General

Is the FIRE community full of hypocrites?

By Fritz Gilbert, RetirementManifesto.com

Special to the Financial Independence Hub

It’s interesting how much controversy the FIRE (Financial Independence Retire Early) movement seems to cause in our society.  Personally, I find it a fascinating topic and view the discussion generated by the FIRE community as valuable to everyone working toward retirement, whether they’re in pursuit of early or traditional retirement.  I’m encouraged by the FIRE community and feel that ANYTHING that makes more people aware of the need to save for their retirement is a good thing.

For the record, I’m a fan of FIRE.  

However, is it right to accept the movement without question, or should we take some time to think comprehensively about FIRE and attempt to determine if there are some “gaps” in the strategy that warrant discussion?  It’s always good to question things, so today we’re going to do just that.  We’re still a land of Free Speech, and we’d be wise to leverage that Freedom for a more complex discussion around important issues.  Money and Retirement are certainly important issues.

So …

Let’s have some fun.  Let’s challenge ourselves.  Let’s learn to keep our minds open.

Let’s look for gaps in the FIRE movement.

I recently had one of the most comprehensive comments I’ve ever received on this blog.  As you’ve likely guessed, it was regarding the FIRE movement.  Given the quality of the comment, I’m dedicating this post to answering the issues raised.

Phil raises the questions about FIRE respectfully and they deserve a thoughtful response. Is FIRE hypocritical? Today, my thoughts… Click To Tweet

Regardless of where you are on your journey to retirement, I trust you’ll find some value in the discussion.

The comment which generated this post was in response to my article titled “What the FIRE Movement Is All About – In One Word”.  The reader, Phil, prefaced his comment with a generally favorable view of the FIRE movement, including a few comments I’ve summarized below:

  • Darrow Kirkpatrick and others ” have had a big and, largely, positive impact for me and my family.”
  • “To be clear, I find nothing wrong with trying to improve people’s financial literacy and promote a culture of frugality.”

However, Phil soon moves into the “meat” of his comment with this statement:

“ …After being on my own FIRE journey for 4+ years, I have developed some serious reservations about what I am reading these days…”  Phil

Turns out that Phil has been a member of the FIRE community for 4 years!  My curiosity peaked as I continued to read his words.  Here’s a member of our community, and he’s raising some questions.  “Hmmm, this could be interesting,” I thought as I continued to read his words.

What followed was this statement:

However, FIRE bloggers are ignoring some serious issues with their collective community and their message. Click To Tweet

Phil follows this claim by writing 4 well-thought-out concerns about the FIRE movement.  Given his tone, I took his comments seriously, and have spent some time thinking about the issues he’s raised.

I challenge you to do the same.

 

4 questions about FIRE

Phil’s comment, respectfully raised, has merit.  In an effort to look more critically at the FIRE movement the points he makes deserve to be considered.  In our culture of increasing “Political Correctness,” it bothers me that folks aren’t open to exploring ideas that contradict their own. Personally, I love to look at arguments that don’t fit the conventional narrative.  What I like in particular about Phil’s arguments is that he has been a self-professed member of the FIRE community for 4+ years.  In full transparency, I consider myself a member of the FIRE community, having retired at a (by society’s standards) relatively young age of 55, though “older” than most in the world of FIRE.

If Phil has questions, perhaps others do as well.  Let’s air it out.  Let’s look for gaps.  Let’s discuss the issues.

Arguments which contradict our narrative make us think. Thinking Is Good. Challenge your brain, and learn to think through alternative ideas. Click To Tweet

Today, I’m going to look objectively at the 4 questions Phil raises.

My approach for each question will be the same:

  • Phil’s Comment: I will copy each of the issues Phil’s raised verbatim from his comment.
  • What’s The Point? I will summarize what I believe are the main points raised by Phil “What’s The Point.”
  • My Thoughts: I will provide my thoughts on the topic raised.
  • Subjective Score:  Where I’ll rate my agreement with the validity of the comment (100% = Total Agreement)

With that, let’s challenge our brains …

1.) We should be skeptical of FIRE bloggers

Phil’s comment:

“FIRE bloggers are “lifestyle influencers,” and merit the same level of skepticism as anyone in this game. Most FIRE-bloggers monetize their blogs and so are sellers of a product, a product that should be evaluated objectively. I’m sorry, but the general defense that FIRE can be anything you want it is not accurate. Every single FIRE-blogger is selling the idea that financial independence and a lifestyle of much less work or no work will improve your happiness significantly. The reality is that this may not be true for everyone. I applaud Chris Mamula, Sam Dogen, Joe Udo and others who have written about the downsides of this lifestyle: depression and loss of purpose. JD Roth has been willing to write about the down-side of the FIRE-blog community and people should read his posts.

