Why aren’t more folks FIRE?

[marko]

If you do that poll, add in pensions.

However, spending can be subject to interpretation. If I buy a vacation home or condo, is that spending or just an additional investment in real estate? Same with car replacements, etc.

Pensions might skew the results as fewer people receive them. May be best to leave off ss as well

 

[pb4uski]

I thought the objective was to see how many people don't need to dip into principal?

Also, if fewer people receive them how will that skew the results?

 

[marko]

I thought the objective was to see how many people don't need to dip into principal?

Also, if fewer people receive them how will that skew the results?

Well, this is all moot because I might get to this in around 2030 or so. Feel free to have at it if you're able.

 

[imjustawarrior]

It comes across to me that those who talk about not dipping into the principal are income/dividend investors. The goal of dipping into principal is the ultimate goal of total return investors. I would really like it if I only had LTCGs when I wanted them instead of dividends including qualified dividends.

 

[ERhoosier]

Back to the OP's question, I've known some folks that don't FIRE because they PLAN want to live the max 'lifestyle' their income supports at the time and fully intend to never retire. Biggest mortgage/home they can get, fancy cars, expensive vacations, etc. Personal choice, but through the years I've seen a few of those hit a hard emotional (& financial) wall when they are forced to stop w@rking (due to personal health, economy, whatever). Sad in a way, but it was their choice.....

 

[TickTock]

I respect that choice. And have little sympathy if the wall is hit.

 

[BackcountryMe]

I post this because, admittedly, in a recent post, I lamented that why aren’t I, and most others with a decent education, basically bonkers, over the top rich, through incredible extremely high paying corporate jobs (ideally laid back, WFH, too). But I wanted to address something I touched upon and why I’m FIRE, or at least on that track, even if I don’t retire until about age 57. I’m FIRE because I’m of more modest income and learned early on the only way to have anything is to invest aggressively, and save a lot. I saved because nothing in my more modest income realm of affordability interested me, and so I didn’t do any over the top spending. Nice homes on lots of land, impressive places overlooking the water, artwork collected by the ultra rich, antique and rare automobiles are all of interest, but way off the radar screen. High end new mass produced junk for the masses never interested me (think gated communities, luxury automobiles, etc) and so I’ve lived modestly, and very comfortably too, I might add. TV with a modest size screen works fine, the house is climate controlled (heat and A/C), I actually enjoy doing the lawn and landscaping, so don’t hire out for that, low end 4 WD vehicles (mine has crank windows and is stick shift) are paid for.

So, where does it go if you aren’t FIRE? When you are starting out it’s rough, it was for me, it is for others, and I pity those trying to purchase a house for the first time in today’s market. (And why it has to be rough starting out is a sore point with me—start the young out with extremely high paying jobs so they can buy houses and stimulate the economy). But, once you have been working for a few decades and hopefully didn’t get scammed by the overpriced cost of child care in this country and/or crater to Junior’s pleas that he needs that expensive college degree—or a degree at all—and your help paying for it—where does it all go? (And another aside, colleges are so expensive because they sell a product that is more of a lifestyle at the higher end and require Junior to pay for it, as well as the parents, grandparents, and that uncle you haven’t spoken to in over 15 years. If they had less bells and whistles, fewer administrators, and based on what Junior alone could pay for, the cost would be far more modest).

But back to the original topic. If you have a decent college degree and a spouse does as well, you both are going to earn the high 5 figures or crack 6 figures in income. In my case, and probably most others who didn’t trade up houses over the years, a monthly payment might be 2k a month, taxes and insurance 10 -12 k, utilities and other expenses put you at maybe 20k. Then you have groceries, entertainment, travel/vacations, etc, but having said that, even after accounting for income taxes, there’s still quite a bit left over.

So, where does it all go? I’m surprised to see some folks even my age living on the edge and worrying about can I ever retire?

And, I’ll add a little story. The most TOXIC co worker my wife ever had was a woman who was handed money from her parents. Used that, and a lot more, to go on vacation all the time, when back immediately got on the work computer to plan the next big escape. I had to listen to why don’t we do this, why don’t we do that, etc. Fortunately, she left for another job within a year, and that ended.

