What caught my eye this week.
Articles in the mainstream media about what only the mainstream media calls ‘the FIRE movement’ are a staple nowadays.
And some of them have been kinder – or flat-out more accurate – than others.
Lingering recollections of the worst can have you reading the first few lines of a new take on ‘Those Wacky Folk Who Don’t Want To Work For The Man Forever To Buy Stuff They Don’t Need’ through your fingers.
But by any standard, The New York Times’ latest encounter in the wild with FIRE practitioners – which we can all read for free thanks to a gift link from the ever-vital Abnormal Returns – is one of the better ones.
At least it is once you get past the headline: Your Neighbors Are Retiring in Their 30s. Why Can’t You?
Hard bargaining
This time the focus is on FatFIRE. That is, retiring early because you can retire early because you’re loaded.
Once the preserve of rock stars, footballers, bankers, and criminals who really did manage to pull off one last job, FatFIRE is now a realistic prospect for anybody who can hold down a job with one of The Magnificent Seven tech giants for a decade.
But beware!
The New York Times’ article notes that:
“…while most other FIRE communities steer toward the friendly and pragmatic, FatFIRE’s adherents tend to be jaded, brusque, laser-focused. They hunt for the ‘exit’, in the tech-world manner of speaking: a fast, lucrative way out. On the r/FatFIRE subreddit, aspirants ogle severance packages, geo-arbitrage, REIT, tax loopholes, high-risk options straddles and potential business moonshots.”
The article’s author Amy Wang does a nice job contrasting these FIRE stormtroopers with the ‘stoic ultraminimalists living off beans’ of yesteryear – and she makes me feel ancient by doing so.
Then again, it was only a few weeks ago I republished Jacob Fisker’s extreme frugality pieces on Monevator myself – almost as a hymn to that lost era.
I guess there’s something in the air.
DefaultFIRE
It’s true our kind of blog has attracted a broader range of readers over the years.
With respect to Monevator this definitely includes a sizeable cohort who’d either be deemed FatFIRE or wanting to go that way.
Much more so than in the old days, I reckon. I wonder why that is?
Has modern work – even sexy make-a-packet work – become so dispiriting that even the high-fliers want to fly away?
Is it Instagram filling our heads with dreams about what, where, and who we could be doing instead?
Or is it – whisper it – the invisible hand of capitalism fingering its way into our secret plans for financial independence, to make sure that if we’re going to do it then at least we’ll buy all the mod cons first?
Perhaps everyone always had a bit of FIRE in them. A decade of these articles has simply brought it to the surface.
More darkly though, I wonder whether a few years into a cost-of-living crisis, eating beans and turning down the central heating just doesn’t seem so newsworthy anymore.
Have a great weekend. Enjoy the sun!
From Monevator
Scrimping and saving to start your snowball rolling – Monevator
From the archive-ator: Fixing your financial posture – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Bank of England holds rates at 5.25% for sixth consecutive month – Sky
House prices to rise by average £61,500 over next five years – This Is Money
Legal & General boss calls for fewer ‘unscrupulous’ BTL landlords – CityAM
Remittances to developing nations overtakes foreign direct investment – Guardian
Chinese women are teaming up with strangers to save money – BBC
Asset management industry ‘under pressure’ as costs rocket – CityAM via Yahoo
Chinese network behind one of the world’s ‘largest online scams’ – Guardian
Youngest self-made billionaire chooses London for European HQ – CityAM
One million families with two retired generations in a decade – This Is Money
UK has moved out of recession, official figures show – Guardian
Products and services
How deep are the problems at St James’s Place? [Search result] – FT
First Direct lifts bank account switch bonus to £175 – Be Clever With Your Cash
Tesco is gamifying Clubcard reward points – This Is Money
Transfer your ISA to InvestEngine by 31 May and you could get up to £2,500 as a cashback bonus (T&Cs apply. Capital at risk) – InvestEngine
What’s happening with buy-to-let mortgage rates? – Which
Fraud rife on marketplaces Depop, Preloved, and Shpock – Guardian
Used car sales hit a five-year high as prices drop – This Is Money
Get £200 cashback with an Interactive Investor SIPP. New customers only. Minimum £15,000 account size. Terms apply – Interactive Investor
Vomiting frogs and other ‘dust’ vex US bitcoin ETFs [Search result] – FT
The cheapest and most expensive cars to insure in 2024 – Which
Georgian homes for sale for Bridgerton fans, in pictures – Guardian
Comment and opinion
Temper FOMO and regret by owning the market – The Financial Bodyguard
Pension savers warned of new tax-free lump sum cap [Search result] – FT
Long odds – Humble Dollar
The worst bond market ever marches on [US but relevant] – A.W.O.C.S.
