The Retirement Lie and Its Unintended Consequences

Here is the standard FIRE blueprint:

Step 1: Work hard, save, invest and … wait.
Step 2: Reach FI, retire and sail into the sunset.

We all know that’s not what usually happens (bear with me). Almost everyone (as in 99%+) of people who hit FI in their 20s, 30s, 40s and even early 50s will continue working in some capacity.

I know I’m not telling you anything you didn’t already know. And that’s fantastic. It’s good to see that the fact that most of us won’t actually retire early is widely accepted in the FI community these days.

This is actually quite a shift to, say, just five years ago, when the voices of the “I’ll never work another day in my life” crowd were much, much louder.

A Quick Walk Down Memory Lane

The modern FI movement (which arguably started with the birth and rise of Mr Money Mustache’s blog) is still very young, so five years is actually quite a long time.

Back then, most financial independence content (mainly blog articles at the time) was about the traditional approach to FIRE – work, save, invest, retire. Articles covering “softer” approaches like semi-retirement and the associated alternative strategies were few and far between. That’s one of the reasons I started this blog, by the way – I just couldn’t find the kind of content I was looking for, so I created it.

These days, most FI enthusiasts are aware that they will likely continue working and generating income after they reach their FIRE number. The RE part of the FIRE acronym is heavily debated, and many people have tried to redefine what it stands for. All because we now know that we probably won’t retire in the classic sense once we hit our number. I am glad that, as a community, we have started having these conversations more often.

But there is still one problem:

We are still chasing that FIRE number as if we didn’t know any better.

The Retirement Lie

I first wrote about the “Retirement Lie” in my very first article on this blog and made these graphs to illustrate it:

The Retirement Lie illustrated in two charts

I argued that we can bake the fact that most of us will work after FI into our plans and calculations – if we are willing to admit it.

The point I was trying to make back then was – and still is – that there is no reason to wait until you reach your FIRE number before you start downshifting and doing more of what you really want to do with your life.

When we acknowledge that we won’t actually retire when we hit FI, we can stop pretending we need to prepare for a life without active income. We can stop believing and spreading the Retirement Lie.

This then allows us to come up with alternatives to full FI and early retirement, which usually also means we can get our freedom back much sooner.

The Retirement Lie Is Still Alive

What I find a bit strange about the current state of the FI community is this: We all know we won’t actually retire when we reach FI. But 90% of us still chase our full FI number before we start downshifting. We know about the retirement lie but choose to ignore it.

And that’s despite an overwhelming amount of evidence available to us. Many of the early FIRE adopters (who learned about FI in the early 2010s) reached their numbers over the past few years. 99% of them are still making money in one way or another. Just look around the online communities and FIRE blogs. You’ll be hard-pressed to find even a handful of people who actually live the RE part of FIRE permanently.

What is more, almost no one is actually making withdrawals from their portfolios.

The FIRE Godfather – Mr Money Mustache himself – is a great example. He reached his number and retired from the rat race. But he also makes a lot of money from his blog and works on all sorts of income-generating fun projects. It is safe to assume he has never had to touch his nest egg to fund his lifestyle. That doesn’t make his story any less legitimate, it just shows what actually happens in reality – people continue making money in “early retirement”.

In fact, considering MMM’s low-cost lifestyle and high amount of blog income, my guess is that he is probably a decamillionaire by now. This brings me to my next point: the unintended consequences of the Retirement Lie.

We tend to pretend that this is what the next 40+ years after we hit FI will look like and plan accordingly

The Consequences of Denial

What happens to investments you don’t touch? They grow.

Let’s look at a quick hypothetical example:

Jimmy starts his FI journey at age 25. He works hard, hustles, lives cheaply and saves and invests as much as he can. At age 40, he hits his magic number – $1,500,000. He is financially independent and can cover his annual expenses of $60,000 with income from his nest egg. Woohoo!

