Badass vs Dumbass
Master your Financial Kung Fu to be one and not the other.
Go to Sifu’s Notebook for FIRE and Longevity: Mastering Financial Independence in a Longer Life
Primer: Who are Sifu & Ronin
Episode 31: Ronin Gets A+
Ronin: Freaking out here, Sifu! I’m learning about how life expectancy is increasing like crazy. People used to retire and 65 and then die at 75, give or take. Now, it seems many are living until their 80s and 90s and beyond!
Live long and prosper
Spock, Star Trek
Sifu: Ronin, this is good, no?
Ronin: Boss, if I retire early, say at 50 and then live to 100, how the hell am I supposed to live a lavish life on my retirement savings for 50 years? I don’t think my FIRE plan supports anything like this. Please tell me I’m wrong, boss!
Sifu: Sit down before you have a stroke, my man. Slow down and just breathe for a minute…
Ronin: Ok ok, I hope you have some secret sauce to solve this. I’m worried my FIRE dream is just a dream, with no way of becoming reality.
1. The New Reality: Retirement Lasts Longer
Sifu: It is true: we are living longer these days. Retirement def could last 40 to 50 years. That just means your early retirement plan might need a little… adjustment.
Ronin: Don’t get me wrong – I love the idea of not working for 50 years. That’s all good, bro!
Sifu: 50 years of freedom is amazing. However, your money must last as long as you do.
Ronin: Exactly my concern. I’ll keep this body lean and mean for as long as I can, but what about the money? No way it’s going to keep up with me!
Sifu: Not going to lie. Living that long will bring more expenses, so we will def have to sharpen our pencils and get the math right.
Ronin: I have sharp pencils and solar powered calculators at my disposal, if that’s what it takes, boss. Let’s do some mathemagic!
Sifu: Hahaha – let’s go!
2. The Health Factor: Longer Life = Higher Costs
Sifu: Let’s start with the bad news. As you grow older, your healthcare needs will increase. It’s inevitable.
Ronin: Oh, fantastic. So, not only do I have to survive on my savings, but I also get the joy of medical bills? Hey wait! With tech innovation, maybe we’ll have dollar store dentures by the time I need them.
Sifu: Ha! You never know, #1. Health costs are a major factor. You’ll need to account for rising healthcare expenses—long-term care, medical emergencies…
Ronin: Oh, you mean like the emergency I’ll have when I see my medical bill and go into shock?
Sifu: Perhaps. But it’s important to plan for this. Don’t forget about healthcare inflation.
Ronin: Healthcare inflation? That’s just a fancy way of saying, “We’ll charge you more for the same thing next year.” Why do I have this feeling that you’re going to give me lots of “bad new” today? FML, bro!
Sifu: When we finish today, I’ll let you decide if it’s all bad. Jury’s still out, #1.
Ronin: Aight, but the punch line better not be “Your Dream Is Officially Dead, Sucker”.
Sifu: Ye of so little faith…
3. Revisiting the 4% Rule
Sifu: Now, the 4% rule, while useful, may not be enough for longer retirements. You may need to consider withdrawing less—perhaps 3%.
Ronin: Oh, so now I’m rationing my money like it’s the apocalypse? “Only 3% today, Ronin. Gotta make it last in case the zombies show up.”
Sifu: It’s about sustainability. If you withdraw too much, your savings will run out.
Ronin: So, if I live that long, I’m probably gonna be a frugal sumbitch and head into LEAN FIRE. Def not FAT FIRE.
Sifu: Dunno, #1. Spoiler alert – it’s up to you. Again, let’s take in all the facts before we jump to conclusions. Whether it’s 3% or 4%, think of it as financial discipline that you’re employing. Once you have the right mindset, possibilities open up.
Ronin: Ok boss. No knockout punch yet …
4. Sustainable Spending: Adjusting Your Lifestyle
Sifu: Speaking of spending, you’ll need to ensure your lifestyle can last for decades. Sustainable spending is key.
Ronin: Sustainable spending? So, what you’re saying is that I shouldn’t buy a new car every 5 years once I’m retired?
