Can anyone retire in their 30s?
When did you start thinking seriously about preparing financially for your retirement? Not yet? Many people never do. One in three adults in the UK have no private pension, and will rely on the state pension in old age. Even those who do start saving usually only get round to it in their 40s and 50s, upping their pension contributions in the hope of retiring in their 60s. But there is a new breed of supersavers who have no intention of waiting that long. They intend to quit before the age of 40 and live a free life.
The Financial Independence, Retire Early (Fire) movement originated in the US, but has spread to the UK, attracting twenty- and thirtysomethings who do not intend to spend 40 years strapped to the corporate machine. Instead, they are practising a combination of extreme saving and rigorous investing to try to build up the “stash” you need – commonly seen as 25 times your annual expenditure – to quit, or, as these millennials put it, to “get Fired”.
Jordan Hall is 24 and a fully paid-up member of the movement, eagerly following blogs from the likes of Mr Money Mustache in the US and the Escape Artist in the UK. He earns £50,000 a year as a commercial manager – well above the national median figure of less than £30,000 – and saves 50% of his salary. He moved to Manchester from London because the cost of living was cheaper, shares a rented flat in the city centre for less than £400 a month and cycles to work.
Hall says it’s a question of being organised, not miserly. “I wouldn’t want to come across as some tight old git who doesn’t socialise,” he insists. He says the choices he makes are simply rational, and mentions using the free coffee machine in his office rather than stopping off for an expensive one at the shop at the entrance. “You would not believe how many people every single day get the coffee downstairs, paying £2.50 or £3. Do that every day for a year and it adds up to quite a significant number. Going out for lunch is another big thing.” Make your own sandwiches, he suggests.
He is putting his money into a lifetime Isa and “passive” tracker funds, which follow the stock market and charge low fees because they are not actively managed. He intends to buy a property in Manchester, rent it out and perhaps work abroad. “I enjoy my job for now, but things can change, and when I’m 30 or 35 I’d like to have the option of thinking: ‘Do you know what? Stuff it. I’m going to go and do something else.’ The goal is not retirement, but freedom to do whatever I want to do.”
Dave Hamilton, who is 41 and lives in south London, retired five years ago after spending 15 years working in data analytics. “I was always convinced there was more to life and more fun to be had in the world of nonwork,” he says. He has paid off his mortgage and, after spending the final seven years of his working life saving £35,000 of his £75,000 salary, has accumulated a pot of £500,000. Properly invested, he says, this should keep him going for the rest of his life. “I have very simple tastes. I don’t buy flashy clothes, cars, computers. My aim wasn’t to retire rich, but to retire with a realistic understanding of what I would need for my living standards to continue.”
He says his family and friends thought he was mad. “‘Why are you doing this?’ they said. ‘You’ve got a good job. You’ll get bored. I reckon you’ll be back in a year.’ I didn’t know what I was going to do, I just knew that the world was full of things I wanted to see and do, and even if I chose to watch daytime TV all week, at least I didn’t have to go into the office at someone else’s beck and call. Now, I have been retired for more than five years. In that time, I’ve travelled a lot, got married, had a child, learned Italian, taken up painting and built a house. I play a lot of tennis and rarely switch on the telly. I spend much less money now because the things I enjoy don’t cost that much.”
Emily (she prefers not to reveal her surname), who is 44 and earns £90,000 a year at a scientific company, is another committed Fire follower. She says she will work at most for another 10 years. That would make her a late retiree by Fire standards, but she wants to be sure she will never have to do paid work again.
She admits to getting carried away now and again, and imposing “shopping bans” where she does not buy anything except food. “You can get really obsessed about not spending any money, and that’s not good for you either,” she says. “The whole point about saving a huge pot of cash is not having to stress about money, so overstressing about saving that pot of cash isn’t doing you any good. You need to find that sweet spot between saving a decent amount and still living a life.”
Mr Money Mustache, AKA Pete Adeney, is the standard-bearer for Fire. A 44-year-old Canadian living in Colorado, he worked for 10 years before packing it all in just after he turned 30. He describes himself as a “mild-mannered retired computer engineer”. “I realised in my mid-20s that I was perfectly content to ride my bike to work and cook my own dinner,” he says. “So I had no interest in spending the relatively high salary that even an average income earner, let alone an engineer, makes here in the US. But I knew that money was a useful thing, so I wanted to put it to good use. I decided that buying my own freedom was probably the best use of that money.”
He divided his life into two phases – the working, earning, saving part and the living, creating, parenting part. “As a young engineer, I remember seeing what a challenge my older colleagues faced with having to divide their attention between their careers and their kids,” he says. “It seemed like they were not able to give their full efforts to either endeavour. So, I decided to focus purely on my work for that period of my life, and then focus on being a dad for the 18 years thereafter. I’m currently on year 13 of the second project.” He and his wife divorced recently, but he says they are “still very close co-parents”.
