The FIRE Movement Was Inevitable
The world used to work differently. It used to be that a young man or woman could sign on to a solid company and be assured of long-term employment. Along with a job that would take them to retirement age, they had defined benefit plans (pensions) that provided for the years that came after retirement age.
This model, combined with government social security programs kept the boomer generation and their parents financially secure well into old age. This worked all through the 1950’s, 60’s and even through the 70’s.
But then the world changed. In the 1980’s the traditional pension system started to break down. People started living longer, and the world became more globalized. Suddenly employment, which was once considered secure, became far less secure.
Private companies had to compete against significant global competition AND they no longer wanted the open-ended responsibility of paying for workers who might live into their 80’s or 90’s.
So the world shifted to defined contribution plans (IRA’s and 401k’s)
Pensions died out almost completely, and today only employees of government entities might be offered pensions.
The Rise Of The 401k
Honestly, I don’t have a problem with the rise of the IRA/401k and the decline of pensions. Instead of the burden being on the government or a shaky employer, the responsibility for retirement savings now lies on the individual…
As it should be!
The world has completely changed. People now change jobs much more frequently — once every couple of years isn’t considered abnormal in many fast-paced industries.
Everything goes faster now… even the lifespan of our employers. If we look at the average lifespan of companies in the S&P500, back in the 1970’s that average age was 30 years. Today, it’s half that. Change is happening faster than ever before.
If employees were still joining pension plans at each company they worked at today, a modern employee with a 30+ year career might end up dozens of tiny pensions by the time he retired.
That sounds downright silly compared to the tax-deferred retirement plans we take with us when we leave a job today.
Nope, I don’t have a problem with pension plans dying out. What I do take issue with however, is the severe lack of financial education provided to young people today.
The Lack of Financial Education
When I went to high school, the closest thing we had to a personal finance class was a course that taught students how to do their own taxes, and calculate credit card interest. That was it.
Pathetic!
We didn’t learn about stock investing, bonds, index funds, ETFs or anything remotely like the Trinity study’s 4% rule. Retirement never came up.
Once I joined the corporate workforce, this distinct lack of financial education continued… my new employers handed me the signup paperwork for the company 401k plan … and that was it.
Not once in my short career did I ever receive practical advice on how to utilize retirement accounts to actually retire. The lack of financial education available to young people like myself is utterly frightening.
Rather than live in ignorance, I chose to teach myself…
For years I literally devoured ever book on investing I could. From the classics, like Ben Graham’s Intelligent Investor and Thomas Stanely’s Millionaire Next Door, to more modern tomes like Jeremy Siegel’s The Future For Investors, and Mohnish Pabrai’s Dhandho Investor. (FYI: All of these books can be found on my Books page)
I read everything I could get my hands on. The point is, I was entirely self taught. I had to wade through piles of good information and mountains of bad information to eventually sort it all out on my own.
Few people probably have that same level of passion for investing. It probably qualifies me as a “Personal Finance Nerd” or “Investing Geek”.
Unfortunately, a young person just starting out in the world shouldn’t need to go to these extremes just to learn how to retire.
Too Much BS
Today, learning to invest is harder than ever — We still have very poor personal finance education in schools. All the classic investing books still exist, but now we have countless more books published on investing.
Most people aren’t looking to read hundreds of long, boring investing books. They want to be out leading incredibly awesome lives… windsurfing or something! Not pouring through some old dusty investing book.
Oh, and we can’t forget the relatively new-ish phenomenon called “fake news” to contend with. That bullshit just confuses everybody.
For the average person, it’s just too much noise to sort through. Who can you possibly trust? Everybody is selling something (or charging fees). It’s a nightmare for young people just starting out in the world.
The world needs clear answers and a way to cut through all the financial BS to get what it really wants — financial freedom.
Authenticity Is Everything
Thus, change gave rise to the FIRE movement — bloggers telling their stories about how they reached financial independence. Some of them retired early. Others kept working. A few even traveled the world. Real people, real lives, and real finances. I happen to be one of them.
