DIRE-Movement
00:00:00.000 | Hello, everybody, it's Sam from Financial Samurai. I hope everybody is having a wonderful, wonderful
00:00:05.520 | holiday season. I am excited about this podcast because I want to introduce a new movement to the
00:00:12.320 | world, and that is the DIRE movement. D-I-R-E. Ten years ago, when I first started writing about
00:00:20.320 | achieving financial independence early in 2009, I never thought the FIRE movement would reach such
00:00:26.800 | a huge level of interest a decade later. After all, only misfits decide to aggressively forego
00:00:33.040 | material pleasures, save 50% or more of their incomes, and retire from well-paying jobs in
00:00:39.440 | their 30s and 40s. Back in 2009, the lifestyle design movement was all the rage because people
00:00:46.000 | were getting blown out of their jobs left and right. Some people went back to graduate school
00:00:50.560 | to save face. Others decided to start lifestyle businesses after getting laid off. I, for one,
00:00:56.160 | figured there was a good chance my head would also roll, which is one of the reasons why I started
00:01:00.560 | Financial Samurai that summer. And thanks to a raging bull market that ensued, which is pretty
00:01:06.160 | much all luck, life turned out just fine and the FIRE movement picked up steam. And today, I'm here
00:01:13.280 | to say we are at peak FIRE right now, perhaps similar to peak cryptocurrencies reached in
00:01:19.680 | December 2017. And unfortunately, when you're at the peak, there's usually nowhere to go but down.
00:01:26.320 | You know we're at peak FIRE because the mass media has latched onto the FIRE movement like a
00:01:31.440 | rabid dog which hasn't eaten in weeks. Not a day goes by where there isn't a new story about
00:01:36.960 | someone leaving a job early and how they did it. And as an investor, we know that by the time the
00:01:42.800 | big media gets hold, it's often too late to invest. Rather, it's probably a more opportune time to
00:01:49.600 | sell. Just think about Uber and Lyft finally filing to IPO in 2019. After all these years,
00:01:56.480 | all the easy money has already been made as private companies, they're now finally hoping to
00:02:01.440 | finally cash out to public investors. And I'm sure they will, and they're going to do a wonderfully
00:02:06.320 | good job as a result. My job as an investor, and as a personal finance writer, is to do my best to
00:02:12.800 | forecast the future. Writing about and talking about what may happen is infinitely more interesting
00:02:19.520 | and more risky than writing about the past. Forecasting the future challenges your mind,
00:02:25.520 | and could make you a rich hero or a broke fool with egg on your face. But as with everything
00:02:31.200 | in life, no risk, no reward. Today, my crystal ball is saying the FIRE movement is in for a rude
00:02:38.320 | awakening. On the one hand, there is growing disdain against the FIRE movement from the
00:02:43.360 | majority of Americans who will never reach financial independence, with the median household
00:02:47.920 | income going nowhere over the past 10 years, and actually over the past 20 years, it's been hard
00:02:53.440 | for middle class Americans to get ahead. Further, the average American has a pitiful amount saved
00:02:58.560 | in their retirement accounts, less than $20,000. When you've been spinning your wheels for so long,
00:03:05.760 | all this brouhaha about people retiring early to live their fabulous lives in their mom's basement
00:03:11.280 | while posting fake Instagram curated pictures about their amazing lives starts to get
00:03:16.800 | mighty annoying after a while. And this annoyance turns into rage, and a new movement is born.
00:03:22.480 | And on the other side are FIRE practitioners, who are finding out that not all is sunshine and
00:03:28.560 | rainbows once they've quit a stable job with wonderful benefits. They're finding out, hey,
00:03:33.760 | quitting a job at the top of the market and then it goes down 10, 20, 30% might not be a good thing
00:03:40.320 | as that income that you're relying on goes away. So with a slowdown in the economy on the horizon,
00:03:46.320 | things are just not looking good. The Fed is on a mission to suffocate the economy with more rate
00:03:52.000 | hikes. The current administration wants to further escalate trade wars because of alpha male ego.
00:03:57.760 | Do we really need to arrest the CFO of Huawei after you guys just met and said hey, we're going
00:04:04.960 | to talk about good trade de-escalation policies? No matter how adversely it affects the stock market,
00:04:10.800 | it seems like hey, we must conquer you and win. Meanwhile, the housing market has gone past its
00:04:16.640 | peak, the peak was probably in the fourth quarter of 2017 or first quarter of 2018,
00:04:22.000 | and will likely continue to be in the doldrums for the next several years.
00:04:25.280 | So when a downturn hits, if it hasn't already, it's an inevitability that FIRE followers will
00:04:31.920 | be forced to go back to work and earn their retirements the old-fashioned way. Some might
00:04:37.520 | even say FIRE during a recession stands for Foolish Idealist Returns to Employer. However,
00:04:44.880 | as long as we keep the FIRE acronym alive, we give hope to its original meaning, and when all is lost
00:04:51.360 | but false hope persists, people get into further trouble. Therefore, let's eliminate FIRE entirely
00:04:58.240 | from our psyche so that we can finally make a change. Nothing happens until you're feeling the
00:05:04.720 | pain. So let me introduce the newest retirement movement to the world. DIRE. D-I-R-E. As a realist
00:05:12.880 | who sees the future, it is all but a certainty the DIRE movement will supplant the FIRE movement
00:05:18.400 | as the retirement path of choice. Let's find out why by going through the letters one by one.
