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June 18, 2024

Don’t play with FIRE: The retire early movement is bad for the economy

By VARDHMAN LUNIA | March 29, 2023



Lunia argues that the economy will suffer if highly skilled workers begin retiring early en masse.

The Financial Independence, Retire Early (FIRE) movement, predominant among millennials, is now also taking off among Generation Zs — people born between 1997 and 2012

FIRE, coined in the 1992 book Your Money or Your Life, involves saving a large share of one’s earnings during their working life to create a capital base that will serve them for the next 30 or so years of retirement. Specifically, it is recommended that one saves 50% or more of their income until their savings, combined with investment returns on those savings, reach 30 times their annual expenses. After this, the person can retire and withdraw 3–4% from their savings annually to enjoy the rest of their life. 

Factors like alarming levels of workplace stress, increasing job market competition and rising burnout rates are all fueling the push to join the FIRE movement. Despite all of this, I’m against people retiring early — at least, on a large scale. 

People become more skilled at their jobs over time, and highly skilled workers have been shown to boost economic growth and productivity. Take the case of the Asian Tigers — Singapore, Hong Kong, South Korea and Taiwan. A driving force in their growth has been the fact that their labor productivity increased over time. 

A simple example of the damage the FIRE movement could cause is the case of one doctor who is fresh out of residency and another who, after 10 years of practice, decides to retire early. The latter doctor has acquired a great amount of experience over time and their loss is going to have a greater consequence for the economy than the first one because they are more effective. 

In a sense, the FIRE movement encourages people to desert their work when they are at their best, a period which not only has great benefits for them — generally, people with more experience earn higher wages — but also for society at large. It is apparent to anyone with common sense that the consequences of a large-scale outflow of highly skilled labor in any industry can be devastating — even for the professions that are not essential for human survival.

Imagine the state of the world if all airline pilots above 40 years of age decided to retire. Granted, the example might not be very realistic but, spread across various industries, the effects of the retire early movement could have a detrimental impact on the entire economy.

Additionally, people lose the ability to make structural changes in organizations in line with their belief system if they retire early. People usually rise to the “top job” in business, politics, entertainment or any other industry after 20 or more years of experience. For example, the average age of a U.S. president when they first take office has been about 57 years old. If the most talented people with the best ideas fall prey to the FIRE movement, we’ll end up with a slew of inefficient organizations unable to solve pressing problems.

The choice to retire at age 30 or even 40 is extremely bohemian and objectively selfish, and that’s how it should be viewed. People should always have the independence to retire early happily, but we as a society shouldn’t create a trend around it. Otherwise, the FIRE movement will lead to a fear of missing out among people who choose to stay on with their careers in their middle age. This means that people will be peer-pressured into retiring early, which will in turn lead us down a serious, messy spiral.

Vardhman Lunia is a freshman from Jaipur, India majoring in Economics.

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