Larry Swedroe on why you shouldn’t pick stocks [Podcast] – At The Money
Is the 4% rule too safe? [Note: US data] – Think Advisor
The sweet spot principle – Mr Stingy
How to avoid your wealth robbing your kids of purpose [Podcast] – Money Wise
Buffett minus Munger mini-special
How would Warren spend one more day with Charlie? [Video] – Via X
How to find a partner like Charlie Munger – The Alchemy of Money
Lessons learned from Charlie Munger – Davis Funds
The religiosity of the Berkshire AGM – Flyover Stocks
Naughty corner: Active antics
Big tech’s big spending will crimp returns – Base Hit Investing
Is it time to look again at China? – Sherwood
Choosing the right counterparty – Capital Gains
The FTSE 100: bubble or a new bull market? – UK Dividend Stocks
American endowments’ love affair with private equity [Search result] – FT
Bill Gross thinks bonds are still not yielding enough – Morningstar
Gold is overvalued – MarketWatch [Also: Research]
Kindle book bargains
How to Own the World by Andrew Craig – £0.99 on Kindle
The Great Post Office Scandal by Nick Wallis – £0.99 on Kindle
Number Go Up by Zeke Faux – £0.99 on Kindle
Chums: How a Tiny Caste of Oxford Tories Took Over the UK by Simon Kuper – £2.89 on Kindle
Global warming mini-special
World’s oceans suffer from record-breaking year of heat – BBC
Climate scientists are in despair about the future of the planet… – Guardian
…and coral scientists are gloomy after unprecedented bleaching – Guardian
The ‘world’s largest’ vacuum to suck carbon out of the air – CNN
Venezuela may be the first nation to lose all its glaciers – BBC
Robot overlord roundup
Ways to think about AGI – Benedict Evans
Environmental factors
Environment groups call for urgent action on UK sewage spills – BBC
The deep ocean photographer that captured a ‘living fossil’ – BBC
“I’m a blue whale, I’m here” – Guardian
Off our beat
Plonker, prat, and numpty: study shows classic British insults dying out – ITV
How coffee became a joke – The Honest Broker
Saudi forces “told to kill” to clear land for eco-city Neom – BBC
The real science behind the billionaire pursuit of immortality – Vox
“I have no children and have started to fear for my legacy…” – Guardian
Google briefly lost the Google domain after selling it for $12 – Yahoo Finance
And finally…
“Investing is a simple activity, which an entire industry strives to make complicated to justify its existence.”
– Nicolas Bérubé, From Zero to Millionaire
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@TI thanks for the early post (again!). I’m currently recovering from surgery, and the Monevator archive has kept me occupied in a way the 999 TV channels couldn’t possibly! Much appreciated
I won’t post a link but I read a story in the press about a young finance guy in London on £120k a year hoping to FIRE – he felt that he needed £200k a year to live on and that meant £5m in his pot (no idea if tax is an element but the good folk at SJP who hold his ISA will surely be able to help him – just ignore the fact that 4%SWR is AFTER investment fees).
How is that FIRE? And how many earn over £100k? It’s the preserve of a small minority (and with high income comes HCOL.
To me it seems like being able to retire in your 40s/50s from a career in a high paid job, or after a successful IPO you were lucky for, or with the help of a million pound inheritance, family trusts or mad gains in your BTL portfolio should just be called “Getting Rich”
Without the sacrifice and spending restraint (above what you’d normally call budgeting), it’s just that – not FIRE, just getting rich.