The FIRE movement simply said — “Here we are! We’re actual real people and we reached financial independence! Here’s how we did it…”
I think this was inevitable given the monumentous social changes we’ve seen in the last 50 years. People needed real answers and real authenticity. We no longer had the safety of “big brother” handling our pension fund. We needed real role models to follow… to see that our financial plans were actually going to work.
For the most part, bloggers provide that authentic message. I think this authenticity is what really helps the FIRE movement grow.
There’s still doubters of course — plenty of people who still don’t believe FIRE is real. Despite the mountains of pictures, detailed dividend and expense reports, annual net worth posts, and countless personal blog posts about how I live my life…
People still doubt.
For The Doubters
I get it, I really do. Change is hard. The world often sells fake dreams. People are jaded. You can tell some blogs are clearly created with a profit motive.
But there are plenty of honest story tellers out there. Take me for example — I’m as real as they come! I’ve written hundreds of blog posts now, and earned only pennys per hour of effort. Barely enough to pay my website hosting and domain registration fees.
Why do I do this? Because I love it! I’m a personal finance nerd. I geek out when I see the latest annual report of my favorite investments. I absolutely love investing, and I wanted to share my story with the word. Because it’s fun!
Nothing could make me happier than spending countless hours researching data to write detailed posts on investing. I’m weird that way.
I do it for my kids too — I want them to lead lives of financial independence once they grow old enough. I think they need better financial education that I received.
Of course, I do it for the readers too — If I can help someone make their own escape from the chains of wage slavery I’ll be a very proud octopus.
That’s why I do it.
Thank you for doing it. Your blog shows your passion. I agree, the FIRE community was inevitable given the economic and employment changes that have taken place. I think many people look at the FI blogs snd think they are fake. Even my wife!
I wish I had learned the basics about investing and personal finance in school. Thankfully I had parents that modeled frugality and responsibility in finances . Generally if your parents are bad with money you will end up being a lot like them. You can learn on your own but it is unlikely you will do so if you don’t know anything else. I appreciate that most of the fire bloggers are doing what they do to help other people and aren’t in it only for the money.
My situation was pretty similar John! We got the whole frugality thing at home, but I knew next to nothing about investing except for savings accounts and CD’s.
Thanks for sharing your brain with the world.
I think most people just don’t understand that there are other paths to take with there money, and that small amounts can buy freedom.
So true. We definitely need to keep getting the FIRE option in front of people!
It’s all about choices. You hit the nail on the head with the education aspect. Compounding interest seems to be a deeply held secret or a dirty word that can’t be taught to students in grade school. Instead, we get to learn about couponing and Consumer Reports, so we can BUY the right shit.
Great post – Summarizes the “movement” very well.
Thanks Cubert!
Thank you, thank you, thank you!
Yes, there are doubters. But there are also thousands, or even tens of thousands os us out there who devour the content that you write!
Please keep on inspiring us!
Regards,
Steven
Thanks Steven! I love to hear that people appreciate it!
There are definitely better resources available now both in print and online, but it is still amazing how few of “average folks” (non-investing-geeks) know about or practice the FIRE option. I guess those who want the info will seek it and find it. Still, I think everyone should be exposed to it as an option.
Just knowing that FIRE is an option has made a HUGE impact on many people’s lives. Mine included!
Yes, the financial education is the key. Kids don’t get enough financial knowledge from the schools. As parents, we should step by, and make up that gap for the kids. Not only to teach kids about those skills, but also to save and invest ourselves as a role model. So the kids are well equipped, and could start saving early and investing properly.
Absolutely. I full intend to fill that gap for my own kids!
Great read, Mr. Tako! I agree with you on the school curriculum, what a joke not to include any finance related classes. The only class in high school we had that was remotely close was Accounting. It kind of missed the mark at that age to say the least.
I enjoy your passion towards the community and PF in general. One of my favorite blogs!
Thanks Mr. Defined Sight!
I have never had a pension before. But the thought of paying someone well into their 90’s sounds stressful to a company, especially if they’re small.
I totally agree that more personal finance should be taught in school. At the same time, I was thinking back on my past and whether any personal finance knowledge I know today was taught in school. The answer is not much.