Sifu: You’ll def need to be more mindful of your purchases, especially the big ones.
Ronin: Oh beautiful – I’ll just practice saying “No” to myself in the mirror every morning.
Sifu: Stay with me, #1. It ain’t over ‘til the fat lady sings.
Ronin: Sifu, can you still say that these days? Hee-hee.
5. Flexibility in Retirement
Sifu: Who’s going to fuck with Sifu? I said it … there. Hahaha! Next, flexibility is essential. You may need to adjust your plan as life changes.
Ronin: Adjust? So, if things get tight, I’ll just move into a yurt and start a worm farm. Sounds like a plan.
Sifu: You may need to consider part-time work, side hustles, or other income streams to supplement your savings.
Ronin: Oh, great. It looks like I’m going to keep pursuing my side gigs as MC Ronin and bus boy at that poutine joint. If that’s not enough, guess I’ll be schlepping people to the airport with Uber.
Sifu: Flexibility will ensure your retirement doesn’t crumble under unexpected pressures.
Ronin: Gotcha. Will keep these hustles in my back pocket, just in case …
6. Avoiding Big-Ticket Purchases
Sifu: Now, you might want to avoid big-ticket purchases that can wreck your retirement.
Ronin: Whoa! So there goes my plan for that cool summer castle getaway in Spain. Dang it!
Sifu: Large, unnecessary purchases can destroy your financial plan. That said, if you can turn that castle into a money-maker, then you never know. Maybe you can pair up with your entrepreneurial genius cousin Cletus and find a way to make that profitable. Anything is possible.
Ronin: Epic idea, boss! I’m down with that. Cletus will be stoked too.
Sifu: I like the positivity, #1.
7. Investing for the Long Haul
Sifu: Now, with longer life expectancies, you can’t afford to play it too safe. Your money still needs to grow in retirement.
Ronin: Oh good, because the stock market never gives me heart palpitations. Investing for 50 years while avoiding anxiety attacks will be a challenge!
Sifu: It’s about balance. You need growth, but with a level of risk you can handle. Diversify, Ronin. Stocks, bonds, maybe even real estate. Spread out the risk. Armed with proven long term strategies, this should not be a huge challenge. Anxiety is for the weak, #1. Are you weak?
Ronin: My risk tolerance is about as high as my tolerance for cold tofu—low. Very low.
Sifu: Yeah, I get that. It takes time to build up tolerance to the market. With time, you’ll find the balance that works for you and still meet your goals. Trust.
Ronin: Roger that, boss.
Sifu: Here’s some secret sauce for you, #1. Once retired, if you’re able to live off of your passive income, and never touch the principal amount invested, then it won’t matter if you die at 100 or 150. Feel that, bro?
Ronin: Yo dude! For real?
Sifu: 100% real. The key is to make enough passive income with your solid investment plan. Coupled with a disciplined approach to spending, it’s def possible.
Ronin: I can’t believe it, but I’m starting to think it’s possible again … maybe.
8. Staying Active and Healthy
Sifu: Finally, maintaining your health is crucial. Staying active will help keep medical costs down.
Ronin: So, running away from the stock market every time it crashes counts as exercise, right?
Sifu: Ha! You jest, #1. Staying fit will help you live longer and reduce the risk of expensive health problems.
Ronin: Oh you know I got this down, boss. Health and fitness is what I do for fun, so I’m not about to give that up any time soon. Gotta be healthy to take maximum advantage of early retirement. Am I right, bossman?
Sifu: Yes sir, Muscle Man. You should def enjoy your retirement, not just survive it. Maybe even follow Bryan Johnson and his “Don’t Die” movement. When you’re retired and can stay healthy and wealthy, you’ll probably want to live forever.
My mission in life is not merely to survive, but to thrive; and to do so with some passion, some compassion, some humor, and some style.
Maya Angelou
Ronin: Hey, why not?
Sifu: So, after all this information, how do you feel, #1? Is it still all bad news or do you think your FIRE dreams can be sustained?
