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Notebook Money

Krieg Barrie

(Krieg Barrie)


Playing with ‘FIRE’

Extra-early retirement has become a new financial fad

The Protestant Reformation taught us that “vocation”—a calling from God—belongs to all Christians, not just clergy. Often this vocation expresses itself in our work, and in the last few years Gene Edward Veith, Tim Keller, and others have written books that help Christians develop a theology of work and vocation. At the same time, another movement has spread in America with a different perspective on work. Its followers call it FIRE.

FIRE stands for “Financial Independence, Retire Early,” and when people say “early” they mean very early. Many people pursuing a FIRE lifestyle dream of retiring in their 30s. Most workers in developed countries labor for 40 years before retiring, but the FIRE folks want their own lives to be mostly retirement.

People in the movement often trace FIRE’s rapid spread to a single blog post. Pete Adeney worked as an engineer for 10 years before retiring at the age of 30 thanks to a high savings rate and a frugal lifestyle. In 2012 he wrote a post, “The Shockingly Simple Math Behind Early Retirement,” that advises consistently saving half of one’s income. By his calculations a typical working career need not last more than 17 years.

Adeney’s blog post went viral, and the FIRE community developed a rule of thumb: Have 25 times your annual expenses saved in investment accounts, then retire. But what will early retirees do? In a 2016 post called “Happiness Is the Only Logical Pursuit,” Adeney describes the human person as “nothing more than a complex machine made of meat,” and he suggests people should do whatever gives them a hit of dopamine.

One person at a FIRE meet-up in Houston, former car seller Chris Stam, told the group that anyone not working toward a 50 percent savings rate is not making progress. Stam retired last year at age 47 so he could “live life” while still young enough to enjoy it. He struggled to articulate what he does all day, but he assured everyone he stays busy: When he retired he gave himself “self-care” and likes choosing what he does and with whom he does it.

Tristan Sarremejane, a 29-year-old structural engineer from France, also was at the FIRE meet-up. He likes his work but doesn’t want to do it for the next 30 years because it leaves him insufficient time for leisure. He and his wife, a Texan, don’t have children yet, but he says a desire for family prompted his interest in FIRE. He fondly remembers his own childhood in France: His parents, who were teachers, had months of vacation time each year.

Some people note that focusing on early retirement can become a selfish squandering of talents. Vicki Robin, 73, wrote Your Money or Your Life in 1992, years before FIRE existed, but many leaders in the movement cite her book as inspiring their journey. In the book, Robin advocates getting out of debt, building wealth, and having a life of service to others: “We are not just lone wolves out there for our own personal agenda—for our own personal needs, wants, and desires. Lives shine when people discover how to be of service.”

Robin defines jobs as what we do for money, but “work” is something we do to improve our community and the world. Her emphasis on work echoes the Christian doctrine of vocation, and she’s right to reject the goal of retiring early to focus on ourselves. Christians can prepare for paying careers that satisfy and also allow us to be of service in business or nonprofit work—but there’s nothing wrong with seeking financial independence. What matters is whether our heart’s desire is to love God and our neighbors through our work, paid or unpaid.

—Collin Garbarino is a World Journalism Institute mid-career graduate

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Photo illustration: Krieg Barrie; Paul Sancya/AP; John Locher/AP; Jose Luis Magana/AP

Ocasio-Cortez, Warren, and de Blasio (Photo illustration: Krieg Barrie; Paul Sancya/AP; John Locher/AP; Jose Luis Magana/AP)


Not enough plunder

Taking from the rich still won’t pay for Democrats’ dream programs

As April 15, income tax day, approaches, Congressional Democrats are proposing significant increases in taxes to fund new programs. U.S. Rep. Alexandria Ocasio-Cortez, D-N.Y., has proposed a 70 percent federal income tax on incomes above $10 million. Other Democrats have proposed similar levies. Proposals such as providing Medicare for all and the Green New Deal would require significant new expenditures and revenue to support them.

Is it really possible to tax the rich to fund fully such new initiatives?

Many Democrats certainly think so. New York Mayor Bill de Blasio says, “Here’s the truth, brothers and sisters, there’s plenty of money in the world. Plenty of money in this city. It’s just in the wrong hands!” Ocasio-Cortez says “a system that allows billionaires to exist” is immoral. U.S. Sen. Elizabeth Warren, D-Mass., says, “We are the wealthiest nation in the history of the world — of course we can afford these investments.”