I learned a lot of frugal, saving, and investing tips from my parents and extended family. They are my very first PF teachers. I think sometimes we put too much focus on formal education. For example, parents always blame the teachers for not teaching their kids well. But if we ask the parents how much time they spend with their kids to help them with homework every day, I don’t know if the answer would sound positive. I strongly believe that schools and families should work together to improve their children’s education. Self-learning is always the way to go. What matters is whether a person wants to pick up a PF book or read PF blogs instead of watching YouTube or Netflix all day.
I’m big on self learning too, but I still think formal instruction has its place too. Maybe a 50-50 mix is a good one.
In Europe it is only now that retirement and pensions are becoming an issue. Most European countries have state pensions that allow the elderly to live well after retirement BUT the demographic shifts all over Europe (more old people, less young) are making these state pensions unsustainable. So retirement age keeps getting put back meaning people my age (43) are likely to have to work till they are 68+ before they are eligible for a pension. Most people will not want to work that long so I expect FIRE to become a topic of interest in the region over the coming years 🙂
And yes, we have exactly the same problem with financial education. It’s nonexistent.
Thanks Mrs. Smelling Freedom. I always love to hear these comments from those who live or have spent considerable amounts of time in different parts of the world. Where do you live? It wasn’t immediately apparent from your blog.
I live in Malta. It’s a small island in the Mediterranean sea. Under half a million population 🙂
Our realities are very different to those in the US. We have a single-payer healthcare system with costs covered by the State from our taxes (so healthcare is not something we have to save for). There are also State pensions for all citizens BUT as I said above, the pension age keeps getting raised. So saving for retirement is now important, in order to be able to retire while still “young” enough to enjoy it
Malta? Awesome! I heard the climate there is fantastic.
It’s a vicious circle! I have three kids (21, 19 and 16) and I am trying to guide them as well as I can with the knowledge I have acquired so far. It would definitely help if they were also getting some education at school on the subject. But overall they are doing fine. Unfortunately, many of their friends don’t even get guidance at home because their parents didn’t get guidance either(and never tried to learn on their own). I hear about parents buying their kids a new car! Deep down you know (or assume) they probably can’t “afford” it. What lesson are they teaching their kids.
And as far as PF bloggers, yes many like yourself say it the way it is (thank you!) but I have come across a few blogs where it is obvious that blogging income has become a more important goal. There is nothing wrong with making money blogging unless your only focus becomes the potential income.
Couldn’t agree more Caroline! There’s a culture that celebrates ignorance and poverty in America, and I absolutely hate it.
One of the biggest problems we have is that a lot of folks just don’t seem to understand how important it is to save for traditional retirement let alone retiring early. I’m wondering if a number of them just figure it’ll work itself out – it did for their parents or grandparents. They don’t seem to realize that onus is now on them to save and not their employer or the government.
As a fellow personal finance nerd 🙂 I think the FIRE movement is definitely promising. Sure, it helps folks like you and I quit our jobs earlier than the norm. But more importantly, it gets people talking about personal finance. I know that my passion for the topic has helped a number of friends and family in understanding the broad scope of things. And then a few have delved even further to really put themselves on the right track… and that’s how it spreads – a little bit a time.
Cheers to you on spreading the message, Mr. Tako!
— Jim
Jim @ Route To Retire recently posted…Can You Make Money Blogging? I Am.
Thanks Jim! I think you absolutely right. Sure, in the back of everybody’s mind they think, “Oh yeah, I need to save for retirement” But if you ask them when they plan to retire and how much income they’ll need to generate and how big a portfolio is required, you’ll get some pretty blank looks.
There’s different levels of awareness, and I think only now our generation (which started out with only 401ks and IRAs) is realizing how important it is.
I agree that many people make the ‘it will all work itself out’ mistake. I have a (crazy) BIL that doesn’t save for retirement because he is ‘going to outearn his retirement’. I have no idea what he thinks that means, but if you haven’t even started saving at 41, that will be a tough road.
I still remember my ninth grade woodshop teacher. He would take the first 15 minutes of class to talk about the stock market. Not because he had to, but because he wanted to. I can honestly say that I learned the basics. Companies were traded and I understood how to find and read a ticker symbol.