But then Jimmy does what everyone does – he continues working. We’ll be generous and assume he only earns enough to cover his expenses and doesn’t add any funds to his portfolio.

At age 55, Jimmy is ready to fully retire. Guess how much his portfolio (which has continued compounding in the background) is worth now? (assuming 7% inflation-adjusted returns per year)

Over $4,000,000!

15 years of uninterrupted compounding in action

When I share a spreadsheet like this, some people are quick to point out that Jimmy’s returns might be lower. And that’s true. He might get 5% returns and “only” end up with $3,000,000. Or $2,300,000 if he achieves 3% returns. But you get my point – in all likelihood, he will end up with much more than he actually needs to fund his lifestyle.

Surely Being Rich Is Not A Bad Thing… or Is It?

Ok, this is a trick question. Sure, I don’t know many people who could complain about having $4,000,000.

But remember, everything in life has a price. And Jimmy definitely paid for his massive nest egg.

He paid with the things he could have done with his life in his late 20s and 30s instead of racing to the FI finish line. He paid with the experiences he missed out on. He paid with the holidays he probably didn’t take. And he paid with the stress he endured in the name of FI.

This concept is called opportunity cost.

So is having more money than you need to live comfortably at age 55 a bad thing? Well, it depends on whether you think the price you paid was worth it.

Personally, I would rather enjoy my younger years as much as possible. That’s why I chose an approach that will get me to full FI slower but that allows me to enjoy my life and work less along the way. The risk of running out of time is real and much more scarey in my opinion. So for me, it’s all about balance and maximising my quality of life. As long as I end up with the money I need to live a good life, I’ll be content. Having a net worth that far exceeds what I actually need is not an attractive outcome to me because it means I oversaved in my earlier years, which is not an efficient use of my time and resources.

Everyone is different, so everyone’s answer to this question will be different. There is no right or wrong answer, but it’s important to think our financial plans through and be aware of the consequences of our choices.

The key here is intentionality and honesty.

Are We Just Scared?

I have spent a lot of time thinking about the Retirement Lie over the years. Why do we still hold on to it although we know it’s a lie? We now even have data-backed concepts like the flex rate that allow us to adjust our plans. Plus, there is now more info on alternative FI strategies than ever before. These give us options to lower our savings targets (which, in turn, gives us our freedom back).

The only logical conclusion I can see is that we are scared. Scared of breaking away from the status quo. Scared of admitting what we really want and then going for it. Scared of failure. So we delay happiness and tell ourselves we need to be 1000% financially secure and set up for life before we take any risks.

I truly believe fear is the reason many of us don’t consider alternative FI strategies or semi-retirement. These options are less black-and-white, which probably makes them seem scarier.

Mr Money Mustache himself wrote about the fact that he had “nothing to worry about in the first place” in one of my favourite articles ever. In the article, he reflects on his FIRE journey and openly admits that it was his younger self’s insecurities and lack of confidence that drove his wealth accumulation efforts.

Are you choosing to ignore what will probably happen when you reach your magic number?

Final Thoughts

I am super passionate about busting the Retirement Lie, and that’s why I’ve written about this topic for almost five years now. I think it’s really important that we make decisions about our FI journeys intentionally.

If you reach FI and then continue working, you’ll probably end up with more money than you’ll ever need. Your younger self is paying for your older self’s excessive wealth.

If that’s what you want (maybe because you want to build intergenerational wealth or make large charitable donations), that’s completely fine. But if your main focus is a high quality of life and more freedom along the path to FI, you might want to re-think your approach.

I’m not saying you should retire early if you want to continue working (work is great once you don’t need the money!). Instead, consider alternative approaches, semi-retirement, and lots of mini-retirements along the path to FI. You can have both – a great life now and FI later on down the track.

Would you rather grind away now and be extra wealthy later on? Or would you prefer to live a little more now and just have enough? The choice is yours.

Remember, nothing in life is free.