Ronin: Actually, I am still positive about it. It looks like I might have to double down on my discipline though. Need to keep an eagle eye on how I spend my money. Got to be thoughtful. And even more importantly, keep ploughing my free cash into my investments. Those seem to be the keys to the FIRE Kingdom.
Sifu: A+. Couldn’t have said it better myself.
Ronin: I feel so good, lunch is on me today, boss! Loaded poutine sound good? Let’s enjoy that 50% off employee discount.
Sifu: Ronin, I knew there was a genius hidden beneath that dumbass exterior of yours.
Ronin: Thank you … I think. Poutine, daddy’s coming!
Sifu’s Notebook
FIRE and Longevity: Mastering Financial Independence in a Longer Life
We’re living longer, healthier lives, and while that’s great news, it brings new challenges for those in the Financial Independence, Retire Early (FIRE) movement. FIRE is about building enough wealth early to retire decades before the traditional retirement age. However, as life expectancy increases, many FIRE enthusiasts find their retirement might last longer than anticipated.
1. The New Reality: Retirement Lasts Longer
- What It Means: In the past, retiring at 60 meant planning for around 20-25 years. But now, with many living into their 90s or beyond, early retirees could be facing 40-50 years of retirement.
- Example: If you retire at 40 and live to 90, that’s 50 years of retirement, which means a much higher FIRE number to account for longer living expenses and increased uncertainty.
2. The Health Factor: Longer Life = Higher Costs
- What It Means: As we age, healthcare needs increase, and so do the costs. Healthcare inflation is real, and planning for future medical expenses is critical.
- Example: A FIRE enthusiast who retires at 40 may be healthy for the first 20 years, but by 70 or 80, they could face hefty medical bills, including long-term care. Even in countries with solid healthcare systems, private treatments or emergencies can drain savings.
3. Revisiting the 4% Rule
- What It Means: The 4% rule is a staple of FIRE planning, suggesting that withdrawing 4% of your savings annually should sustain you through retirement. However, it was designed for a 30-year retirement, not a 40-50 year one.
- Example: A retiree following the 4% rule may run out of money if they live beyond 30 years. Financial experts now recommend a lower withdrawal rate, like 3%, which means saving more upfront or adjusting spending habits.
4. Sustainable Spending: Adjusting Your Lifestyle
- What It Means: Achieving FIRE isn’t just about hitting a savings target; it’s about maintaining a sustainable lifestyle. The longer the retirement, the more crucial it is to manage spending carefully.
- Example: A FIRE retiree who spends lavishly in the first 20 years may find themselves struggling to maintain the same lifestyle 30 years later. Avoiding lifestyle creep and focusing on sustainable living helps ensure long-term financial stability.
5. Flexibility in Retirement
- What It Means: Retirement should offer freedom, but longer life expectancies mean that flexibility is key. You may need to adapt your spending, withdrawal rates, or even return to work in some capacity.
- Example: A retiree might pick up part-time work or a side hustle at age 60 to supplement their savings, avoiding the need to dip too heavily into their principal.
6. Avoiding Big-Ticket Purchases
- What It Means: Long retirements mean that large, one-time expenses can have a more significant impact. It’s essential to be cautious with major purchases.
- Example: Instead of splurging on a luxury car or vacation home in the first 10 years of retirement, spreading out or avoiding large expenses helps keep your financial plan on track.
7. Investing for the Long Haul
- What It Means: With a longer life comes the need for a more long-term investment strategy. Retiring early doesn’t mean you can afford to go conservative too soon. Your money needs to keep growing.
- Tip: Once retired, if you can live off of your passive income, and never touch the principal amount invested, it won’t matter how long you live.
- Example: A FIRE retiree who shifts to a conservative portfolio of bonds at age 40 may lose out on significant growth over the next 50 years. Maintaining a diversified portfolio with stocks and other growth assets ensures your wealth continues to build.
8. Staying Active and Healthy
- What It Means: A healthy lifestyle can help reduce healthcare costs and improve quality of life during retirement. Prioritizing health can stretch your retirement savings.
- Example: A retiree invests in preventive health measures, such as regular exercise and check-ups, to avoid costly medical expenses down the road.