We had a small competition over the semester. Each student picked a stock and followed it. He would bring the newspaper in and we would record the price. I can’t remember what the winning prize was, but it opened my eyes to something that I would later be hooked on.
I wish more teachers would share real world finance lessons.
You learned about the stock market in wood shop!?!?! That’s friggen awesome!
I agree that financial education is lacking, both via formal education and also in our immediate communities.
I suspect many people get turned off by the charlatan sounding siren songs of people retiring in their 20s/30s/40s, particularly if they then try to sell a book or course about it.
The advice is invariably simple, because personal finance is simple.
I think one of the reasons JDRoth’s site was successful the first time around was because he pitched his message as don’t be a financial dumbass, rather than the alluring promise of something that sounds too good to be true. Message is fundamentally the same, but easier to accept.
Well said Slow Dad! Thanks for the comments!
I’m lucky that I do have a pension that will kick in in a few years as well as my 401k and other post tax investments. But most people don’t have that.
Fully agree on the financial education issue, I spent a day in the summer sitting down with my teenage daughter and nephew going over stocks, 401ks and how to plan for retirement. I’m not sure how engaged they were though 🙂
Some 401ks are needlessly complicated as well, I had a recent experience with this which I blogged about last week.
Wow, you’ve got a pension? That’s quite rare these days!
Good for you for sitting down with your kids and at least giving them some exposure. That conversation might just be the key that unlocks a life of financial independence for them one day!
You know, you actually had more hs financial training then I did. They only taught us how to balance a checkbook. It took persuing a minor in economics to get real exposure. It really is a sad state of affairs when u need an advance degree to get basics.
Full time finance recently posted…Insurance You Should Never Purchase
Couldn’t agree more FTF. It shouldn’t be this bad.
absolutely agree with the need for personal finance education in schools. I also think the FIRE movement is the outcome of companies transferring the responsibility of retirement savings to the workers and not demonstrating loyalty to their employees. They did it to cut their own costs, but it opened at least some people’s eyes to how they can live a happy, well funded life without working. Consequently, companies will lose some of their best workers much earlier than they would want as they FIRE or move to the small number of companies that still demonstrate that they care for their employees.
Great point Kristen. Unfortunately I don’t think companies are interested in employee loyalty at the lower levels. Maybe at the C-suite level, but not in the rank and file. They can be easily replaced by a dozen more employees.
Sad but true.
absolutely agree that many companies only demonstrate loyalty to the highest levels. Unfortunately, many of the people that embrace the FIRE movement and are looking for something different could have been a future C-suite superstar, but are going another path because they aren’t engaged. I certainly fall into that group. At 23, I was all fired up to move up the corporate ladder (maybe I never would have been a C-suite superstar?). At 39, I am counting the days until I hit FatFIRE and can do my own thing, without all the corporate BS.
I appreciate what you do Mr. T, in fact you helped inspire me to join the group and start blogging too! I don’t plan on even breaking even at this point since I have several profitable non-internet side gigs making money I don’t need. I wonder, would teaching finance in schools really help? I mean does sex ed cut teen pregnancies and STD’s? I don’t know if it is more a head or a heart problem, but maybe it would make a huge difference.
I do think schools can help get some basic education in place. They might not completely solve the problem, but just some basic exposure would go a long ways.
Like any other class, there will always be the ‘A’ students and ‘F’ students. A student that gets no education is automatically an ‘F’.
Dave Ramsey’s team has developed a great curriculum for high schools to get kids thinking about money, debt, retirement, going to college without school loans, and more. I believe it’s a ready-made short course that any teacher could incorporate into their classroom, and to hear the kids that come out of that class proves that they are engaged and learning.
You’d think that the various boards of education would recognize the need, given the change in culture and disappearance of pensions, to teach kids about money–but somewhere along the way, the average education stopped truly preparing kids for the real world when home ec and other such classes died out. I graduated 30 high school years ago, and was not taught even how to balance a checkbook, how a passbook savings account (WHAT IS THAT!?!?) works… Thank goodness my mom taught me how to write a check and reconcile account statements, however planning for retirement was never a consideration. So many would benefit from a class like this, including those no longer in school! Thank goodness for the PF blogosphere and myriad of books that teach us knuckleheads what to do.
