The Dark Side of F.I.R.E. (Financial Independence, Retire Early)

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Editor’s Note: This blog is written by a guest writer, Aiden White. 

Aiden White is a new name in the world of finance blogging. He has always had an interest in analyzing financial matters and recently has started discussing financial concepts at He loves to spend his leisure time fishing and enjoying nature.

FIRE or “Financial Independence, Retiring Early” means that you can configure your lifestyle while keeping the money aside, as per Tanja Hester, a recent FIRE graduate and founder of Our Next Life website. There are a number of positives with the FIRE movement that are rapidly getting momentum. The age of 62 is the standard age at which many people consider retirement. But people who consider FIRE retire usually in their 30s, and even in their 20s.

What is a FIRE psychology?

The perspective of the FIRE movement is to adjust your lifestyle in such a way that it can speed up the process toward retirement. Deacon Hayes, the author of “You Can Retire Early! “ said that FIRE is really about “the freedom to choose to work or not.”

There are few things people do to get the benefits of a FIRE:

a. Track every dollar they spend – A key FIRE discipline is to track your spending for every single penny.

b. Compare every spending decision – While engaging your life to earn money, compare every dollar spent and use it to evaluate prospective purchases.

c. Calculate your net worth – Calculate your current financial status and tally the available assets and liabilities to get a preview of your net worth.

d. Determine the real hourly wages – It means chalking out how much you are getting paid per hour.

e. Find cheaper substitutions – Reduce your money consumption and find cheaper means to fulfill your needs.

Those things might look easy to achieve when other people are somehow doing them. There might be many benefits of FIRE. But practically, FIRE also has some darker sides that people don’t want to discuss. So here we will try to break that trend and talk about the negative aspects of FIRE.

Why do people want to retire early?

There are several reasons that a person might wish to retire early. The causes are as follows:

1) They didn’t find the right job

2) They are feeling hopeless

3) An easy way out for unsuccessful people

4) Realizing that this is the time to enjoy, not to work

5) People are lazy and lack enthusiasm

The effect of early retirement can cause you greater damage to your financial life and even your health.

Here’s why it’s not always cool to retire early:

  1. You might face health hazards

According to a 2008 analysis from the National Bureau of Economic Research, the effect of early retirement on your physical and mental health could be dangerous. Retirement may also increase suffering from clinical depression by 40%. And the negative effects grow over time as the number of years spent in retirement increases.

Retirees who engage in physical activities were less likely to suffer from any kind of mental or physical illness.

  1. Your health insurance might get compromised

If you retire early, you’ll no longer be eligible to the health plan offered by your employer. You won’t qualify for Medicare until you are 65 in the United States. So, you may need to opt for a private health insurance policy to cover your health until you turn 65. That would be a costly investment in your health care.

  1. Your Social Security benefits will be reduced

The sooner you opt for Social Security, the lower the benefits you will get. You’ll get a bonus on your Social Security monthly benefits if you choose to delay the benefits till the age of 70. After age 70, there’s no further bonus for delaying.

  1. Your retirement savings may exhaust early

Suppose you want to retire at the age of 65 and live till you are 95. Your retirement savings (i.e. your IRAs and other such funds) should cover your expenses for 30 years. But what if you want to retire at 45?

Your retirement savings will have to cover you for 50 long years! So, there’s a chance that your savings may get exhausted way earlier than planned.

If you work longer, you may contribute more to your retirement funds like a 401(k) plan or an IRA. You will save more, so you’ll get more when needed.

  1. You might miss your job and other responsibilities

Being a retiree you might miss your old work life and colleagues. When you are in your 20s or 30s that is the best time to work hard with proper dedication. If you leave your job and other responsibilities too early, you may miss them too much.

You might have built up a good momentum with your career. That momentum may get you a good income, savings, and create the path to a successful investment portfolio. As an effect of early retirement, you might lose that momentum of earnings, savings, and investing.

An earlier retirement means you have to rely on your assets for a longer time. There is a chance that you might run out of money while making your monthly payments like mortgage installments, utility bills, credit card debts, medical bills, etc.

If you don’t have an extra source of income or a part-time job, you might be in deep financial trouble. What will happen if you fall into debt? You’ll have to start working again to get out of debt fast. Unless you sort out a plan to manage your finances and reduce costs, you should think twice before opting for a FIRE psychology. Remember, it’s a lot easier to fund a 25-year retirement than a 45-year retirement.

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