Through his widely read blog, Adeney has become the philosopher king of the movement, though he admits his ideas were anticipated by earlier practitioners such as Jacob Lund Fisker in his blog Early Retirement Extreme. Adeney calls his version of Fire “Mustachianism”, and says he started his blog in 2011 “out of a sense of exasperation”. “Already six years into retirement at that point, I was amazed that peers with similarly high incomes were not only still stuck working, but were still living almost paycheck to paycheck,” he says. His main tenet is that “happiness is not very expensive” – it is only retail companies and ad agencies that try to persuade you it is.
He tells his adherents, no matter how much they are earning, that they should aim to save and invest half their income. “At this level, your mandatory work career is about 17 years,” he says. “Just for comparison, saving three-quarters puts you at about eight years. It’s not really about early retirement; it’s about starting to live the best life you can right now, with more purpose and less stress. My blog has never really been about money; it is about encouraging humans to live happier and more rational lives.”
Barney Whiter, AKA the Escape Artist, is the best-known UK-based disciple of Mustachianism. Now 48, he retired five years ago after a 20-year career in corporate finance. On his blog, he says he paid off his mortgage when he was 32, built up an investment portfolio and quit his job at the age of 43.
I tell Whiter Mustachianism sometimes sounds like a cult, and to my surprise he agrees. “You’ve got this charismatic leader and these very loyal followers,” he admits. But, he says, those followers are very diverse. “The people who come to the meet-ups are anything but clones. What they have in common is a desire not to be ripped off by ‘the Man’. They don’t subscribe to consumerism.”
Whiter says the Fire movement will get a boost early next year with the release of Travis Shakespeare’s documentary Playing With Fire, which charts the rise of the movement and looks at one couple’s efforts to achieve financial independence. Shakespeare has skin in the game, he says, because he has been practising Fire for the past decade, having previously been “financially illiterate” and still in the red when he turned 40. Discovering Fisker’s and Adeney’s writings (and inheriting some money from his father) saved him. “I told myself: ‘I have a chance now to not end up eating cat food in my old age.’”
Eight years on, he is financially independent, and feels this has allowed his career as a producer and director to flourish. “I began to make bolder choices at work because I knew that if I ‘failed’, I had a reliable backup plan,” he says.
Shakespeare argues that people who free themselves from what he calls “obligatory work” will be a force for good because many of them will use their creativity for socially useful ends, and that they have the capacity to become standard-bearers for anti-consumerism. He traces the idea of a fulfilled, liberated life back to 19th-century writer Henry David Thoreau and his paean to nature, Walden. The Fire movement even has its own version of Thoreau in Elizabeth Willard Thames, AKA Mrs Frugalwoods, who has written a book about opting out of urban life and buying 26 hectares (66 acres) of woodland in rural Vermont, on which she lives with her husband and two daughters. Like Adeney, she hymns the simple, outdoor life unencumbered by excess – a rival American dream to the consumerist one. Both dreams require money – buying 66 acres of rural Vermont complete with house and barn cost the Frugalwoods $389,000.
Does Fire have anything to offer people on lower incomes? Most of the practitioners in the UK who I speak to are sceptical. It is possible to see the whole movement as malign (Whiter wonders whether I am preparing a “hatchet job”), with middle-class people using rising property prices and a buoyant stock market to become a new leisured aristocracy.
I don’t want to do a hatchet job – I can see that financial independence is attractive, and that an anticonsumerism philosophy, even if more libertarian than socially driven, can be positive. But you can’t ignore what one Fire aspirant called the movement’s “dirty little secret”: saving on a low income is hell. What does Fire offer those who are on low-paying or zero hours contracts, can’t escape high rent or childcare costs, and will be lucky to get out of poverty and enjoy leisure on a reasonable income at 70, let alone 40?
“Your question is one that I have also grappled with,” Shakespeare says. “Obviously Fire is not a path for the working poor, and I don’t think anyone is claiming it ever could be. However, once a person earns more than she needs for basic expenses, she is in a position to grow wealth and pursue a greater sense of freedom and agency over her life.” Shakespeare suggests adopting an incremental approach – everyone who has something left over from spending on essentials should save what they can to buy some degree of freedom. “I personally think of Fire less in terms of polarity – ie, you’re either financially independent or not – and more in terms of stages,” he says. “For example, if someone is able to save a month’s salary, he is protected from events like a water heater going out or a car breakdown. If he saves six months, his ability to comfortably manoeuvre, say, a job change is much more powerful. A year’s savings gives a person the ability to take a year off, try to start a business, go back to school, etc. All these markers grant the individual greater power over, for lack of a better phrase, wage slavery. If you’ve got three years of wages in the bank you can make even bolder decisions.”