My father in law stayed at one company his entire life and has a fat pension that’s still existing. I don’t see that happening today (literally, I think 2/3 of them go belly up!)
I read the comments featured on Yahoo for GoCurryCracker and tbh I never read comments on FIRE’d folks (especially interracial ones) and the comments were “this is a scam, they get money if you click on their website” or “it’s impossible, they had luck with investments if you read close enough” or “who falls for this crap??”
Are people so jaded? Financial responsibility starts with you. Denote something impossible is easier than learning I guess.
I think they really are that jaded. It’s a sad state of affairs, but I try to do what I can. Open and honest goes a long ways.
Also inevitable from all the automation! We’re just creating our own basic income now 🙂
Ooh… basic income. There’s a topic I might want to write about. Thanks for the idea Olivia!
Great post. I’m reading the Dhandho Investor right now actually! I’m only in the first few chapters, but it’s great so far, I’m hooked.
Amazing that he took an investment of $30,000 in his 401(k) and made millions from it.
GYM recently posted…PF Blog Round Up: Weekend Spending January 2018 Edition
GYM recently posted…PF Blog Round Up: Weekend Spending January 2018 Edition
I thought it was a great book actually … one of the reasons I put it on my recommended book list!
I didn’t learn anything about personal finance in high school and college. That’s really too bad. My parents taught me to save, but they didn’t know that much about investing. They invest in their business and I couldn’t do that as an employee. I’m not sure why I started learning about investing. It was good I started early, though. Hopefully, I’ll be able to teach our kid so he’ll be ready for the uncertain future. It will only get more difficult from here.
I think you’re dead on Joe. More and more the onus of responsibility will be on ourselves. If we don’t start early, building up enough knowledge and capital could be difficult.
Howdy… Yes I appreciate your blogs also… A couple of books to add to your list… Would be millionaire teacher And millionaire Expat … They are good for people who live overseas like me… I will get 0 pension … I have 0 retirement accounts, I will get 0 retirement money from the government because I have been overseas too long… And yet I have become a multimillionaire Teacher… By Investing in realestate overseas and stocks overseas… So you could say I am financially independent… Michael CPO , from the far side of the planet …
Andrew Hallam is the author of the books and he often writes for the Globe and Mail too … national newspaper for Canada … CPO
Hi Mr. Tako,
I really appreciate all the great honest content that you put out. I’ve also learned quite a bit from this site, not only on financial matters but on enjoying life and food.
I feel like there are too many financial bloggers now so will blog on health, nutrition and fasting instead.
Becoming self-educated is very gratifying and it is a skill that can be repeated in many subjects throughout your life. There is a lot of BS and fake news but if you have a curious mind and basic training on the scientific method combined with a basic knowledge of physics and science you should have no trouble continuing to learn. I think I am now the in-country expert on pressure canning after a few dozen hours of research and practice!
-Mike
Hi Mike! If I need to do any pressure canning I’m going to give you a call! What are you canning in Thailand?
Vegetables and soups. It’s fun and involves engineering and thermodynamics so I think you would enjoy it!
Mr. Tako – I agree with you, I like you blog, and I like your points of view. But there slight paradox in your article and that is that you are not fully comfortable with the idea of being transparent, which would only give you more credibility. Something, to ponder little more.
Am I not transparent because I don’t post my full name and address? Maybe. I also believe in protecting myself and my family.
If that means a little less credibility, so be it.
“”People needed real answers and real authenticity.”
So true. I think this is also why Ads don’t work anymore. Instead we read reviews, research products ourselves. Nothing beats real life examples of happy FIRE people living the life we’ve always wanted to live. The best part? We don’t need to sell crap we don’t believe in just to make money.
Thanks for being honest and authentic!
Thanks FireCracker! I’ve noticed a trend whereby companies are spending significantly less on ads, and now promote mainly with influencers…
I see a lot of it these days — youtubers being ‘gifted’ products in exchange for reviews, influential celebrities promoting products on twitter, and so forth. Bloggers aren’t immune from this by any means.
