Fake Christmas

Good Morning,

This year has been a crazy one that seemed more like a soap opera than real life. One of the topics that I have blogged about in the past was the F.I.R.E. (Financial Independence, Retire Early) methodology. When I first learned about this topic earlier this year (January 2019 post), I was a little skeptical based on my view that some of its underlying future assumptions are flawed. Last week a proponent of the F.I.R.E. methodology wrote an article for CNBC about why the lifestyle turned out to be unsustainable for his family. The CNBC article highlighted a couple of key points;

  1. Income needs were overestimated based on an assumption of higher bond interest
  2. Children increase cash-flow needs
  3. Healthcare costs were underestimated
  4. Location and cost of living were significant factors in the cost of living

The overall concept of F.I.R.E. is attractive, but sustainability was always one of my biggest complaints. I am a fan of the concept and the philosophy, but I am also realistic. When I originally researched some of their assumptions, some things that I felt weren't being considered were;  

  1. The results of a significant draw down in equity markets
  2. Interest rate assumptions were too optimistic
  3. Healthcare cost are rising at a faster rate than inflation
  4. Children exponentially increase the cost of living

Living in a major city is expensive, which makes this philosophy more unrealistic if you aren't a high earner. I do think that early retirement is possible, but it requires a substantial amount of income. Based on the article, the author could've considered doing consulting as a way to bridge the gap between full-time employment and being fully retired.  

Well, everyone, this will be the last blog of the year, I would personally like to wish everyone Happy Holidays and a Happy New Year. I have tried to ensure that the commentary I provide is informative and insightful. As this blog continues to morph, I hope that I can continue to supply beneficial content.

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