Now starting 2nd year as a “Mogul”. Started as @Time Like Infinity, or @TFI, but using @DH now avoids any confusion with our own @TI. Grateful for this site, which was a rare oasis of sanity back in the dark despairing throes of the GFC when the likes of ‘the Market Oracle’ and other sites so unwisely persuaded me to get out of ‘the market’.
It was building up confidence again reading MV in 2011, 2012 (first came across MV in 2008 IIRC) which finally gave me enough ‘courage’ to reinvest (85-90% passively) in 2013.
I don’t think I can FatFIRE, but at least I’ve now got a Snowball 🙂
As someone without offspring or siblings, the Guardian link under the ‘Off our beat’ section in the Weekend Reading really hit home.
When I have thoughts like the 54 year old writing to Philippa I just remind myself of this quote to put it all into some sort of perspective:
“In all of my universe I have seen no law of nature, unchanging and inexorable. This universe presents only changing relationships which are sometimes seen as laws by short-lived awareness. These fleshy sensoria which we call self are ephemera withering in the blaze of infinity, fleetingly aware of temporary conditions which confine our activities and change as our activities change. If you must label the absolute, use its proper name: Temporary”
> FatFIRE is now a realistic prospect for anybody who can hold down a job with one of The Magnificent Seven tech giants for a decade
Tongue in cheek I assume. The FatFIRE subreddit tends to define a FatFIRE as having something like £5-10M in net worth.
I very much doubt many people working for one of the Mag7 in London will be achieving that inside a decade short of lucking out on employer equity grants.
A £200K/yr salary ain’t going to cut it
Truly loved the Scrimping and saving to start your snowball rolling article from earlier in the week. Excellent work. And great timing for myself, being at somewhat of a crossroads of dealing with ill health retirement at 44 (fortunately with final salary benefits) and receiving an inheritance. I thankfully paid off all debt minus mortgage following advice from here in 2014. I don’t know what the future holds wrg to my health and pension income, so knowing what is best financially is difficult. Clearing the mortgage gives the most security, but am I missing out on growing my snowball by not investing? Finding the balance is key I guess. Thanks for the inspiring articles though!
Valuations? CAPE and all that. I started in 2009, kicked up the butt with this post of yours for which I’m deeply grateful.
But make no mistake, I would he hosed, stuffed, up the creek without a paddle at today’s valuations. Why is fatFire having a moment? Because you need to be loaded to do FI/RE at the mo. Frugality ain’t gonna help you nowadays. With due respect to your snowball article, your snowball gets bigger faster if you start when the market is in a hole. I expect my indicative networth to drop over the next five years, because everything is up in the sky and may find its level.
Saving hard works better than the snowball at high valuations, and the rich can save hard easier than the frugalista FI/RE aspirants (of which I was one).
I’m not saying don’t start, but the road ahead is steeper than it was around 2010
Delta Hedge-An interesting nugget from Larry Swedroe,s new book “Enrich you Future”
Missing the best 10 days of the stockmarket reduces your terminal wealth by 65%
……………………….20 days………………………………………………………………..85%
……………………….100 days………………………………………………………………99.7%
Stay invested at all time!
xxd09
@DH /Andrew
I was wondering where TLI had gone – thanks for coming out.
What is the definition of FF? I think if you are in the top 5% of earners without needing to work that’s got to be a good starter for 10.
On that basis @ £200k earner has a very good chance of achieving FF especially if it’s net (tax & NI) top 5%.
Recalling TLI’s household DB pensions – you are well into fat fire already
Now fat fire living in London is a different matter altogether.
@xxd09 (#7):
FWIW, this is not a new stat – what IMO is never made crystal clear is whether or not these are consecutive days.
Personally, I suspect not!
Having said that, it is stats like these that have always been behind my efforts (which always have a cost) to minimise any time out of the market.
I second @Boltts comment re DH, TLI, et al!
I was one of the people profiled in the New York Times FIRE piece. If you wanna get a behind-the-scenes look, here’s my take: https://www.financialsamurai.com/my-experience-working-with-the-new-york-times/
I’m glad the New York Times branched out to people from different backgrounds who also live in more expensive cities.
Not everybody wants to live in a low-cost area, the country, or spend minimal amount of money with their one and only lives. And more power to those who do.