It’s not wrong, but there’s always going to be a subtle bias towards a positive review. That bias hurts credibility.
Marketers always keep pushing the envelope to find an ‘edge’ on what the next thing is. Unfortunately these next things get spoiled in the process. When we all know that the Youtube reviewer is a paid shill then the message will be far less effective.
Kind of reminds me about the post you did on web hosting and the number of affiliate programs and the sliminess of it all!
-Mike
Oh, you mean this post!
I just signed up through your affiliate link… hope you get the fee!
Your post is spot on! The days of a 30 year career with one company, a pension, and retirement at 65 are long gone. I believe you hit the key lesson — each individual must become financially savvy and take responsibility at an early age to ensure FIRE will be an option.
Right on! You nailed it Daniel!
Mr. Tako,
Found you through RB40’s blog and really starting to dig in to your blog, too. Your blog is great! Thank you so much for sharing all of this information. I am getting so excited about retiring early and as I was reading this post was getting more and more giddy. I love that I can identify with the FIRE community!!
Hi FUFG! Thanks for checking out the blog! Hope to hear from you again in the future!
I also don’t have a problem with pensions dying out. I think it’s good, 401ks and IRAs are great vehicles and all we need. It would be great as well if I would’ve been allowed to choose to invest my social security taxes into some kind of a personal stock fund all those years as well, but whatever. I’ll be happy to see any of it.
And please keep blogging Tako, you obviously love it and it shows!
Thanks AccidentalFIRE, I’ll keep blogging if you try not to burn the house down! 😉
Dear FIRE Nerd, great post! Funny thing is that we still need people not to believe in FIRE, someone has to buy all that BS so you and I can have our dividends 😉 Mother nature is not really going to love it though….
“a modern employee with a 30+ year career might end up dozens of tiny pensions by the time he retired. That sounds downright silly compared to the tax-deferred retirement plans we take with us when we leave a job today.” welcome to our world. We can however bundle these little pensions into one big pot. But we generally don’t have tax deferred retirement plans (and the ones that exist don’t pay out before age 67-68). It’s a pity really, the US has the perfect system to FIRE! Count yourself lucky with that.
I had no idea Cheesy! At least you can combine your pensions like we combine our IRAs. That’s got to save a lot of headaches.
I 100% agree about 401ks and IRAs actually being an improvement over pensions. I hate how the media is always trying to generate sympathy for the common man’s plight because they no longer have pensions. The real issue, like you mentioned, is complete lack of financial education. On top of it all, in many families, talking about finances is taboo. If we can change our ways, be open about money, and teach kids about finances early we could likely solve a lot of problems.
So true. It really is a cultural shift and our institutions need to catch up. The internet moved a little faster of course and FIRE was invented by the first generation to grow up without pensions.
Testify brother!
I wish I was more productive at spreading the vision. I have a few acolytes. Real hard core finance nerd types. No casual reader would ever follow my blog. Maybe I need to change a few things.
Also, I am human or cephalopod and have checked the appropriate box.
Financial Velociraptor recently posted…Monday Trades ON, MTCH, MSFT
I think you should do a series of posts on how you earn income with options. That would be very interesting to a broader audience if you could dumb it down for the rest of the world!
I love this. I share the same passion. The world is definitely changing. The word is spreading quite well and I am optimistic that more people will get financially educated in the future.
My generation, (those who grew up in the 80’s) was the first generation to never really see pensions.
The more frugal among us are now reaching FI. If we keep fighting the good fight I hope younger generations will find us and learn.
One of the best FIRE posts of all time from any blog, and something I’ve thought about a lot. Once pensions (golden handcuffs, in reality) disappeared and companies ceased being loyal to their employees, it was certain that intelligent, educated, independent thinkers would reassess their situations and come to the same conclusions you and the rest of the FIRE community have reached- people can’t depend on a steady job for money, so they have to save and invest for not just financial independence, but security. There isn’t any other logical choice; why focus on increasingly volatile, time-intensive careers that inevitably involve multiple moves and extended periods of joblessness? It’s just not worth it.
