Financial Independence and Early Retirement (FIRE) improves lives. Those who FIRE enjoy unparalleled freedom, lower work commitments, relief from daily commutes, less stress, better health, and more time for friends and families.
Although there’s ample proof that FIRE benefits individuals, no one seems to ever discuss how FIRE benefits society. That’s too bad. If FIRE can be shown to profit the many as well as the few, that’s all the more reason for newcomers to join in and for policymakers to incentivize its future growth (with FIRE-friendly tax laws, for example).
So instead of reiterating for the umpteenth time how FIRE helps individuals self-actualize, this article tries something new. It lists some of the ways that FIRE can benefit society as a whole—especially if and when it becomes widely adopted.
Fair warning: this post covers a lot of territory. You can read it straight through, or, instead, click whichever topics interest you the most:
1. FIRE Protects the Environment
2. FIRE Pushes Governments into Fiscal Responsibility
3. FIRE Increases Employment
4. FIRE Lessens Shortages in the Healthcare System
5. FIRE Boosts Gross National Happiness
6. FIRE Grows the Economy By Increasing Investment
7. FIRE Eases the Retirement Savings Crisis (if any Exists)
8. FIRE Fixes Wealth Inequality
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In the course of adding more green to their wallets, seekers of FIRE lead greener lives. They consume less of everything, including gasoline, natural gas, electricity, and water. They reuse what others discard, which benefits landfills and oceans. They favor hybrids, electric vehicles, and bikes over internal combustion engines. They forego McMansions, preferring to live better by living smaller. In short, as FIRE seekers improve their finances the planet prospers.
Unlike most elected officials, those who FIRE know how to live within their means. As responsible money managers, they’re more likely to vote for balanced budgets and less debt. They’re also more likely to oppose government programs not funded by adequate tax revenues.
A few FIRE practitioners can’t possibly sway elections. But an inspired million might tip the political scales in favor of fiscal responsibility. After that, future generations could worry less about subsidizing their elders’ excesses and more about supporting their children—and that’s how a functional society is supposed to work, isn’t it?
Some who FIRE leave the workplace completely and permanently. This is a generous act. Instead of monopolizing their jobs until age 65 or beyond, early retirees create opportunities for others. If their vacancy is filled by someone who doesn’t work, that means one less person is unemployed. If their vacancy is filled by someone who does work, that creates an opening at the new hire’s former post. Potentially, a single full retirement echoes through the workforce several times, promoting many up the ranks.
Some who FIRE transition into part-time gigs, particularly during their first years away from work. In these cases, FIRE provides a loose form of job sharing, which helps curtail unemployment. Initially, a partial retiree opens up only a fraction of a job (it’s marginally less generous than a full retirement). Eventually, however, the part-time retiree leaves the workforce completely—usually years ahead of a traditional retiree—which opens up fresh opportunities for others.
Just as fire clears the forest for an infusion of new growth, FIRE readies the workplace for an infusion of new talent. In this virtuous cycle of workplace rejuvenation no one gets burnt. Those who retire early get to enjoy years of enviable freedom. Those who replace them enjoy newfound employment. In time the new hires can choose to retire early themselves.
In the near future, FIRE may evolve from a personal preference into a social necessity. Currently, our economy runs at near full employment. But according to many experts, in just a few years artificial intelligence and robotics may be destroying jobs that now employ tens of millions of people. If this happens, industrial societies will be reeling and the worldwide outfall will be severe.
Some futurists propose to address this potential job famine with palliatives such as robot taxes or universal basic incomes.
But as far as I’ve seen no one has yet proposed the cheaper approach of simply encouraging early retirement. FIRE provides policymakers with a scalable template. Properly motivated, the upper half of income-earners could afford to leave the workforce sooner and thereby make room for others. Governments could speed their exodus by expanding the incentives to FIRE, e.g., increasing contribution limits for tax-advantaged accounts, reducing taxes for Roth conversions, liberalizing Social Security for those with fewer than 35 years of wages, etc. These steps would cost money, but they’re much cheaper than a universal basic income—a massive giveaway that would induce loud howls from oppressed taxpayers.
Healthcare represents a huge slice of the US economy, in 2016 comprising 17.9 percent of gross domestic product (GDP). Despite its size, the system faces severe shortages of doctors and nurses as the population continues to age.
FIRE takes strain off the healthcare system both before and after early retirements.
FIRE seekers who still work consume less healthcare. Compared to mainstream consumers, they’re more likely to shop for alternative treatments and pursue medical tourism. They’re also more likely to practice wellness as a means of managing medical costs. While such efforts don’t guarantee a full escape from the expense of illness—solid genes and good luck are also needed—they certainly cut the risk.
Early retirees also tend to demand less healthcare. Freed from stressful commutes and demanding jobs, they suffer fewer ailments. Those who FIRE also have more time to exercise, sleep, and prepare healthy meals. They’re markedly younger than typical retirees, an advantage they can use to leverage themselves into better health while their elders stay chained to desks and sedentary jobs.
(Personal note: after I retired at age 48 my cholesterol and glucose numbers suddenly dropped. Was it coincidence or was it FIRE?)