And my wife’s sister and her husband are of modest means (nurse and computers), live in a townhouse, and are traveling to Europe the second time in a year soon and spent a week in Florida a few weeks ago (I cannot recall a vacation of more than 3 or 4 days in a long time). Perhaps this is where it all goes to.

I put the maximum towards retirement, thereby decreasing my available income and still a lot left over. Maybe I’m boring…

I always wondered the same until I found myself in a senior admin position at several companies with both general and specific insights into employee finances. This is what I observed:
1- Most people do not have a "mind for money". While there are tons of folks pursuing FIRE on the internet, it's not easy to capture them in the wild. For most direct deposit = their budget. And their budget = a bunch of finance payments.
2- There's always a reason. Most people have no sense of what to do with money other than spend it. Nice cars, nice vacations, home improvement and services, it adds up quick. Justified or not, there's always a reason. One employee needed an in-service 401k distribution because she was behind on her mortgage. When I sat down to help her budget, I found out her mortgage was only $700. I asked why, when she made $65k, how did she get behind on her mortgage. She said she's been helping her son who's getting his life together and not paying her credit cards or mortgage. What can you say to that?
3- Investing is scary. They don't know how to invest other than in a 401k, and what's worse, most people don't save in their 401k. I've seen many a census, and it's generally only senior management, a few older employees who are maxing out their 401ks. There are a few other folks who save a little (like $50/month), but in general, 401ks are a public policy disaster. I've never observed a non-senior management employee with a large balance.
4 - CRAZY REALIZATION - I had a real eye-opening moment when I had a smart, young manager get upset when I told her our ST disability carrier would be paying her salary upfront before she went on maternity leave. She was actually angry with HR! I asked why and she basically said that the money that flows in each month was her budget (her and her husband make over $250k combined, maybe closer to 300k). When I suggested that she put the amount in a HYS account and just transfer money over every two weeks (after all, it would be more money overall), she just couldn't get her mind around. And this was an accountant too! I asked around and found out that this is not an isolated incident. There are many people who would rather be paid over time because that is simply just how they budget.

My guess is, some kind of pareto-type principle applies here, it's like 80% who have zero clue about money. And another 15% who save a few percent of each paycheck. Probably 5% are super-savers Most people just spend on everything imaginable.

Anyway, I hope that helps.

 

[marko]

Back to the OP's question, I've known some folks that don't FIRE because they PLAN want to live the max 'lifestyle' their income supports at the time and fully intend to never retire.

Your assumption is that in order to RE one has to cut back on their lifestyle. Many of us transitioned from work to RE without skipping a beat in maintaining our way of life.

The key is to develop enough passive income to equal one's work income, which many here have successfully accomplished.

 

[RetiredHappy]

I always wondered the same until I found myself in a senior admin position at several companies with both general and specific insights into employee finances. This is what I observed:
1- Most people do not have a "mind for money". While there are tons of folks pursuing FIRE on the internet, it's not easy to capture them in the wild. For most direct deposit = their budget. And their budget = a bunch of finance payments.
2- There's always a reason. Most people have no sense of what to do with money other than spend it. Nice cars, nice vacations, home improvement and services, it adds up quick. Justified or not, there's always a reason. One employee needed an in-service 401k distribution because she was behind on her mortgage. When I sat down to help her budget, I found out her mortgage was only $700. I asked why, when she made $65k, how did she get behind on her mortgage. She said she's been helping her son who's getting his life together and not paying her credit cards or mortgage. What can you say to that?
3- Investing is scary. They don't know how to invest other than in a 401k, and what's worse, most people don't save in their 401k. I've seen many a census, and it's generally only senior management, a few older employees who are maxing out their 401ks. There are a few other folks who save a little (like $50/month), but in general, 401ks are a public policy disaster. I've never observed a non-senior management employee with a large balance.
4 - CRAZY REALIZATION - I had a real eye-opening moment when I had a smart, young manager get upset when I told her our ST disability carrier would be paying her salary upfront before she went on maternity leave. She was actually angry with HR! I asked why and she basically said that the money that flows in each month was her budget (her and her husband make over $250k combined, maybe closer to 300k). When I suggested that she put the amount in a HYS account and just transfer money over every two weeks (after all, it would be more money overall), she just couldn't get her mind around. And this was an accountant too! I asked around and found out that this is not an isolated incident. There are many people who would rather be paid over time because that is simply just how they budget.

