This post may contain affiliate links. Please read my disclaimer for more information.
How Suze Orman Got It Right (Mostly)
Suze's recent post on LinkedIn outlines the parts of FIRE she likes, and the ones she disagrees with.
This is the main sticking point for Suze - what does "early" mean?
It's still the wrong question
Suze concludes that those that follow FIRE do not actually mean retirement when we say "early retirement."
Yes and no.
Yes, FIRE is about having the freedom to choose your work. But this is still not a mandate. Her analysis still sets up a false dichotomy.
There may very well be those who chose not to work in the traditional sense.
If you reach financial independence, as defined as the point at which you no longer have to work for money, you now have a choice. You can decide how much you want to work, where you want to work, or if you want to work.
How you define work is even up for debate. Volunteering at a local community shelter? Definitely work, but not work for which you are paid. For those who have FIRE'd, this is not an issue since money is not the primary concern.
That's exactly the point of FIRE. You get to choose. You are the boss. It's both freeing and terrifying at the same time.
How to achieve freedom
Later in the article, Suze says this:
Bingo! Point for Suze.
This is exactly in line with FIRE. You see, each of us could retire today and go "live in a van down by the river." But that's not the goal. As Suze says here, money is a means to an end. Saving money will not ultimately bring you happiness (although I do get a kick out of seeing my net worth grow each month), but it is absolutely needed for security.
How much security do you need? I stand by the 4% rule, but Suze still disagrees.
Except, it does work.
According to the article Safe Withdrawal Rate for Early Retirees by the Mad Fientist, the Safe Withdrawal Rate (SWR) has proven to stand the test of time:
But what about after those 30 years? To answer, let's look at Sequence of Return Risk.
Not about if. About when.
At the risk of completely copying the Mad Fientist article, this point is crucial to the discussion.
It is not simply the average market return that matters, but instead when the market suffers its losses (known as sequence of return risk). If a catastrophic drop in the market occurs within the first ten years of retirement, you may have a problem. It is very possible that the market will not recover quickly enough before funds are drained.
But again, this is not an either/or choice. If you find yourself in a tough spot because the market experiences a dramatic drop, you will still be better prepared than the non-FIRE seeker. You already know how to live frugally. It might be possible to adjust your 4% SWR to a lower level.
In fact, evidence suggests that increasing the retirement horizon from 30 years to 45 years or more does not lower the SWR below 3.5%. Adjusting your SWR can help you weather the tough times.
Or, you can still work
Instead, if you want to find a job to get you through lean times, consider this. All you need to replace is the equivalent of the 4% rule, not the job you left. You may find it easier to replace, say, $40,000 per year than the higher-paying job you had before. Or not - everyone's situation is different.
Our current plan will put us at around a 2% SWR instead of 4%, but does delay retirement a bit. A couple of extra years of working will help bolster our savings and pay off mortgage debt, so we deem it worthwhile.
Do not be dogmatic. Do the calculations yourself instead of relying on anyone (even the "matriarch of personal finance") to tell you what's right.
Last week I was very critical of Suze Orman for her misunderstanding of FIRE / incendiary comments to promote her brand.
But fair is fair. She seems to now understand the concepts of FIRE slightly better than before, and there is much more common ground than I previously thought.
She still misses some of the nuance of FIRE, and unfortunately I believe those nuances can make the difference in how you approach retirement.
Do you think Suze is fully understanding FIRE or is she still missing the major points? Do you think Suze is doing harm or good to the FIRE community with her powerful reach? Let me know in the comments below!