Fantastic post, and something companies should read, too, if they are interested in retaining good employees.
Thanks snowcanyon! That’s some incredibly high praise! 🙂
Terrific post!
I am relatively young (25), and have never experienced a pension plan system in my career. In all honesty though, I prefer the 401(k)/IRA to the traditional pension plan. I work as a contractor supporting the government, and ALOT of the older folks around the office stress how important it is to get a government job and stay in for 20 years for the pension. I actually find this as a lazy way to secure your financial future because most don’t realize that they can fund their own “pension.” That self funded “pension” through 401(k)’s/IRA’s can also be worth ALOT more than what a government pension provides.
Like you said…If only this was taught to us when we were younger, most would realize that they can become multi-millionaires relatively quickly through consistent investing.
Great post!
The ‘old guard’ that’s retiring right now still had (some) pensions. They also had IRAs too. It was a bit of a mix for that generation. For them, I would guess that pensions seem far more stable than the ‘401k wild west’ that is the stock market.
I agree that the FI and FIRE movement was inevitable. We are now in a free agent economy. Without a good pension, there is little reason to comment to an employer for 30 plus years. It has released employers from that financial commitment. It also has a cost. Employers are losing leverage over their employees. In some cases it is just a lack of continuity. In other cases it can be a brain drain. The tables have turned. If an employee decides to terminate their employment, there is now less to consider.
Absolutely Dave! Some employers are catching on to this, but in essence they’ve already cut the cord and can’t go back.
Now, we see companies adding 401k matching and cushy job perks like free drinks to try to retain people. Not sure if its working or not.
In regards to lack of loyalty from employees to the employers: savvy employers typically have a “vesting” scale to ownership in the funds that they match. For example, the first company that I worked for that did any matching matched 1/2 of what I matched, up to 3%. Which meant for me to get the full match, I had to put in 6%, and they would give me 3%. Free money, right? Yes, but I couldn’t keep that money if I left, and there was a sliding scale of how much I could keep the longer I was there–after 3 years, I could keep 30% of it, sliding on year by year until after 7 years they would allow me to take 100% of their match with me (well, in the 401k) when I left. The company I work for now has a 3 year/100% vesting schedule, which is a little too lenient in my mind, and doesn’t really foster much loyalty (as turnover rates would indicate).
The match is a company’s modern version of pension, so the fact that some companies don’t match, or don’t match very much, really irks me. I think 6-7% should be adequate (and count myself lucky to get 6%), and still save the companies over what an old-fashioned pension would have cost them in the long run.
Just ramblings, but hadn’t seen anyone mention this modern way that employers are still providing for retirement. Now if only they would pay the fees, then accounts could grow to their full potential and we might see better options in our accounts!
That’s true, I didn’t mention 401k matching in the post. Some employers do this.
I used to have an employer that did 401k matching. I worked there for years and built up a good 401k balance, but ONE MONTH before the ‘matching’ dollars vested they laid me off.
Coincidence? Maybe. It just lends evidence to employers treating the workers as disposable.
They treat employees as disposable, yet it costs a huge amount of money to replace an experienced, highly-skilled employee. In my field, companies are paying a HUGE amount for temporary physicians and nurses instead of treating their employed docs and nurses well. When will the bottom line start to matter again?
Ever since I started working around 1980 (did I just date myself?) I’ve read again and again about how costly turnover is supposed to be. Yet my experience is most companies do little or nothing about it. Several I worked for acted like they couldn’t have cared less who stayed or left. Even in the tech field! So this trend really started quite a while ago, and continues to accelerate. Worse, the anti-compete and anti-poaching conspiracies recently uncovered weren’t to retain valued employees, but to suppress job mobility and therefore wages. I’m sure more will be discovered.
I too wish I had better financial education growing up… Thankfully I’m somewhat a natural when it comes to money. Plus I love learning on my own. Still, there’s many things I wish I knew.
Despite the bemoan from some people, I’d much rather be in control of my retirement (401k) than in control of someone else (pension). I’ve heard to many horror stories of companies raiding the pension fund, or somehow denying promised pensions to begin with.