Let’s try some hypothetical exercises to test out the theory. The Trump administration has asked for $4.7 trillion in spending for fiscal year 2020. One way to raise this revenue in a progressive manner would be to confiscate all income, starting with the wealthiest Americans. Based on the latest Social Security wage statistics tables from 2017, raising $4.7 trillion starting at the highest income levels would require all the taxable earnings of over 35 million Americans. The government would have to take away completely all taxable income of individuals earning over $65,000 in 2017 in order to cover the proposed spending for fiscal year 2020.

If, on the other hand, we were to “outlaw billionaires,” a good place to start would be the Forbes 400 list of wealthiest Americans. So what if we confiscate billionaires’ money until we have funded the 2020 federal budget? Surely that would cover years of federal spending and leave plenty left over for new programs. Or would it?

The budget proposal of $4.7 trillion annually represents $13 billion daily. If we start with Forbes billionaire No. 1, Jeff Bezos, with $160 billion in net worth, we can fund the federal government for 12 days. Now who’s next? Bill Gates and his $97 billion can take us about out to Jan. 20. Next up is Warren Buffet with $88 billion, who takes us out to Jan. 27. This isn’t going very well. We have reduced the three wealthiest Americans to food stamps, and we are not even out of January yet!

It is obvious where this leads. Take all the wealth of the Forbes 400 (a total of $2.9 trillion) and we can only fund the federal government for 225 days, or into the middle of August. Now all those billionaires are a welfare expense to the government rather than a revenue source for the government. And we also have bankrupted state and local governments that are equally dependent on the success of these wealthy Americans.

Progressives might protest and say corporations are not paying their fair share. When they lobby for tax loopholes and then use those loopholes, or when cronies in government give them preference over competitors, they deserve criticism. Many reforms are worth discussing, but remember: Corporations provide the majority of the income to the working Americans paying the individual income tax. The stocks and bonds of corporations are central parts of the pension, investment, and college funds of many Americans. Impairing or confiscating those investments will only increase dependence on government.

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(Jim Lo Scalzo/EPA/Newscom) ()


Office of prognostication

The Congressional Budget Office’s healthcare predictions aren’t a reliable guide for lawmakers

With the GOP promising a “repeal and replace” of Obamacare, all eyes have turned to the U.S. Senate. The House passed a repeal-and-replace bill, the American Health Care Act, on May 4, and while the Senate is widely expected to make adjustments to the House plan, the reconciliation process gives senators a path to repeal and replace that requires only 51 votes, versus the 60 normally needed to prevent a filibuster.

One thing worrying advocates of this repeal-and-replace plan is that Senate votes could be swayed by the dire forecasts of the Congressional Budget Office. The CBO is a nonpartisan group whose job is to “score” various legislative proposals and predict their numerical impacts. CBO projections are known to scare some senators away on certain votes, and they also are known to provide cover for senators looking for a fiscal stamp of approval. That’s true whether the legislation be a spending bill, a tax proposal, or something more complex, like this healthcare legislation.

The Congressional Budget Office has forecast an additional 23 million uninsured Americans by 2026 if the House bill becomes law. It is ironic that such dire projections from the CBO could threaten a repeal and replace of Obamacare, since it was the CBO’s rosy projections about Obamacare that allowed the 2010 healthcare overhaul to pass in the first place. The office’s original projection was that 23 million Americans would have signed up on the exchanges by now, a figure nearly double that of the actual 12 million enrollment. Perhaps it was just too hard to project with accuracy seven years in advance?

Fair enough, but just last year the CBO projected 15 million enrollments on the exchange, a figure still 25 percent higher than the actual total proved to be. In its scoring of the present legislation, the CBO is not only going out 10 years to make its projection, despite a woeful record in both short- and long-term projections, but it is completely ignoring the waivers the new bill allows all 50 states to claim from certain parts of Obamacare. Each state could end up with a totally different mix of results, creating a landscape that makes enrollment projections impossible. In other words, there is no scientific way for the CBO to accurately forecast the bill’s effects.

Ironically, the same CBO report that predicted the House plan would leave 23 million additional Americans without insurance also scored the bill to be a deficit reducer (to the tune of $119 billion), a tax reducer (by just shy of $1 trillion), and a spending reducer (by well over $1 trillion over 10 years through the elimination of subsidies). These parts of the CBO projections apparently did not warrant much media coverage.

The CBO itself doesn’t deserve criticism for its consistent missing of the mark with things very difficult to predict. The nonpartisanship of the CBO is not really at question: The sheer viability of its task is.

But senators who let CBO reports dictate their vote deserve criticism, given the office’s historical track record and the impossibility of its objective.

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