Unfortunately, many other bloggers refuse to acknowledge this. The fact is that most research into the psychology of happiness in the past several decades has shown that people are actually more happy when producing than when consuming. The simple fact is that remaining productive is difficult for many people outside the context of a standard career. FIRE bloggers should talk more openly about this.”

What’s The Point? Phil raises three issues in his first comment:

  1. We should be skeptical of the motives of FIRE-bloggers who are attempting to monetize.
  2. FIRE-bloggers promote the idea that less work will improve your happiness; it may not be a reality.
  3. Research indicates that people are happier when productive, and that may be harder outside a career.

My Thoughts: In my view, the most valid point raised is the question of happiness after FIRE is achieved (I also agree we should always be skeptical of folks trying to “sell us something,” but don’t see that as a major flaw in the FIRE movement.  I think it’s also fair to mention that there are likely more FIRE followers who don’t blog than do.  While this comment questions the blogging element of FIRE, it’s not fair to throw the non-bloggers under the same bus).

But, more importantly, on to the “happiness” question:

As I was moving toward retirement, I did a lot of research on the topic of happiness after retirement, which I summarized in my post “Will Retirement Be Depressing”. For the record, I agree with Phil that this element of early retirement is not covered to the extent that it should be.  Having said that, I also provide some suggestions on how to ensure you’ll avoid some of the traps that cause depression in retirement in the post mentioned above.

I’ve implemented those steps, and I’ve found my retirement to be anything but depressing.  I agree more should be written about the topic, and agree with Phil that this is a valid point regarding the FIRE movement.  Too many folks focus on the financial side of early retirement, but true happiness requires an equal (or greater) focus on the “non-financial” aspects of retirement.  I suspect we’ll see a natural shift as more of the FIRE bloggers achieve RE.

(For the record, this is why I’ve been writing a larger % of my posts about the “soft” side of retirement.  Now that I’m in retirement, I realize the importance of the non-financial topics in achieving a great retirement.  I also realize it’s not covered to the same extent as the financial side, so I’m doing my part to rectify the situation.)

Subjective Score: 80%   Skepticism is good, and there should be more written about the “softer” side of happiness post-RE.

2.) FIRE as a Marketing scheme

Phil’s Comment:

FIRE bloggers are too much like multi-tiered marketing sales people.

Blogger: “You should save a lot of money to retire early.”
Reader: “Why?”
Blogger: “It will give you freedom to pursue more creative pursuits.”
Reader: “Like what?”
Blogger: “Blogging. Take my course!” Continue Reading…

Canadians embracing low-cost ETFs: Is a tipping point on the horizon?

By Dale Roberts, CutTheCrap Investing

Special to the Financial Independence Hub

Data shows that Canadians continue to embrace low-cost ETFs. That said, more monies continue to flow into high-fee mutual funds. As you likely know, Canadians pay the highest mutual fund fees in the developed world. Of course, those high fees are wealth destroyers and can eat up 50% of your investment returns over the decades.

But here’s the good news: more Canadians are moving more monies to low-cost ETF portfolios by the way of self-directing or through Canadian Robo Advisors or by way of those One Ticket Asset Allocation Portfolios.

Here’s a look at the flow comparisons for Mutual Funds and ETFs courtesy of the IFIC site:

Here’s the sales figures for mutual funds in what we would typically call the usually robust RRSP season, January and February:

Mutual Fund Sales 2019 Jan FebAnd here’s the sales figures for the ETF industry for RRSP season:ETF Assets 2019 Jan Feb

If we want to be optimists, that is more than promising. While 2019 was a soft RRSP season for money flows into mutual funds and ETFs (compared to 2018 figures) there was an acceleration of flows to ETFs compared to mutual funds, year over year.

  • In 2019 35% of new monies went to ETFs.
  • In 2018 27% of new monies went to ETFs

That is certainly something to celebrate. While the total mutual fund industry is almost 10 times the size of the ETF industry, they did not even double the size of inflows for January and February of 2019. That aligns with the findings of Nest Wealth, which conducted a poll in RRSP season. Respondents suggested one third of all new account openings would be by way of one of the Canadian Robo Advisors: also known as digital wealth managers. For more on that please have a read of There will be a tipping point for ‘Robo Advisors’ suggests Randy Cass of Nest Wealth. Keep in mind the poll was reading account openings, not the move of assets or amounts of assets.

Here’s another way to frame that more than ‘good news’. Continue Reading…

How are changes to Renewable Energy affecting our daily lives?

By Sia Hasan

Special to the Financial Independence Hub

One of the biggest changes to the energy industry has been the introduction of renewable energy. The idea that energy could be produced without having to burn fossil fuels was extremely foreign to the industry at its inception. Luckily, more and more consumers have made the switch to solar and other renewables to build a greener and more sustainable energy infrastructure. This gradual switch to solar has affected more than just large utilities. So, how have changes to the renewable energy sector affected the daily lives of most citizens?

