Boomers on FIRE

How the FIRE movement has shifted in favor of Boomers

Photo by Mohamed Nohassi on Unsplash

The title may sound like a bunch of older Americans in the Western part of the country fleeing current forest fires — but this blog post is about a different kind of F-I-R-E: “Financial Independence, Retire Early.” The FIRE movement gained traction with the under-50 set as a way to retire as early as possible by accumulating enough savings to fund a potential 50-year retirement. But the pandemic has cooled the interest in FIRE in one way and created a new class of adherents in another way.

One of the tenets often viewed as a cornerstone of retirement planning and part of the FIRE movement is the “4 percent rule.” Here is a simple explanation of the rule from investment management firm Charles Schwab:

You add up all of your investments, and withdraw 4% of that total during your first year of retirement. In subsequent years, you adjust the dollar amount you withdraw to account for inflation. By following this formula, you should have a very high probability of not outliving your money during a 30-year retirement according to the rule.

This rule seems quite adequate for a 30-year retirement but much riskier for a 50-year retirement. According to mutual funds giant Vanguard, applying the 4 percent rule results in an 18 percent chance of running out of…