Suze Orman Hates FIRE

Today’s post is about last week’s revelation that Suze Orman hates FIRE, and the media and blogger community reaction to that.

Suze Orman

The FIRE (Financial Independence, Retire Early) movement has had a reasonably good press in the UK recently, with stories making it into the bigger newspapers.

• FIRE involves saving a lot / as much as possible of the money that you earn so that you can stop working entirely, earlier (sometimes much earlier) than normal.

Over in the US it’s a different story, with Suze Orman saying that she hates FIRE.

• She was appearing on the Paula Pant podcast at the time.

Suze is not too well-known in the UK, but she’s a big deal personal finance guru in the US.

As Paula Pant put it on her Afford Anything blog:

Suze is a legend in the world of personal finance.

She’s appeared on Oprah multiple times, published 10 mega-bestselling books, and hosted The Suze Orman Show on CNBC from 2002 to 2015.

She’s one of the most famous voices in this space.

Suze’s comments provoked a lot of reaction, both in the mainstream press and amongst FIRE bloggers.

What she said

I hate it. I hate it. I hate it. I hate it.

Early retirement is the biggest financial mistake, financially speaking, you will ever, ever make in your lifetime. You will get burned if you play with FIRE.

Most people don’t effectively plan for rising health care costs in retirement.

As you get older, things happen. You get hit by a car. You fall down on the ice, You get sick. You get cancer. If a catastrophe happens, if something goes wrong, what are you going to do?

People need to save at least $5-10 million to retire early.

Suze also thinks that people will be endlessly bored by sitting around all day doing nothing.

• She recently came out of her own three-year retirement, citing boredom, so we can assume that she’s speaking from personal experience here.

How much?

$5M is around £3.8M at today’s exchange rate.

• That sounds a lot to me.

Using an SWR of 3.25% pa and a typical retirement income of £20K to £25K pa, after housing costs are taken care of, an individual in the UK would need somewhere between £750K and £1.5M to retire.

• The figure varies depending on where they want to live and how much the houses cost in that area.
• A couple in central London might need as much as £4M between them, but they are the only people who would hit Suze’s lower boundary.

It’s worth pointing out that FIRE is easier in the UK because we have socialised medicine (not a free healthcare system, as some people think).

• So we need less money because we don’t need to fund this for ourselves.
• According to Suze, the average medical bills for a retired couple total $280K over the course of retirement.

We do need to fund social care, which can run as high as £10K per month in London.

• The average is $82K pa in the US, apparently.
• And you can buy insurance the first $50K pa of that, for around $4K pa for a couple.

But few people last more than two years in a home (at a cost of up to £250K).

• And the local council will take the money from your assets anyway (or sell your house when you die).
• If you don’t have enough money left to pay for all the care you need, then the council will fund it anyway.

So we can stick with the £750K to £2M per person figures.

• It might be difficult to amass that kind of money in your 30s.
• But if we define Early Retirement as anything before the State Pension Age (now 67 and rising), it’s definitely realistic for higher earners.

The reaction

Mainstream media reaction was mixed – some articles felt that Suze had raised valid concerns, whilst others questioned her maths and thought she was off target.

• There were even a couple of FIRE bloggers who agreed with Suze, but most of them didn’t.

One of the key points made by the FIRE community was that FIRE isn’t really about money – it’s about time.

• FIRE gets you back your time to focus on the things that matter to you.
• It’s not about doing nothing.

Once you have enough money to take care of your basic needs indefinitely, any future earnings have diminishing returns.

A second point was that whether retirement is good or bad depends to a large extent on whether you like your job, and what you will replace it with.

•  A few lucky people (( My partner is one of them )) have interesting jobs that they enjoy and don’t want to leave.

But most people don’t – I was one of them.

Conclusions

Suze is probably right that FIRE isn’t right for her.

• But it’s definitely feasible on less than $5M.

And it works for me, and for lots of other people.

Until next time.