“My favourite debate!” says Whiter. “The tools and techniques of Fire are needed more by low-income people – to avoid them being fucked over by the system.” In a blogpost entitled Financial Independence Is for Everyone, he tackles the subject head on: “If you’re not a high earner, it’s even more important not to piss your money away on ridiculous spending. Living paycheck to paycheck leaves people at the bottom of society prone to disaster. They, more than anyone, need the techniques of financial independence to build a safety net and gain options to improve their life.”
In another post last month, Whiter featured his friend Ken Okoroafor, who arrived in the UK from Nigeria at the age of 14, speaking poor English, lived in a bedsit and encountered daily racism. Twenty years later, he too is financially independent. If Okoroafor could do it, suggested Whiter, anyone could. But he went on to make a more general point – that everyone, whatever their circumstances, can do something to improve their situation. “Sometimes, people tell me that not everyone can get to financial independence,” he writes. “I file that information under ‘N’ for ‘No shit, Sherlock’. Not everyone can run a marathon in three hours either. But more people would be able to run five or 10 miles if they put down the doughnuts and went for a run.”
I did find some people earning close to the national median who had retired early or were hoping to quit or reduce their hours of paid work. Ilyas (not his real name), a 35-year-old lecturer in the north of England who earns about £30,000 a year, believes it is possible to plan for Fire on that income. He has a wife – Ilyas calls her the “queen of frugality” – and two children, but has already paid off his mortgage, is saving 60% of his income and plans to go part-time within the next four years. He hopes to use his semi-retirement to write fiction. A Muslim, he isn’t permitted to use interest-bearing bank accounts, which makes reaching this position even more remarkable.
Greg and Frankie Owens, both 43 and recently retired, approached their decision to leave the world of work less systematically than many in the Fire community. “We started formulating plans to retire about seven years ago,” says Frankie. “We had our children young – our youngest [of four] was 18 this year – and knew they would be leaving home at this age. I was a teacher and was working very hard, and thinking about retiring early was a way to keep going.” They saved hard, paid down their mortgage, lived frugally, never owned a car.
Greg had a brain haemorrhage last year – which was the trigger to put their plan into action. The Owens were keen on boating and, when Greg recovered, they sold their house in Bradford and bought a 55ft narrowboat. They now cruise the canals of Yorkshire, moving on every couple of weeks to avoid mooring fees. They have a budget of about £750 a month, which they admit is tight, but say that having to forgo a few luxuries is worth it in exchange for the freedom.
I ask them what their children think of their nomadic lifestyle. “They are somewhere between amused and despairing,” says Frankie, “but I think they are secretly quite pleased. They understand that we want to do something for us and that we worked hard for a long time.” Greg, who used to be a copywriter, says having their first child at 19 meant they were never “young and free”, so they have chosen freedom now. A perfect example of living your life backwards, though they accept that in a couple of decades, when they take their occupational and state pensions, they may come back on to dry land and invest in a flat. Until then, they just hope to stay afloat.
Financial advisers, who may feel threatened by the Fire community’s capacity for independent action, are largely dismissive of its approach. “People need to realise that we can’t have our cake and eat it,” Martin Stewart, director of the financial advice firm London Money, told the Daily Telegraph in September. “Sure, save half your salary, eat the roadkill, bin-dip, raid the charity shops, recycle everything, just stay in and actually read the T&Cs of things rather than waste money going out. From this you will create lots of savings, but sadly very few memories.”
“I hate it,” the US personal finance guru Suze Orman said last month when asked about Fire on the Afford Anything podcast. “As you get older, things happen. You’re hit by a car, you fall down on the ice, you get sick, you get cancer. Things happen, and if you don’t have a significant amount of money, what are you going to do? You are going to burn up alive.” By significant amount of money she didn’t mean $250,000 (£195,000) or even a million. “Two million is nothing,” she said. “It’s nothing. It’s pennies in today’s world.” She thought $10m might just about do it.
“This thinking is completely backwards,” Adeney countered in a blogpost. “Money will not cure your fear, as the megamillionaire Suze proves so clearly. If you are afraid of what might happen in the future, you have a mental problem rather than a financial problem.”
He ended his counterblast with what sounded like a manifesto. Fire, he said, is “a system of living your best life in all ways rather than just the financial, based on our best understanding of human nature, with a bit of math and science behind it … It’s always open for modification or improvement, but like science itself, there’s nothing for a rational person to hate. Who hates learning? The reason it has spread to millions of people is that it works. People try it, they like the results, so they share it with their friends, and the cycle repeats. There’s no stopping an idea or a movement like that.”