My guess is, some kind of pareto-type principle applies here, it's like 80% who have zero clue about money. And another 15% who save a few percent of each paycheck. Probably 5% are super-savers Most people just spend on everything imaginable.

Anyway, I hope that helps.

I suspect many on this forum are similar in the sense that direct deposit get spent, hence they have large 401K/IRA and little taxable money. I had always maxed out my 401K contribution. I actually have way more taxable money than tax deferred money, and my husband has much higher tax deferred money than taxable money.

 

[BackcountryMe]

I suspect many on this forum are similar in the sense that direct deposit get spent, hence they have large 401K/IRA and little taxable money. I had always maxed out my 401K contribution. I actually have way more taxable money than tax deferred money, and my husband has much higher tax deferred money than taxable money.

Maybe you're right. Maybe direct deposit = budget for most people. For me, I've always managed expenses almost completely independently of my income. The way I live costs X, anything I make above that is savings.

 

[CO-guy]

For me, I've always managed expenses almost completely independently of my income. The way I live costs X, anything I make above that is savings.

Same. I got my first "W-2" employment at 15. From that point forward, the first $2k of reported income each year went into an IRA. As soon as I got a position with 401K benefits, I maxed that out as well at 20% of my income to take full advantage of the employer match.

At no point has my cost of living (i.e., "X") been higher than my income, and so there's (almost) always extra to save and invest. We have cared for both young and old family members where, at times, our household costs have exceeded our income because of it, but those situations have been both temporary and undertaken with that knowledge.

 

[HuskerChica]

So many people spend so much money on kids travel sports/dance teams-thousands, every year, just for junior to decide to quit, and so many get complacent renting instead of actively saving money for a downpayment on a house-and really, no one teaches anyone about investing or FIRE or how to not be a sheep and go against the main stream…..it’s something you have to seek out, learn, study, and then act to make happen. I’ve thought about having the “retirement dinners” but have it for 23-25 year olds and explain things like insurance, investing, etc!

 

[Out of Steam]

I would say many but not most folks on this forum just live off their income. I WOULD say that not many folks on this forum average a 4% withdrawal rate.
Where is RobbieB.........

Between 2021 and 2024, my wife and were withdrawing between 3.8 and 4.5% while waiting to draw Social Security. We should be near the bottom of that range this year, and I expect us to settle in at 3%, which should still allow us to do some postponed home maintenance and "blow that dough" spending.

 

[indiajust]

Simply reflects the cultural context of value, life, and money. If everyone is trying to borrow, it pays to be a lender. Vice versa as well. If everyone was trying to quit early, imagine how high the cost of capital would be, what the risk/reward ratio and pain threshold would rise to. And what would you invest in if no one is working?

All things in moderation... including moderation. Think of the generational cycle of wealth building, maintenance, and then destruction. Three generations to close the circle. Italian inheritors famously lived lives of outrageous profligacy, spent every penny and extended every line of credit. Suicide when the last lira was gone.

Think of the hollywood types that see all wealth as unearned play money. The lead character from Pirates of the Caribbean complained that he could not possibly subsist on a $20k/month wine budget.

Now add international capital flows, with their varying cultural contexts and legal constraints. Africa is decades younger, starved for capital, but has lousy property rights for capital protection. So they suffer.

Add in the genetic predisposition for a bird now rather than 2 later. Smoke em if ya got em makes great sense in a world war, as do the german/french/japanese war brides. Time horizons can compress markedly, with instantaneous time/value of money/life cultural shifts. Context shifts culture, then markets, then investing...