Personally, I don’t want to scrimp and save to retire early, to then scrimp and save in retirement. I would rather just keep on working.
Sam
During the pandemic, I considered firing. A growing desire to make a difference to the world though, specially to this green and pleasant land in the current climate, made me change my mind. What I actually needed was to leave quantitative finance and investment banking and change my carrier to a proper traditional physics job.
I am glad that I kept working, as it has also been helping to reduce the risk of supporting my wife’s dream of building a lake house. Despite this folly (that is well underway now), I have been so lucky with my investments and also just by not having drawdown from my SIPPs, that I think when I do decide to fire, I could hope to have something resembling fat fire. At least for someone of frugal standards like my wife and I 😉
Thank you for the sweet spot article. I read Monevator because most articles and posters are centred. I love to reflect on the thoughts of Ermine and xxd, et al.
I resigned this month. I’m in the sweet spot of enough… It’s time to brave change… I will be trying other jobs for growth and to see how I adapt in other situations.
I’ve been too rich on occasions and it isn’t healthy. I floated at the start (in my late twenties), but I didn’t enjoy feeling untethered in my mid thirties. I found a better middle ground for my personality.
It was nice to buy my PPOR for cash at 28, but I ultimately chose risk-off over more risk and bigger, newer, more. (PS. I still invested passively)
I have always found the FATFIRE movement a little off-putting because to me that is…just being rich? I know a couple of people who got in on the ground floor of start-ups who were able to cash in substantially when the companies went public. They of course packed in their careers and focused on other things. They wouldn’t call themselves members of the FIRE community, they would just think they had enough to not have to work.
I guess because I have been practising some version of FI in my life since I read Your Money or Your Life in 1994 (not just to retire but to work part time, start a business and be a SAHM for a few years) in my mind the idea is that many *average people* can use FI as a tool if they hunker down and prioritize. It was a movement that was surprising because people who were doing it weren’t always rich or were people who suddenly came into money. So while technically FATFIRE counts in the strictest sense – and no shade to them, I am glad they are out there doing what is best for them – it’s just basically rich people doing rich people things.
@PostMorbus. Nailed it.
Right now, FatFIRE is more common simply due to the environment being obscenely favourable. Private sector households are overflowing with wealth. Sky high US stock market, Bitcoin/gold on the highs. Bonds and cash offering decent yields. Property going up. Most important, a truly extraordinary wealth transfer from the government to private sector households during COVID ($2.3 trillion in the US alone).
What a shock! Some people see a massive increase in their wealth and decide to retire early. They attribute it to a movement called FatFIRE. It sounds less competitive than saying you wanted to be rich. More proactive than saying the job paid too much and you got lucky with investments. Easier than saying you cannot be arsed to work.
If FIRE is a daft concept, FatFIRE is even dafter. Don’t talk bollocks about FatFIRE. Call a spade a spade. Just tell people you are rich.
@ermine
regarding savings and the rich being able to save more, I once found myself looking to see what the cheapest way to get porridge oats was (i think there’s something about a food that already feels frugal making you want to be even more frugal), before realising that I could basically buy high end porridge oats for the rest of my life and it would make very little difference.
@postmorbus if they continue to work after a financial windfall, that they are not Fat FIRE. Believe it or not, plenty of people make a lot of money and then continue to work and make a lot more money at the expense of other things.
In other words, FIRE is a mindset and a course of action to not work, unless the work itself is wonderful and meaningful.
Sam
I think FIRE, whatever the flavour, is much a mindset one adopts on the journey as well as a destination. If you work in a startup or a bank with the aim of making away with enough loot to cover all of your living costs for the rest of your life, you are going for FI. If you choose to exit the rat race at that point, you’ve RE. There is a mindset here ie you are choosing to do something most of your peers aren’t doing ie spend below your means and get out, and you weren’t simply gifted the money via inheritance.
Being extremely wealthy at the start, or inheriting your way there doesn’t make you a member of the FIRE community, you’re simply rich.
Agree with the posts above FIRE is a mindset. Most FatFIRE people are just rich. Nothing wrong with that, but they’ve not been intentionally living below their means for years in an attempt to gain independence. It doesn’t have to be excessively frugal but I do think it does need a level of conscious dialling back or limiting of spending.
