Deciding When to FIRE is a Balancing Act

Life’s a balancing act. You have multiple roles and goals, and you can do it all – just not all at once.
–Denise Morrison

Timing FIRE (financial independence retire early) is an optimization problem.

There are two competing factors that you must solve for.

The first is that you want to have a certain standard of living in retirement. That standard of living will require your investments to support you, since you plan on not working any more.

To get to that point, you need to work.

Each day of work, if FIRE is truly your goal, is one day less of FIRE. You want to FIRE because you don’t want to work.

However, pull the plug on work too early, and you either will eventually have to go back to work, or you’ll have to compromise your standard of living in order to be able to live within whatever your investments can sustain.

But, as most people who have gone before you and already are FIREd can attest, there’s a certain about of FUD – fear, uncertainty, and doubt – about whether or not the accumulated nest egg is going to truly sustain you in retirement, and you fall prey to the “one more year syndrome.”

While we had contingency plans in mind, we didn’t particularly want to use any of them if they were necessary. Our standard was to be able to maintain a lifestyle at the point that we decided to retire without needing to cut back.

Had we decided that retiring early was more important than the standard of lifestyle to which we’d become accustomed (which, by the way, is no longer a standard in divorces), then we could have dialed back our standard of living and retired a few years ago. While we don’t live a baller lifestyle, we certainly aren’t depriving ourselves of too many of the daily pleasures of life. Sure, we’d rather host friends for dinner or for brunch than to go out, eat the same quality food, do the same thing (talk and laugh loudly with each other), and pay much more for the privilege; however, we’re not destitue, and we’re not boondocking 300 days out of the year while couchsurfing the remaining 65-66 days of the year.

Yes, we could have worked longer. Our dog is still (fortunately) alive, so our nomadic wanderlust will have to wait a while longer until he goes to the Great Treat Factory in the Sky (he’s 13 now, and we know of a dog of his breed who made it to 16 years old). Thus, we could have padded the nest egg once we reached what we felt like was the retirement number.

But, we could have also worked less. We could have stopped several years ago.

We didn’t, for the following reasons:

  • We enjoy our lifestyle, and wouldn’t really want to give anything up. Yes, perhaps we got on the hedonic treadmill. Our budget from 8 years ago is 54% of what it is today. It’s important to splurge on the things which matter to you.
  • I didn’t want to be left wondering “what if” and my wife wasn’t ready to quit. Even though I’d sold a company, I felt like I had another run in me, and could, hopefully, apply some of the lessons from the first company to whatever venture was next.
  • I didn’t want to live having to keep money in the forefront of my mind in every minor decision we made. Yes, I’m still going to keep a budget fairly meticulously, but I also don’t want to eschew an impulse brunch halfway through the dog walk because we could do it for $25 cheaper by having it at home. We know our habits. We’re not going to buy mid-life crisis Porsches. However, having lived in a past where we were paying attention to every dollar to pay off credit card debt, I didn’t want to have that type of stress staring me in the face every day for the rest of my life. We review finances month-to-month, not day-to-day, and had we chosen to retire when we first feasibly could have, then we would have spent a lot more free time worrying about money. The money worries never completely go away, but they aren’t to the artificially created levels of worry that we would have had if we would have retired when it was first financially feasible.

How do you know when you should pull the plug on work in your pursuit of FIRE?

There’s no perfect answer.

However, as research from the National Institutes of Health shows, people have strong emotional and psychological inertia, meaning that it’s a challenge to change your behaviors over time. So, if you think that you’re suddenly going to drastically stop spending money on certain things in order to achieve FIRE, you may want to rethink that assumption.

Instead, live like you want to live when you are retired. Not all of this is possible; you may need to commute to work, go to the dry cleaners to have clean work clothes, and the like. But, you want to try to mirror your intended retirement lifestyle as much as you can so that you can see if you really can live that lifestyle, or if you’re simply deluding yourself. You may need to give it up to 9 months for the new habits to form and stick.

If you love your new lifestyle, great! FIRE away!

If not, keep working until you can afford the lifestyle to which you have become accustomed.

What about you? Are you willing to trade lifestyle for an earlier retirement date, or are you willing to keep working to support your lifestyle? Let’s talk about it in the comments below!

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