 

[Out of Steam]

I suspect many on this forum are similar in the sense that direct deposit get spent, hence they have large 401K/IRA and little taxable money.

My wife and I have long been in the situation of having solid retirement accounts, but no taxable savings beyond an emergency fund. It's only in the past year that we've decided that our ordinary savings were inadequate and have been increasing them.

 

[gkjapo]

To the original question of this thread: "So, where does it go if you aren’t FIRE?" Too many Americans have way too much junk they accumulate over the years, don't get rid of it, and most of it has no value. Where I live in FL, it seems like there are more storage places than restaurants. They are going up every day all over the county. Clearly, those storage place owners understand the American hoarding dynamic or they wouldn't build. I live in a middle/upper class neighborhood and most open garages are filled to the brim with junk. Then they'll rent a storage unit to clean out the garage for the next purchases of junk. Instead of buying cheap foreign made crap, they should invest that money and live below their means, and then FIRE is attainable.

 

[kilgore]

Well said, Koolau. One defines oneself from the inside out. Far too many allow the reverse to occur--with fairly predictable results, sadly.

Kilgore

 

[gauss]

To the original question of this thread: "So, where does it go if you aren’t FIRE?" Too many Americans have way too much junk they accumulate over the years, don't get rid of it, and most of it has no value. Where I live in FL, it seems like there are more storage places than restaurants. They are going up every day all over the county. Clearly, those storage place owners understand the American hoarding dynamic or they wouldn't build. I live in a middle/upper class neighborhood and most open garages are filled to the brim with junk. Then they'll rent a storage unit to clean out the garage for the next purchases of junk. Instead of buying cheap foreign made crap, they should invest that money and live below their means, and then FIRE is attainable.

I have a sneaking suspicion that some of this is going towards storing stuff that was inherited from late parents or other deceased individuals. You see this as a recurring theme on the TV show Hoarders.

I also suspect that many of the abandoned houses in cities with low property values also arise from this.

 

[Dee]

I post this because, admittedly, in a recent post, I lamented that why aren’t I, and most others with a decent education, basically bonkers, over the top rich, through incredible extremely high paying corporate jobs (ideally laid back, WFH, too). But I wanted to address something I touched upon and why I’m FIRE, or at least on that track, even if I don’t retire until about age 57. I’m FIRE because I’m of more modest income and learned early on the only way to have anything is to invest aggressively, and save a lot. I saved because nothing in my more modest income realm of affordability interested me, and so I didn’t do any over the top spending. Nice homes on lots of land, impressive places overlooking the water, artwork collected by the ultra rich, antique and rare automobiles are all of interest, but way off the radar screen. High end new mass produced junk for the masses never interested me (think gated communities, luxury automobiles, etc) and so I’ve lived modestly, and very comfortably too, I might add. TV with a modest size screen works fine, the house is climate controlled (heat and A/C), I actually enjoy doing the lawn and landscaping, so don’t hire out for that, low end 4 WD vehicles (mine has crank windows and is stick shift) are paid for.

So, where does it go if you aren’t FIRE? When you are starting out it’s rough, it was for me, it is for others, and I pity those trying to purchase a house for the first time in today’s market. (And why it has to be rough starting out is a sore point with me—start the young out with extremely high paying jobs so they can buy houses and stimulate the economy). But, once you have been working for a few decades and hopefully didn’t get scammed by the overpriced cost of child care in this country and/or crater to Junior’s pleas that he needs that expensive college degree—or a degree at all—and your help paying for it—where does it all go? (And another aside, colleges are so expensive because they sell a product that is more of a lifestyle at the higher end and require Junior to pay for it, as well as the parents, grandparents, and that uncle you haven’t spoken to in over 15 years. If they had less bells and whistles, fewer administrators, and based on what Junior alone could pay for, the cost would be far more modest).

But back to the original topic. If you have a decent college degree and a spouse does as well, you both are going to earn the high 5 figures or crack 6 figures in income. In my case, and probably most others who didn’t trade up houses over the years, a monthly payment might be 2k a month, taxes and insurance 10 -12 k, utilities and other expenses put you at maybe 20k. Then you have groceries, entertainment, travel/vacations, etc, but having said that, even after accounting for income taxes, there’s still quite a bit left over.

