On an unsuspecting Fall afternoon in 2018, an icy wind whipped through the air and sent shockwaves through the FIRE community.
It is a day that will live on in infamy.
That was the day Paula Pant asked Suze Orman if she was familiar with the FIRE movement and Suze broke our financially independent hearts.
Here is a link to the full 2018 interview with Suze Orman if you’d like to hear her words right from the source: https://affordanything.com/153-hate-fire-movement-suze-orman/
Personally, I haven’t seen much of Suze Orman on TV. Most of my knowledge of her has come from Kristen Wiig on SNL.
Suze is known for having some strong opinions, so I guess I shouldn’t be too surprised that the FIRE community made her naughty list.
As a dual card-carrying member of both FIRE and the LGBT community, I’m very familiar with hate.
Most of us gays grew up with it as kids. It was an American tradition and regular part of our lives, like breakfast cereal, Saturday morning cartoons, and voguing.
When it comes to hate and misunderstanding of the FIRE community, I like to pause for a hot minute and take a deep breath. Rather than fight hate with hate, I try my best to understand where those strong feelings are coming from. And Suze is a money nerd like me and member of the LGBT family, so we already have two things in common!
So, in the spirit of understanding, I made an effort to hear her out and not find any ways possible to refute her viewpoint. Here are a few highlights from Suze’s interview, and my opinions about her opinions. As each of us navigates our way to Opulence, we’ll need to take ownership of our financial education and decide which path we will follow. This is where I’ve always believed the ideological path diverged: Suze’s way or the FIRE way.
To my surprise, after listening for myself, I actually agreed with some of Suze’s points from her infamous podcast interview.
SUZE OPINION #1:
The amount of money you retire on in your 30s or 40s will not cover you if you suffer a health catastrophe. Having a nest egg of, say, $2 Million saved and using the safe withdrawal rate (SWR) of 4% to live off of $80,000/year is very risky. It assumes that nothing will go wrong with your health which will cost more than $80,000/year later in life. One unexpected health challenge could force you to draw down on your nest egg and, potentially, risk going into bankruptcy.
At the recent financial conference, FINCON, I attended a panel discussion about life after reaching FI (financial independence). At the beginning of the Q&A, the moderator said something that was a red flag to me:
As a Navy veteran and federal employee, I have peace of mind that I’ll have the options of VA health care and federal health insurance when I retire. But most Americans will have neither, so I do think the subject of rising health insurance and healthcare needs to be addressed.
And I also think the issue of rising healthcare is also a good reason to avoid settling for Lean FI, which means you retire as soon as possible without much wiggle room for unexpected expenses.
SUZE OPINION #2:
To plan for rising costs that come later in life, you should have several million dollars (or more) saved up because it cost her mom $30,000/month for her health care.
I SOMEWHAT DISAGREE
This bogeyman scenario sounds like the cost of health care when someone is in their final days of hospice care, and a very expensive hospice at that. On a side note, check out my post on how to reduce the impact of skyrocketing health care costs later in life.
To combat the rising cost of healthcare, Suze recommends working as long as possible (like 70+) so you minimize how many years you need to budget for between retirement and death. Side note: Suze must love listening to sad country songs, cause that sh*t is depressing AF!
Suze’s other recommended solution is to buy long-term care insurance (LTCI) as soon as possible. However, even the ultra risk-averse Dave Ramsey says in his Financial Peace University seminar that statistically the high cost of LTCI doesn’t make sense until about age 60. Similarly, I called a long-term care company earlier this year and was told the average age that most people buy their policies is about the same: 59.
I’ve heard FIRE expats and slow travel nomads mention how much less health insurance and health care is when living overseas. Of course, if you’re hit by a car here in the U.S. you won’t have the luxury of time to price shop for an international flight. In that case, some basic health insurance and an HSA could save you… quite literally.
Lastly, instead of warning about how to pay for our health when it declines, we should also be taking preventative measures and investing time and money into our present-day health.
SUZE OPINION #3:
As AI (artificial intelligence) becomes more common, unemployment will go up and as a result, so will taxes. Suze predicts this trend will be noticeable as early as 2030. As a result, the money you live on at retirement will shrink with the expected increase in taxes.
If and when AI impacts the job market like she says, it sounds to me like staying in the private sector job market is the bigger risk. Personally, I would rather be retired in an AI world so I have the option to live anywhere, do any type of job for extra cash, and work as much or as little as I want if I ran into a shortfall due to rising taxes.
SUZE OPINION #4:
Don’t retire early from a career you love just to sit and do nothing. You’ll eventually get bored of traveling the world, relaxing in hammocks, and lose your sense of purpose.
I SOMEWHAT DISAGREE
This idea doesn’t acknowledge the nuances of FIRE, but there has been one often-quoted example that adds some validity to her point. The Mad Fientist interviewed a man who retired at 37 and decided to go back to workon a part-time basis with more flexible hours. As he put it…
But Tony is just one person’s story. There have been so many examples of early retirees who love it! It could just be that the type of person who will most enjoy early retirement is not a simple 9-to-5 software engineer like Tony, but rather, a free-spirited adventure-seeking world traveler.
Peronal finance is personal. And so is retirement. So maybe retirement isn’t your bag. For that very reason, I’ve often heard it recommended within the FIRE community to do a test run of early retirement before taking the leap.
Even if an early retiree has difficulty replacing the social aspects of an office environment, they can always go back to work on a part-time basis, do freelancing, gig economy side hustles, consulting, etc. This “worst case scenario” of returning to work doesn’t sound half bad to me, because the early retiree has the power to choose.
They can choose a more flexible schedule, they can choose in-office vs. remote work, etc.
The FIRE community understands the psychological transition and seem to take thoughtful steps to warn about it and prepare for it.
SUZE OPINION #5:
Everyone should enter the work force as young as possible to take full advantage of the exponential growth that happens decades down the road with compounding interest. Start punching a time clock as soon as possible.
I SOMEWHAT AGREE
I’d recommend that a young adult max out their Roth IRA as soon as they have W2 income to make themselves eligible for it. $6,000/year is currently the max contribution and you can never get those years back. Getting in the habit of setting aside $500/month into a retirement vehicle with tax-free growth will pay HUGE dividends if a person starts 15, 10, or even 5 years sooner than their peers.
Here’s a growth comparison by David Bach that shows the power of starting early:
But does someone really have to start full-time work as young as possible?
For a college graduate who is hungry for travel, how about a nice compromise of working half the year—or until they’ve contributed $6,000 to their Roth IRA—and then travelling the rest of the year to gain valuable life experience… experience that could very well make them more competitive in the job market?
What do you think about Suze’s five points I highlighted above? Do you agree or disagree with any of her (or my) opinions? As Linda Richman would say: “Discuss.”