00:05:24.560 | D is for delay. For most people, delaying retirement due to the rapid rise in costs for
00:05:30.560 | housing, health care, and education is the only logical way to survive. Look, the median household
00:05:37.040 | income is $61,000. That's about the same as it was 20 years ago. Meanwhile, median home prices
00:05:42.960 | in America have risen from about $177,000 to $222,000. That's quite a big jump for a no-income
00:05:51.360 | change during the same time period. Housing is simply less affordable, and in some cities,
00:05:56.160 | real estate prices have appreciated so quickly that most residents have no hope of ever owning.
00:06:01.840 | Health care costs are out of control, especially if you plan to carry the entire monthly premium
00:06:07.280 | burden yourself. The average total health care cost is now about $20,000 a year, subsidized
00:06:13.200 | mostly by the employer. Once you're out of a job, the entire $20,000 burden falls on you,
00:06:19.360 | unless you have a low enough income to qualify for subsidies. So for example, a family of three,
00:06:26.000 | I pay $1,760 a month, or $21,120 a year for a platinum plan. Does that sound reasonable to you?
00:06:34.880 | Hell no! None of us are overweight, none of us have chronic illnesses, and we're still
00:06:39.120 | paying out the nose. Now let's look at education, specifically college tuition has grown unbearable
00:06:45.760 | with annual tuition increases averaging 5 to 7% a year, regardless of whether it's a recession or
00:06:51.280 | not. That's a doubling of tuition every 10 to 15 years, folks. Good luck retiring early if you've
00:06:57.120 | got to pay $50,000 to $100,000 a year for tuition alone for four or five years for even just a
00:07:02.720 | single child. And for parents with kids, you know, bottom line, retiring early will be all but a pipe
00:07:09.440 | dream. There will always be at least one parent working full time to earn a steady income and have
00:07:15.280 | subsidized health care. The non-working parent can shout from the top of their lungs they are fire as
00:07:21.280 | loud as they want, but nobody will buy it. Being a stay at home dad or mom is nothing to be shamed
00:07:27.280 | about, folks. Yet for the man especially, it's really interesting. He can't seem to accept his
00:07:33.040 | new reality of living off his wife's income. Grow up. I is for inherit. With no hope of retiring
00:07:42.240 | early, many Americans are counting on inheritance as a retirement strategy. With 25 years old as the
00:07:49.040 | median age when parents had kids in the 70s, and the median life expectancy currently hovering
00:07:54.240 | around 80, the average American will likely have to wait until around 65 to inherit anything.
00:07:59.520 | Today, the average age when women start to have children is 28. Therefore, future generations
00:08:05.280 | will likely have to wait even longer to inherit anything, all else being equal. Well, not all is
00:08:11.920 | bad news on the inheritance front. However, with the average net worth in America rising to almost
00:08:16.800 | 700,000, folks, that's a lot. Don't debate me here. It's the truth. Parents are doing more than ever
00:08:23.840 | before to help their adult children thrive in adulthood. After all, baby boomers have
00:08:29.280 | benefited the most from the longest bull market in history. Every single one of my immediate
00:08:34.080 | neighbors in San Francisco has parents who have either bought them their house or are letting
00:08:38.000 | them live in one of their multiple properties rent-free. When I first moved into my house in 2014,
00:08:43.840 | I met my neighbor's son, who at the time was 24 years old and a senior at UC Davis. When he
00:08:50.000 | graduated in 2015, he returned home and he still hasn't left. That's a long time, folks. Can you
00:08:57.280 | imagine relying on inheritance as a retirement strategy? You might never, ever be able to start
00:09:03.360 | a family, create your own sense of independence, and make your great contribution to society.
00:09:09.200 | Clearly, one side effect of Dyer is a surge in depression.
00:09:14.080 | R is for retire. Forget about retiring in your 30s, 40s, 50s, or even 60s. With Dyer, we're talking
00:09:23.520 | about retiring in your 70s now, baby. We're living longer. This means we've got to work longer to
00:09:29.360 | support ourselves. Once upon a time, people would retire at around 60, 65, and then die within 5
00:09:36.560 | years. We're going to return to that phenomenon of that bygone era. The earliest one can collect
00:09:43.040 | Social Security will rise from 62 to at least 65 if the government wants to make the program whole.