So, where does it all go? I’m surprised to see some folks even my age living on the edge and worrying about can I ever retire?

And, I’ll add a little story. The most TOXIC co worker my wife ever had was a woman who was handed money from her parents. Used that, and a lot more, to go on vacation all the time, when back immediately got on the work computer to plan the next big escape. I had to listen to why don’t we do this, why don’t we do that, etc. Fortunately, she left for another job within a year, and that ended.

And my wife’s sister and her husband are of modest means (nurse and computers), live in a townhouse, and are traveling to Europe the second time in a year soon and spent a week in Florida a few weeks ago (I cannot recall a vacation of more than 3 or 4 days in a long time). Perhaps this is where it all goes to.

I put the maximum towards retirement, thereby decreasing my available income and still a lot left over. Maybe I’m boring…

If earnings are near six figures, then 10-12k for taxes is not realistic. Minimum fed taxes are 10%, then typically the state is another 2-3%, then FICA (SS & Medicare) are another 8%, misc like unemployment insurance is another 1%. My greatest expense is taxes, far more than my mortgage. If you take a close look at property taxes, utility bills, gas for the car, annual car tags, sales tax at the register, etc, you're paying another 1%. These additional taxes are roughly another 20%. Some of these are surely included in your expenses enumerated, but not all. Before retirement contributions, my take home pay in my final few years working was roughly 70% of gross earnings (at just short of 6 figure income), and I still owed more on April 15. And that's after working with a financial planner to minimize taxes. That's the reason so many young people can't save much.

I recently travelled to Italy in off season for 3 weeks. I planned $10k for the expense, but ended up spending far more for a modest VRBO, inexpensive restaurants, low-end plane tickets, and an unfavorable currency exchange rate. Cost me closer to $16k. The cost of going out for a mid-level restaurant dinner with a friend runs $70-80 on average.

I managed to save via 401Ks, and lived modestly. I'm thankful for being able to work 44 years, but only the last 10 years was I able to save most of it. It cost a lot to live in this country, which is the reason young families with children have a hard time making ends meet. There are a lot of reasons for this, but with $37 trillion in debt, something's gotta give. Mismanagement of our country's finances is the culprit, imo.

 

[MrBojangles]

If earnings are near six figures, then 10-12k for taxes is not realistic. Minimum fed taxes are 10%, then typically the state is another 2-3%, then FICA (SS & Medicare) are another 8%, misc like unemployment insurance is another 1%. My greatest expense is taxes, far more than my mortgage. If you take a close look at property taxes, utility bills, gas for the car, annual car tags, sales tax at the register, etc, you're paying another 1%. These additional taxes are roughly another 20%. Some of these are surely included in your expenses enumerated, but not all. Before retirement contributions, my take home pay in my final few years working was roughly 70% of gross earnings (at just short of 6 figure income), and I still owed more on April 15. And that's after working with a financial planner to minimize taxes. That's the reason so many young people can't save much.

I recently travelled to Italy in off season for 3 weeks. I planned $10k for the expense, but ended up spending far more for a modest VRBO, inexpensive restaurants, low-end plane tickets, and an unfavorable currency exchange rate. Cost me closer to $16k. The cost of going out for a mid-level restaurant dinner with a friend runs $70-80 on average.

I managed to save via 401Ks, and lived modestly. I'm thankful for being able to work 44 years, but only the last 10 years was I able to save most of it. It cost a lot to live in this country, which is the reason young families with children have a hard time making ends meet. There are a lot of reasons for this, but with $37 trillion in debt, something's gotta give. Mismanagement of our country's finances is the culprit, imo.

This is a large reason why we didn’t have kids. At that time with student loans and a ridiculously high cost of childcare, but having student loan payments, inflexible employers when it came to child care, and no viable source of help due to the inability to find help near family members—made it impossible to even consider having kids. Due to the poor economy 15 to 20 years, it took a LONG time for the aforementioned to rectify itself—and then it was too late.