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I’ve heard those stories too about failed pension promises. It’s a sad state of affairs for people already past their prime earning years.
Great post. I too am so happy to see pensions go away. Take some personal responsibility for your own future wealth people.
I Love the FIRE movement and I’m happy to be a part of it.
Fear of change is such a funny idea to me, I don’t understand it. People who fear change, end up adopting the change very late to the game. They miss out for not pivoting earlier, and they lose out buy buying into the change at high market prices.
Bitcoin and the fear and hatred over all things cryptocurrency is a perfect example of a fear based mindset. The Bitcoin train is gaining steam, and there no slowing it down. Blockchain technology and the currencies that power it are going to dominate technology sectors and disrupt fiat currency in 2018 & 2019. It’s right in front of us, yet many people are afraid to even learn about this new fertile investment space.
Anyway, not trying to sell Bitcoin. Just agreeing that fear or change leads to fear of loss. Not a good mindset for investors.
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On the bright side, at least you’ll be there to teach your kids about personal finance! Maybe they can retire before 25 haha.
25 would be a really young age to ‘retire’. I’d like to think they’ll be more savvy than I was at a young age, but you never know what’s going to stick with kids… 😉
It’s great that we have the internet out there now with all the blogs available for a young person to at least be able to find with a Google search. From there they can decide what is real or not. I’m sure most are savvy enough to what is authentic with a little bit of time. When I was a youngster in the 80’s we didn’t even have that option. My spark into personal finance was my best friend’s dad who told me at 21 to open an IRA. He even offered to match my deposit to open an IRA. I never took that offer because I didn’t have the money at the time, but it gave me enough insight to ask about the 401k when I started my first Corporate job a few years later. Luckily I have a modest pension from the first Corporate job of 24 years but the 401k started in my 20’s far exceeds that amount.
That’s interesting that your 401k grew so much faster. I assume because it was invested in higher-return stocks?
Thank you, Mr Tako. I got a tremendous CMLT reading this post.
Very well put. I was always a good saver, but just didn’t know the reality of what I was looking for. The authenticity I found with the FIRE movement is truly motivating. The intelligence and down-to-earth advice you find throughout the community makes me just know that the FIRE movement will continue to grow.
As I’m rounding the corner to FIRE now, I think I’m on a similar mission as you mention – making sure that my daughter understands the path to FI as well.
Love what you do, Mr. Tako!
— Jim
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Thanks Jim! And thanks for being such a long-time reader and commenter! 😀
Great post! Glad I found you through Rockstar! I am in my mid-30s and have been pursuing FIre (emphasis on first two initials) for about 2 years. It’s amazing how it changes your life and world view. I do agree that there are bloggers putting out weak content to drive dollars back. I am so happy that there are great bloggers who share information and education so that we can all prosper together.
PS. Your early financial education was far superior to mine. I would love to have received tax prep lessons in grammar school! We did learn how to balance a checkbook (literally, the accounting and math), but not anything about fiscal responsibility! Ha!
Thanks for posting and looking forward to reading your other posts!
There is another reason for the increasing FIREstorms: work sucks way more than it used to. When I started almost 40 years ago, work was much more tolerable, often enjoyable. Never great, but not endlessly soul-sucking. Initially figured this was due to creeping middle-aged curmudgeon-ness and cynicism, plus some inurement, but my much younger colleague’s complaints match my own, as well as the older workers I encountered when I was 20/30-something. So there has been a qualitative change. Millennials have been dealt a pretty raw hand, and I hardly blame them for wanting to exit an increasingly nasty rat race.
Decades ago there were occasional early retirement books and articles that made similar claims to contemporary FIRE blogs. I was a doubter then too, because despite above average income it seemed so hard to get ahead, despite frugal living. (Beginner software development salaries are much higher today.) I figured something was omitted, like an unusually high salary, or lucky investment not available to the typical person. But slowly realized by my mid 50’s that I was already there! Yep, it creeped up on me unwittingly because I never took a full tally. So my route is more like “Millionaire Next Door”, frugal but not overly so. Didn’t help that I was a much better saver than investor.