I think it may be the widening gap between what people want/need from work and the direction of travel of what work/jobs are like.
The constant need to try and improve efficiency, do more with less, is all good when its enabling technologies doing this heavy lifting and such, but you can’t just keep piling more on the actual people and hope that will bring the productivity growth your looking for.
Enshittification seems to be the term thats caught on for how jobs are evolving over time.
FIRE works if it enables you to move toward a scenario where you get some meaning and a feeling of usefulness out of what you do, and ideally at a level of effort that is sustainable. If FIRE does deliver that then it should alleviate a bit of the ‘suffering’ (in the buddhist sense) that we’re all trying to minimise. But just having a bunch of money doesn’t get you there necessarily. I’m pretty convinced FIRE with a view to putting your feet up is just wanting a holiday, i.e. no long-term solution.
@Rhino
Completely agree. My experience is that the workplace isn’t necessarily a worse place than it was 10-15 years ago. It’s just that it’s only improved marginally yet expectations have moved massively.
I don’t have much to add to the Fat FIRE debate other than it’s more about comparison to your industry/career peers of the same age and similar income. So if many/most of your peers are financially independent at, say 50, then it could be the norm in your area, with those still working likely to either be the type of workaholic/high achiever who will never retire, or those with excessive lifestyle creep (expensive to run property/supercars/helicopters/wife, sponging children etc). Or of course people who have left to start their own business that they enjoy running and gives them a better sense of purpose. Backstopped by previous high earnings and accrued assets.
Obviously the lower you are down the income percentiles, then short of some significant windfall, the more of a concerted effort is required to reach even normal FIRE yet alone Fat FIRE.
So to be a FIREee of any sort you can never be “normal” for your peer group for spending and investment behaviour.
I will concede most people should be concentrating on getting themselves into at least the top 10% of earners (maybe even top 5% if you have kids, or top 1% for Fat FIRE) to make any of this remotely achievable given where we are today.
I’m pretty frugal, I don’t need a helicopter, but I also aspire to have a better quality of life than someone who lives on benefits.
Struggling with the article is the 4% rule too safe…..alluring though it is. I wonder if the adviser’s looking to attract some new clients. There’s not a lot of data to back up the article and then in the link to detailed research the chart that sticks out is that 75% of $80-$100k expenses is inflexible. It feels far better to look at today’s S&P 500 p/e ratios and say historically when ratios have been this high what’s the failure rate of the 4% SWR and naturally as p/e multiples are elevated the failure rate is much higher. Few advisers want to talk about this a lot apart from ERN.
The latest data show someone retiring in 1999 with a 4% SWR – 75% / 25% S&P / Bond is nervously looking at the markets to see if they’ll make it to 2029. It’s certainly not clear with a w/r now well into double figures (15% I think currently).
If you want to do fat fire, you are rich, otherwise you are just spending down capital in an accelerated fashion. Probably want to leave a decent legacy to the children or genuinely not touch the capital in any meaningful way. So to keep up with growth in standards of living, taxation, your P(erpetual)WR is probably closer to 2% than 4%.
What’s rich…£100k net income even with a fully paid off house doesn’t touch the sides for a lot of people. Someone in the office has just breezily spent £25k on a holiday – they’re a HENRY btw…:) and likely to stay that way. Sure, lots of people can and do live on £25k a year – perfectly manageable and if you do it right, not much impact to your standard of living, but it’s not fat fire in the way its characterised
A mill isn’t what it used to be. So I reckon to do fat fire in a meaningful and sustainable way these days, you are looking at a £10m pot with a £200k spending rate / pulling out £250k a year to cover taxes etc. Plus no mortgage. On a £10m pot the average person is going to have a £2-£3m house. Call it £2.5m. So fat fire is £12.5m – £2.5m house and £10m investable assets.
That’s probably made a few readers spit into their tea…certainly I don’t need that as a family. Our frugality has enabled a very high saving rate, without any discernable loss of standard of living. And we’ll be firing with a decent pot / lot SWR to counter the uncertainties of the future. But we won’t be living a fat fire lifestyle. Once you lived 30 years in a different way – you are institutionalised – shawshank style.