P.S.: If you are open to alternative options to full FI, you might be interested in our popular Semi-FI Calculator. We’ve just added a new feature on popular demand: separate fields for your expected return rates and your expected long-term inflation rate. This makes it easier to test different assumptions and to see the impact of your returns and inflation more clearly. You can request access to the calculator by filling out the form below.

 
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18 thoughts on “The Retirement Lie and Its Unintended Consequences”

  1. I agree with you and thanks for the reminders about actual reality again. Now for some there is the kids oversight. Not everyone wants to take school kids with them on the FI journey. Mine are teens ….raising them is hard enough without uprooting them. So imagine retiring to kids at home still…..hmmmm can’t take off and travel and still have years of being a parent to them ….:.so what else is there to do but find some type of work.. or it’s easier to keep working that explaining it to everyone why you are confident in your fire trajectory……but I get it. You are right

    Reply
    • Hi Sheryl, I totally agree – I wouldn’t fully retire with kids still at home. The point I was trying to make was that other options – like semi-retirement – are a better option for most people. Our kids young and we will probably continue this semi-retired lifestyle until they are both grown up. That way we get to enjoy more time with them while they are young and still get to FI when we are a bit older.

      Reply
  2. Eye opener! Will def forward this to a few friends who are hustling hard to make progress. More family time and less stress have always been my main motivations. I completely agree with you, there is no point going hard if you are not going to retire. So for most people the slow and intentional path is the better choice. It’s just a shame that many don’t realise this until after they get there…

    Reply
    • Thanks Paul! Yes, I often speak to people who have made it all the way to the finish line only to realise that they could have gone slower and smelled the roses along the way. A bit tragic!

      Reply
  3. Wow. With the numbers you used, both age and financial, I could be Jimmy! Thanks for the wake up call. Time to chase those dreams.

    Reply
  4. This article really speaks to me, but something about the current “economic climate”, and what is happening in Ukraine and what is coming with China tells me that the 4% rule needs to be more like 2%-3%. It’s so hard to pull the plug and work less, especially when you’ve worked so far to get to the current position 🙁

    Reply
  5. For Americans, the biggest driver seems to be uncertainty about how much healthcare will cost, and fears around getting a very expensive but treatable condition, as you age. No one wants to have to go back to work while trying to battle a treatable cancer, for example, especially in their 50s. This risk can be mitigated somewhat if you have a partner (so perhaps they would return to work if you fell ill, and vice versa) but it’s a big fear for many.

    Reply
      • Yes, though finding an employer who will let you go part time (and replacing that job after layoffs or reorganizations) is no small feat. It’s possible, just not easy. And my point is that the fear of super high medical costs is often what drives Americans to accumulate more money than we need, whether that’s delaying full retirement or being uneasy about semi-retirement. It’s unfortunate.

        It’s not as simple as “waste your life working” vs. “be satisfied with enough” here… there’s a third option looming, that looks like “get sick and run through your lifetime savings at a time when it will be very hard to find employment” that is just really hard not to fixate on. It’s not as common as it was before the Obamacare reforms but it’s still something that gives a lot of us anxiety.

        Reply
        • Thanks for sharing. Yes, this situation is really unfortunate, Americans definitely have a lot more to consider than we do here in Australia or in Europe where I’m from. The same goes for part-time work, it doesn’t seem as difficult to request fewer days over her. What I have never understood (and I’m not that familiar with the US healthcare system) is why health insurance wouldn’t just be accounted for as an expense (a big expense) in people’s annual budgets just like any other type of insurance. Surely you would be able to self-fund your health cover? Sounds very much like the health benefits employers offer are golden handcuffs.

          Reply
        • Thanks for the different insight into the US perspective. I recently watched a vlog by retired US citizens where health care was a topic. They discussed sourcing their health care from Colombia and outlined some pretty significant sounding savings. Is that a safety net for all US citizens or were these vloggers unique?
          The topic is so interesting to me given the Australian social services.

          Reply

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