In recent years, economists have begun to measure how well nations foster the happiness of their citizens. These efforts take various forms, including a survey loosely affiliated with the United Nations, The World Happiness Report. This study ranks the United States 14 out of 155 nations on six components of happiness, including “the freedom to make life choices.” (Norway ranks first.)
FIRE boosts societal happiness. Major sources of modern stress include indebtedness, job demands, lack of time, and grueling daily commutes. Those who FIRE reduce these stressors, thus improving their overall contentment and life satisfaction.
Moreover, as evidenced by their early exit from paid employment, those who FIRE usually prefer having more time to making more money. A growing body of behavioral science concludes that people who value time more than money are happier than those who see things the other way around:
“Life frequently presents time versus money trade-offs. [Our research] showed that the way people answer this [hours versus dollars] question predicts their happiness. Although time and money are both valuable resources that give hope for greater happiness, choosing time over money promises a happier life.”
Hershfield, Mogilner & Barnea, People Who Choose Time Over Money Are Happier, http://journals.sagepub.com/doi/abs/10.1177/1948550616649239 (first published 5/25/2016).
Each April, the Gallup organization polls a sample of US adults on their response to this question:
“Do you, personally, or jointly with a spouse, have any money invested in the stock market right now—either in an individual stock, a stock market fund, or in a self-directed 401(k) or IRA?”
This polling shows that many Americans who exited the stock market in the Great Recession have yet to return. Compare the percentage that invested in stocks before and after the 2008 financial crisis:
|All US Adults||62%||54%||-8%|
|Annual Household Income|
FIRE increases investment in equities. Not only do the vast majority of FIRE seekers invest in stocks, that’s where most allocate the bulk of their portfolios. Why? Because over the long run stocks grow wealth fast—and speedy asset growth is a goal of anyone who wants to FIRE.
Society benefits from FIRE’s devotion to equities. In a climate of widespread stock ownership, public companies are more likely to invest in research and the development of new products, which helps to grow the economy. A thriving stock market also encourages investments in new businesses by providing an eventual exit strategy to the heavy risk takers who pour money into venture capital and private equity.
According to some economists, 50 percent of working-age households risk not being able to maintain their current standard of living in retirement. See National Retirement Risk Index. But other experts dispute whether any crisis truly exists at all.
Regardless of whether the US retirement system is a disaster or only slightly underfunded, as more workers pursue FIRE more working-age households will be able to afford retirement. This benefits society. Instead of bailing out underfunded retirements, governments can use tax revenues for other purposes such as better schools, improved health care, and updated infrastructure.
Wealth inequality in the US is pronounced. According to the latest surveys, the top 1 percent of households owns 38.6 percent of private wealth and the top 10 percent owns 77.2 percent, which leaves a measly 22.8 percent of scraps for the lower 90 percent.
Extreme wealth inequality is a curse upon any society. It destabilizes nations by sowing resentment among the vast majority who don’t participate in the economy’s growth. It also gives the rich inordinate power over lawmakers—and as we’ve seen, the rich sometimes decide to become lawmakers themselves.
If adopted on a large scale, FIRE would close the wealth gap because it’s a powerful factory of mass affluence. Instead of buying more consumer goods and paying interest to moneylenders, households on FIRE grow wealth by practicing frugality and investing for the future. What’s more, FIRE perpetuates itself. Each wave of new retirees creates fresh opportunities for up-and-comers.
As it now stands, FIRE is ripe for expansion. Most households earn enough income to reach financial independence. All they lack is the commitment to pursue fiscal responsibility for the long haul. If enough middle-to-upper income households hopped on the FIRE bandwagon, extreme wealth gaps would be a scourge of the past. See Noah Smith, “How to Fix America’s Wealth Inequality: Teach Americans to Be Cheap,” theatlantic.com, published March 12, 2013 (“If America’s middle-class . . . learn[s] to be more cheap, then in 30 years we will see a very different distribution of wealth.”).
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Despite FIRE’s many societal benefits, some argue that early retirement is selfish. According to these naysayers, young retirees are a drag upon society because instead of staying at work and paying taxes, they go off and do their own thing.
This argument is ridiculous. The net loss to society of an early retirement is ZERO. The work of early retirees isn’t left unfinished. Instead, it’s taken over by replacements—and those replacements might even do better jobs. Nor do governments suffer. Whatever income taxes early retirees would have paid are now paid by new hires. If employers pay those hires less, the government recovers any income tax shortfall by taxing the employers’ increased profits from their underpaid workers. Voluntary job exits cost the government nothing.
Doubters of FIRE should try this simple experiment. Grab a bucket, fill it with water, and stick a hand in. Now pull the hand out. The hole that’s left is how much society misses anyone who retires early. The irreplaceable are very few.
Far from being selfish, early retirees are generous. Were they selfish, they would monopolize their job’s income stream by staying at work deep into their 60s or even their 70s. But those who FIRE don’t seek to maximize their earnings. Instead, they give others a chance at success. This process of accelerated renewal benefits many: the retirees themselves, the replacements who move one step up the employment ladder, and, as detailed above, society at large.
Readers: agree or disagree? Does my list overlook any of FIRE’s societal benefits? Please leave your comments below.
Photo of verdant up-and-comers after a forest fire by K. Kendall