Boom – £12.5m
@SF:
Just over 14%, see: https://retireearlyhomepage.com/reallife24.html
Trust all is well, and are you still UK based?
To be in the top 1% of income you would have to have at least £130,000 after tax and the overwhelming majority of those with that sort of spending power will still be working.[1]
To be in the top 1% of wealth in the UK requires $3.3 million. [2]
Knight Frank use $30 million as their definition of “ultra high net worth” and they think that there are 626,600 of them in their 2023 report. [3]
I agree with Post Morbus and all the others. When people talk FatFIRE in the tens of millions they are really talking about being very rich. Nothing wrong with being rich of course, but if you are rich then you already have the option of early retirement in comfort without taking extra steps.
The distinguishing feature of the concept of fire is that you are making decisions and taking actions that allow an early, comfortable retirement that would NOT be the normal course. Had you not run the spreadsheets and made the sacrifices then both the FI and RE part would be out of reach. I think it is proven when you read stories on FIRE websites of people putting in their notice and their colleagues, who have likely been on similar wages over a similar period, are baffled at how they could do it.
[1] https://www.gov.uk/government/statistics/percentile-points-from-1-to-99-for-total-income-before-and-after-tax
[2] https://www.knightfrank.com/research/article/2021-03-01-how-much-wealth-gets-you-into-the-global-top-1
[3] https://www.knightfrank.com/wealthreport
To weigh in on the fatFIRE, I think it can be a thing if it is being intentionally worked towards but it probably looks like just being high earning/rich to most.
Although I recognise what I have done in life as broadly FIRE I wasn’t aware of the “movement” for much of its existence. I’ve kinda drifted into it as it broadly aligned with what I was doing anyway (though arguably at too advanced an age to be real FIRE). I would guess the same holds for fatFIRE e.g. at a point in time those individuals realise they have laid down enough that they can maintain their lifestyle without adding to it.
@SF (#23)
Blanchett’s paper is interesting although the title of the original article is somewhat misleading since as soon as flexibility is introduced the withdrawal strategy is no longer a ‘pure’ safe withdrawal rate one and it is well known that initial rates can then be increased (with the possibility that they will fall during retirement). The figure on page 4 (75% of $80k being inflexible) is, to some extent, at variance with the table in Appendix 2 where essential spending is 100% for social security of $20k, 70% for $30k, and 40% for $40k. The goal based metric is an interesting approach and much simpler than Blanchett’s earlier withdrawal efficiency rate (or McClung’s adaptation of that metric, HREFF).
As for those US retirees of 2000, if they bunged most of their remaining portfolio (about 80% of it if my quick calculations aren’t too far off) into a short TIPS ladder (assuming a real yield of 2%) they could guarantee their ‘4%’ income until 2029 (although missing out on some potential upside).
“The goal based metric is an interesting approach and much simpler than Blanchett’s earlier withdrawal efficiency rate (or McClung’s adaptation of that metric, HREFF).”
Although, on a more careful read, the “percentage of goal” metric that Blanchett introduces appears to be the ratio of the mean withdrawal to the required withdrawal (useful, but possibly not the whole story).
@Al Cam Thanks for that link – interesting. Of course it’s all backward facing and none of us know the future but it’s always good to have the principles firmed up with real life examples.
Ignoring the extraordinary results of the top two portfolios as concentrated bets that could have gone the other way I take away two lessons. Most “reasonably diversified” portfolios with low fees and high patience work out more often than not and fixed income still feels “overrated” even in retirement.
For now I can’t see being happy with any more than 20% as a bear market/crash buffer to eat into whilst remaining fully invested in the equities awaiting a recovery. But who knows as I’ve a good way to go before it becomes a real question!
@Steve B:
In many ways John P Greaney is a forgotten hero of FIRE, see e.g. https://forum.earlyretirementextreme.com/viewtopic.php?t=10436
Real life examples always trump simulations in my experience.
As long as 20% covers a few years of expenditure then I can see your logic, especially as it is all some time off for you yet! It is possibly worth noting two thoughts: 1) times seems to speed up as you age; 2) IMO cash is and always will be king – in spite of all the efforts to eradicate it.
Best of luck.