I don’t know how young families make it, to be honest.

And the reality is, if taxes were MUCH lower, families could have a lot more to invest and to GROW, and if taxes were paid on that GROWTH of income, municipalities and govern would be far better off in the long run. But municipalities and governments are not FIRE, the mentality is to spend, or overspend now, even if it means having less later.

I’ve never understood how we can be taxed to death so much in this country and yet most state and local governments are broke. Where does it all go? (I left out the Federal government because that’s beyond being broke with such an immense deficit. We are at a CRITICAL level now when it comes to the deficit, if it isn’t even too late to pay that off).

But back to the original topic, yes, with student loans for young parents, saving for college for offspring, and, worst of all the highway robbery of daycare costs, how is there any money left over to save and GROW over several decades? I only think I’m FIRE because I didn’t have all these childcare expenses, but that was by accident and not intent.

I always thought I would have six kids, not only for the pleasure it might bring, but also, as an excuse as to why I couldn’t make it to work much of the time (kid is sick, baseball game to attend, Girl or Boy Scouts, etc. Employers give you ZERO leniency when it comes to this, and I don’t know how parents do it unless they have retired parents nearby to help out a lot.

How this all worked in the past was that one income paid for it all, and usually the wife provided childcare issues. Now, it takes two incomes to provide what one once did, and that’s starting out at net zero, and not in the hole with student loan debt x 2.

 

[pb4uski]

... The key is to develop enough passive income to equal one's work income, which many here have successfully accomplished.

I'll pick a couple nits. I think a blanket statement like this is dangerous and a true answer is very situational... so it depends.

You just have to have enough money saved so that you can cover your your gap (spending - SS - pension income). Commonly this would be 4% of withdrawals.

First, if someone is saving a high percentage of their net pay and spending a minor percentage of their work income (or take-home pay) then it isn't necessary for have income (passive or otherwise) equal to work income. In my case, when I was working our spending was much less than 100% of my work income, even as measured by take-home pay which was after SS taxes, tax-deferred savings and withholdings for federal and state income taxes, health insurance, etc.

Second, passive income can vary greatly. It will be low if 100% equities (~2% equity dividend yield) and higher if in bonds (actually held to maturity individual bonds or target maturity bond ETFs). And I know we disagree on this, but there is absolutely nothing wrong with periodically dipping into principal if market condition dictate.

 

[Sunset]

To be fair, this forum has an obvious bias and focus toward FIRE. We wouldn't be here otherwise.

"Why aren't more folks FIRE?" assumes that it is everyone's dream. Why aren't more people buying boats? Why don't more people go skiing?

I'd argue that for a lot of people, it never enters their minds. An early retirement never occurred to me until it became my only option. I was enjoying loving my job, making obscene amounts of money.... the whole scene was hysterically funny. ("You're paying me high six figures to do just this?") Why walk away from that!?

......

I also really enjoyed my job, so much that retirement didn't enter my mind until friends told me they were retiring and had enough $$ to retire. After that I realized I could retire, we just had to pick a date.

 

[dukebound85]

I know for me, it is bewildering to see people I work with paid more and older yet still paying off modest student loans and make off hand comments about debt, be it car payments, heloc repayments or cc debt, etc.

The behaviors I practice that seem normal to me are quite foreign to otherwise smart individuals who truly excel at their jobs but not in finances.

For my family, we have our budget set so that our checking accounts (outside of emergency savings) are fairly flat in terms of growth as we plow as much as we can into maxing our 401k, 457, roth, HSA and taxable brokerages. As a result, early retirement seems to be within earshot and is a matter of how balancing what we desire to spend as oppose to the time we have left

 

[marko]

I'll pick a couple nits. I think a blanket statement like this is dangerous and a true answer is very situational... .

I think you overestimate me. I've been posting here once or twice a day for 14 years. I think that by now, most readers here have learned to not take my often imprecise, shoot-from- the-hip posts very seriously.

A character flaw I've had since about 6th grade.