00:09:48.320 | After all, the government runs a massive budget deficit every year. With little to no social
00:09:54.320 | safety net, achieving a comfortable retirement will all depend on you. With the trend towards
00:10:04.160 | retiring in your 70s or older, retirement life simply won't be as fun. It'll be much harder to
00:10:10.000 | play leisurely sports like golf or tennis when your back is always in pain. There'll be no way
00:10:15.680 | to ever climb the stairs of Santorini, Greece when your knees don't have cartilage. Donkey Ride it
00:10:21.200 | is. The only thing left you can do in this world of retirement is watch tons of TV and surf the
00:10:27.280 | internet. At least with the popularity of food delivery apps, you will no longer have to go out
00:10:32.000 | of the house to eat a nice rubber chicken dinner. Staying glued to a lounge chair is what the new
00:10:38.160 | retirement reality will be like. Finally, E is for expire. Here's where the Dyer movement will
00:10:46.400 | be at its saddest. After a long life of working because you had to, not because you wanted to,
00:10:51.840 | reluctant Dyer followers will look back on their lives with regret. They will curse the day they
00:10:58.080 | ever heard about fire, because otherwise they would never have taken the leap of faith at the
00:11:02.640 | top of the market and fallen splat on their faces. Instead of being the hare, they would have won the
00:11:08.720 | race as the tortoise, steadily saving and investing their income during their highest income earning
00:11:14.720 | years with much less stress and worry. They wouldn't have had to embarrassingly gone back
00:11:20.720 | to work with their tails between their legs and watch old colleagues leapfrog them to now be their
00:11:25.680 | bosses. They wouldn't have had needed to go through multiple mental breakdowns and countless nights
00:11:31.840 | of self-doubt because they couldn't replace their day job income with freelance income or
00:11:36.800 | entrepreneurial income to take care of their families. Contrast reluctant Dyer followers
00:11:42.160 | with Dyer enthusiasts. Dyer enthusiasts see the fire movement is in trouble and decide to stay
00:11:50.480 | the course. Instead of retiring in their 30s or 40s, they decide to maximize their highest income
00:11:55.920 | earning years and retire with multiple millions of dollars in their 50s. Given everyone is living
00:12:01.760 | longer, retiring in your 50s is like retiring in your 40s of yesteryear. Of course, they also don't
00:12:08.800 | just stay miserable at their jobs. Dyer enthusiasts proactively search for better opportunities in
00:12:15.440 | order to keep on working. A Dyer enthusiast doesn't scoff at families who believe they need
00:12:21.360 | $5 million in an after-tax portfolio to retire early, like so many folks did. Dyer enthusiasts
00:12:30.880 | realize that runaway inflation, globalization, and structurally lower investment returns in the
00:12:37.280 | future will wreak havoc on living the early retirement dream. Therefore, instead of getting
00:12:43.280 | to rage about why the world's round peg doesn't fit into their square hole, they simply logically
00:12:50.000 | adapt and work longer. So look, the Dyer movement may sound bad, but I think it's pretty good.
00:12:57.120 | Unless you're willing to work more than 40 hours a week, build some side hustle income,
00:13:02.320 | generate some stable passive income, save aggressively, and continuously make shrewd
00:13:06.560 | investments for the long term, you have no chance of fire. And if you don't do all these things,
00:13:13.600 | and you still decide to retire early, you will likely be screwed and join the reluctant Dyer
00:13:20.160 | camp. Yes, I know, some of you will decide to live like poppers and either delay or not have kids to
00:13:25.600 | keep expenses to a minimum to hold on to your fire dreams. More power to you, freedom is priceless.
00:13:31.440 | However, for the majority of you who want to live more conventional lifestyles, it's more important
00:13:36.960 | than ever to follow some key financial principles to increase your chances for financial independence.
00:13:41.520 | And if you're wise, you will embrace the realities of Dyer as the world heads south.
00:13:48.400 | Giving priority to caring for your family and delaying a super early retirement is the responsible
00:13:55.280 | thing to do. Don't let fire FOMO foster irrational decision making. Early retirement is selfish,
00:14:02.000 | no matter how you look at it, especially if you have dependents. Yes, if the economy gets really
00:14:08.400 | bad, there will be more face saving by folks who say they are fire instead of admitting they got
00:14:15.280 | laid off and are drowning in a sea of despair. Just recognize, not all is what it seems on the
00:14:21.040 | internet or in podcast land. If your passive income cannot comfortably cover your best life's
00:14:27.040 | living expenses, if you have to drastically cut your lifestyle in order to be fire, you're not
00:14:33.200 | fire, you're just fooling yourself. It's time for the Dyer movement to rise up folks. I'm personally
00:14:39.920 | looking to head back to work, but I'm afraid after almost 7 years of unemployment, nobody will hire
00:14:46.160 | my Dyer self. Look, I know I sound like a Debbie Downer a little bit, talking about what it was
00:14:52.560 | like during the previous peak in 2007, reflecting on the 2008-2009 financial crisis, talking about
00:15:00.080 | what if you buy a property at the top of the market, you know, these things, they're not nice
00:15:05.680 | to hear. But look, you've got to listen to it. Because if you're part of the financial samurai
00:15:10.000 | community, you've got to see both sides of the equation. There is just too much damn cheerleading
00:15:15.280 | going on right now by folks who did not have enough skin in the game during the last downturn.
00:15:19.760 | They have no idea folks, how bad things can get. And if things get really bad, please, please
00:15:26.560 | focus on the fundamentals of personal finance. And don't lose your head and think you're going to
00:15:30.720 | retire early and do this, this and that. Look, life is long folks. Save, invest, take care of
00:15:36.560 | your family, love each other. And thanks for listening.