could be forgiven for thinking that because you earn a lot, you must spend a lot. She mentions expenses like private K-12 school, $30k per month long term care costs, paying the quarter million out of pocket cost for Harvard, and other lavish expenses. Not to mention her boat, private plane, and private island. She also went on a bit of a tangent about how artificial intelligence is going to take all our jobs by 2030, leaving massive unemployment. I’ve written about that before, and I don’t think it’s true. People have had the same fear about every major technology revolution, and every time, society adapts.
When Paula pushes her asking about someone who is a low income earner retiring with a certain amount saved, Suze thinks that’s fine. Although Paula pushes repeatedly to understand why they would be fine when someone who earns a high income but spends at a much lower level would not be, Suzes only point about the difference is that the earlier you retire, the more time you have for bad things to happen.
Frankly it’s not the members of the FIRE movement Suze should be worried about. It’s the people who are in debt up to their eyeballs, or the 40% of Americans who can’t cover a $400 unexpected emergency. It’s the 65% of Americans with little or no retirement savings. And the 78% who live paycheck to paycheck. These are the people really playing with FIRE.
Even with health and disability insurance, Americans in these situations would likely go bankrupt if they ran into a situation like I did. I was able to deduct over $10 grand from my taxes in medical expenses that year. Disability insurance only pays a portion of your income. And there’s no “caregiver insurance”-unless you’re fortunate to work for a company that offers paid caregiver leave, FMLA is unpaid.
If you can’t cover a $400 emergency, you’re going to file bankruptcy or be in debt for many years in a situation like ours.
The fact that it was FIRE principles that saved us is part of the reason I believe the stereotypes of the FIRE movement are so damaging. If you think the principles of living below your means, getting rid of what you’re spending that doesn’t align with your values, eliminating debt, and saving as much as possible for the future of your dreams can’t be for you because you’re not a high income earner-I worry about that.
Dismissing these ideas and principles and continuing to live with your head in the financial sand puts you much more at risk than an “early retiree” would be.
The Rest Of The FI Community – Are They What Suze Thinks?
I mentioned before that I have, indeed, seen people who dismiss longevity risk and health problems as issues that they could need to deal with. Fortunately, most are not.
Most people are focused on living well below their means as a way to take a leap into a different life. Some want to reach financial independence but continue working in their current field. They simply want security and flexibility. The majority of people who FIRE don’t have debt (or only have a small mortgage) and DO plan for health, life, and disability insurance.
I’ve been hanging around financial forums and consuming financial content of all kinds for the past 20+ years, so similar to Suze, I’ve seen it all. There have always been folks that are totally risk averse, others who take big risks (which sometimes pay off, and other times lead to disaster). Most are somewhere in between.
I have seen people taking big risks-going without health insurance, not having an emergency fund, assuming the market will always go up, and the like. But I’ve fortunately seen a lot more folk ensure they have a solid financial foundation underneath them before leaping into a different line of work.
Make sure you have a solid financial foundation. Don’t neglect an emergency fund/plan, and health/life/disability insurance. Insure against risks that you can’t cover. Even – or especially-if you’re going to work for yourself.
Ensure your plan and financial projections take into account the costs of college (if applicable), health care, health coverage, and long term care later in life. A comprehensive financial plan includes not only your current day-to-day expenses, but also costs for large lump sum events. And it includes accounting for inflation.
FIRE is an acronym many people use as shorthand for “financial independence, retirement elective”. People don’t want to retire in the traditional sense of sitting in a hammock and doing nothing all day. Instead they want financial security underneath them to help them pursue other goals and dreams. Those goals and dreams will likely be taking in an income of some kind.
But most importantly, don’t buy an island.
Other Reactions Around The Web
Mr. Money Mustache himself wrote all about what Suze, and others, don’t understand about the FIRE movement. Be sure to read the comments, where he talks about his passion for helping these ideas to spread to everyone.
I Want To Hear From You!
Have you listened to the interview? What was your reaction? Let me know in the comments!
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