  • Average Energy Bills Are Falling
  • The Cost Of Installing Solar Is Lower Than Ever
  • More Legislative Actions Are Being Taken To Support Renewable Energy

Average energy bills falling

Homeowners who make the switch to solar will immediately see that they now have lower energy bills. This is because fewer kilowatt hours must now be pulled from the grid because many are already being supplied for free by the sun via your rooftop solar system. These lower bills mean keeping more money in your pocket to spend on other things like better food on the table or a fun weekend getaway for the family. Over the 30+ year lifetime of a solar system, the savings can be massive. Additionally, those who install a solar system usually begin to value electricity more than those who don’t. This can cause homeowners to take additional measures such as installing energy efficient appliances and undertaking LED lighting upgrades which can even further lower energy bills.

Cost of installing Solar lower than ever

Thanks to improved manufacturing processes and higher demand for home renewable energy systems, the average solar panel cost has been falling at a fairly predictable rate over the years. In fact, it is estimated that the cost of solar is falling even faster than some experts expected. So what does this mean for consumers? Continue Reading…

Paying taxes on capital gains could be the best decision you make this year

When it comes to capital gains taxes, sometimes it pays investors to give Ottawa its due (Shutterstock)

Marc Bellefeuille, Manulife Wealth

Special to the Financial Independence Hub

In times of market volatility, anything can happen from one quarter to the next. Market participants witnessed a wipeout in the financial markets in Q4 of 2018. The S&P 500 saw its fortunes accumulated throughout the year evaporate from September to November and American stocks suffered the worst declines ever recorded on a December 24thtrading day. Other markets around the world followed suit.

Fast forwarding to Q1 of 2019, the bounce-back for equity markets has been nothing short of impressive. So what can investors take away from the last six months? Certainly, many investors may have questioned those who advise them at the end of 2018, only to be rewarded for having stayed the course in recent months. But what lessons can we learn from recent events, and how should we adjust to protect our precious nest eggs in the years to come?

In the famous paper by Brison, Hood and Beebower, “Determinants of Portfolio Performance,” the authors suggest that a whopping 93.6% of portfolio return volatility is explained by the asset allocation of the investment portfolio1. Nobel prize-winning economist Harry Markowitz called diversification “the only free lunch in finance.”

Yet, more often than not, I see portfolios of bright and capable people concentrated in a few specific positions. The culprit? Capital gains tax. Investors feel at ease by the value they see on their quarterly statements and often feel like they are playing with house money so they can justify letting their portfolios drift into a state of concentration of their winners. The idea of paying the taxman keeps them from rationally re-balancing their portfolios which, ironically, can expose them to large shocks during market corrections.

The average market drop in a recessionary bear market is 30.4%.2These kinds of drops often take place without warning – and certainly without mercy – and can drag every sector down with them. These declines can often be more severe to high net-worth investors due to under-diversification of their investments.3

Most high net-worth investors know they should follow a diversified portfolio strategy. However, knowing is only half the battle. Many, when asked, could not explain their strategy for selling positions within their investment portfolios. When pressed, many investors believe that, for any position that declined by more than 10%, they would advocate to hit the sell button and stop the loss. But when a position was up 10% or more the button was harder to push: the greater the gain the harder it gets to take the profits. Investors tend to be loss averse but when they are, in their minds, playing with house money the rules go out the window and many sit on large gains without re-balancing back to their strategic asset allocation.4

Better off taking profits and rebalancing

One of the impediments to profit taking is the tax bill. Let’s do the math. Assume a successful investor put half a million into the shares of one of the big five Canadian banks in the fall of 2008 and the stock doubled. Were they to sell those shares, as a resident of Ontario, the tax bill would be approximately $133,800: assuming the top marginal tax bracket. Continue Reading…

Retired Money: Work Optional and the FIRE movement

My latest MoneySense Retired Money column looks at the so-called FIRE movement: (an acronym for Financial Independence/Retire Early), as well as a new book by a FIRE blogger titled Work Optional. You can find the full column by clicking on the highlighted headline here: How “Work Optional” can fit into your Retirement Plan.

You’ll see that regular Hub blogger Doug Dahmer — founder of the Retirement Navigator planning software — has been using the phrase Work Optional for at least five years, even though the new book of that name was just published in January 2019. It’s a useful phrase that describes the kind of thing Mike Dark and I refer to as Victory Lap Retirement in our jointly authored book of the same name.

There are many ways to describe this phase, but generally it refers to a period after full-time employment. FIRE proponents often declare that they “retired” in their 30s or 40s but of course most of them do not spend the next half century doing absolutely nothing. They really create encore careers based on self-employment, and often build businesses based on book-publishing, blogging and public speaking, wherein they reveal “how they did it.”

Victory Lap and Findependence

To some extent this very website does a similar thing, focused as it is on Financial Independence, or my contraction of it, Findependence. Continue Reading…