Hey everyone, how are you holding up? It’s been 15 days of lockdown for us in Oregon. The RB40 household has adjusted relatively well. Mrs. RB40’s office is closed and she is working from home. She isn’t as productive, but we all have to lower expectations in this trying time. The only issue for her is back pain from sitting at the dining table all day. Our bench is not ergonomic at all. I ordered some furniture and we’ll set up a better working area for her soon. As for RB40Jr, he loves the extra time off from school. He misses his friends, but he’s very happy with the school closure. Me, I’m so ready for these two to go back to work/school. I need some space! (Only half-joking here…)
I know we’re very lucky compare to many families. We are financially independent and we don’t have to worry about how to pay the bills. There is some good news for regular families. The federal government passed the stimulus bill and everyone should receive some financial relief soon. Also, 2020 will be a challenge for the FIRE movement. My blog traffic dropped way down in March. Lots of people are working from home, but few want to read about early retirement right now. We have too many other things to worry about.
Over the last few weeks, the stock market crashed and took everyone’s portfolio along with it. This is a big setback for anyone looking to retire early. It’ll be a big challenge for us too. My main goal for 2020 is to generate enough passive income to cover our living expenses. This goal will be difficult to achieve in the economic meltdown. Even if I include my blog income, it might not help much. Let’s hope we can bring Covid19 under control by summer. That will give everyone a chance to catch up financially. Anyway, this is a good test for us. If my early retirement can survive this 2020 recession, it can survive anything. What about the FIRE movement? Can it survive Covid19?
FIRE is easier during good times
The FIRE (financial independence, retire early) movement has been getting more popular over the last several years. When I started blogging in 2010, there were only 3 early retirement blogs. Now, there are hundreds of blogs and frequent media coverage. However, the last 10 years were extraordinary. The longest bull market in history made every investor look like a genius. If you save and invest, your net worth increase every year. FIRE seems like a reachable goal if you live modestly and minimize lifestyle inflation.
Now, the economy is imploding and FIRE doesn’t look so hot. Most people are more concerned about keeping their job and health insurance. I retired from my job in 2012 so our portfolio benefited from the long bull market. For now, we’re still way ahead of where we were when I retired. What about people who retired recently or plan to retire soon? Will they be okay with the pullback? I reached out and got some feedback from a couple of FIRE bloggers.
Retired early a year ago
Let’s hear from Jim from Route to Retire. He retired about a year ago and moved to Panama with his family.
I think we’re in good shape overall to weather this downturn. Financially, we were prepared for the economy taking a turn for the worse. We have 1 year’s worth of living expenses in cash and another 5 years in a bond fund ladder. That gives us about six years of time for the economy to get back on track – otherwise, we might need to adjust our plans along the way.
There were two things we weren’t prepared for though. One was the cause being a pandemic. When this hit, we had to figure out a game plan because we’re living in Panama right now and ways in and out of the country started closing quickly. We had only a couple of days to decide if we should take the risk and stay here as foreigners in another country or take another chance and get on three different airplanes back to the U.S. After a lot of discussions (and arguing), we decided to stay here in Panama. So far so good.
But the other effect I’m concerned about is our rental property. We own a duplex in Ohio and we were already having problems with a tenant on one side not paying. Our property management company was just starting the eviction process when he came up with most of the money. Now, however, we’re in a position where landlords can’t (or shouldn’t) evict tenants. I already reached out to our property management company a few weeks ago and told them to work with our tenants on both sides regardless. The problem is that if the tenants can’t pay rent, I still need to make the mortgage payment. If I need to, I know I can probably get a forbearance, but I don’t want to go down that path if I can help it.
It sounds like Jim was prepared so he can handle a recession. That’s great. Cash is king when the economy turns south.
Retiring early in 2020
A Purple Life plans to retire later this year. Everything was going smoothly until recently. Can she still retire early with this recession?
I am still planning to quit my job in September of this year. While a global pandemic and market crash was not what I envisioned my last year of work to include, I’m still comfortable with my plan. Financially I will have 2 years of spending in cash so I won’t even need to touch my portfolio until the fall of 2022.
The only situation I can see where I would not quit in September is if life looks exactly as it does now – quarantines, closed borders and social distancing. If that’s the case and I will just be sitting at home anyway I can see staying at my remote job a few more months until I can have the friends and travel filled retirement I was imagining.
My September timeline was originally born based on my net worth projections and travel I have already booked to Australia, New Zealand and Argentina. However, if the world looks as it does now those plans will obviously need to be pushed back a year or two. Luckily I have travel insurance and an entire lifetime to reschedule! Overall I’m surprised with how little my plans need to change as a result of everything that’s happening the world right now. A few trips might be postponed, but basically I’m still full steam ahead.
That’s great! Having a sizeable cash cushion is the key to surviving a recession. She’s writing a whole post about her plan and I’ll link to it when it’s live. My only suggestion is to engineer a layoff instead of quitting. However, she said her industry doesn’t give a severance package so it won’t work.
FIRE will come roaring back
It’s great to hear my fellow FIRE bloggers are doing so well. However, I imagine a lot of people are discouraged right now. That’s understandable. We’re all dealing with too many big problems right now. It’s okay to hit the pause button for a while. Your portfolio took a hit and early retirement looks more daunting than ever. However, we can learn a lot from this experience too. Now we know a solid cash cushion is essential. These days, we have about 3 months of emergency fund. That’s okay because my wife is still working. Once she retires, we’ll beef our cash cushion up to at least 1 year and have some bond ladder behind that. That’s life. We need to keep learning from our experience. Let’s all hope this recession will be a short one so we can all bounce back soon. Your retirement fund should survive the stock market crash as long as you don’t panic sell.
Another reason why I think the FIRE movement will survive is how employers behave during a recession. Now, workers are realizing their employers aren’t their friends. One of the reasons I wanted to retire early is the way my old employer treated the workers. During the last recession, I survived many rounds of layoffs and many of my friends didn’t. My old manager was let go a week before Christmas so they didn’t have to pay him the annual bonus. Ouch! That woke me up. I realized can’t depend on a corporation to take care of me forever. Employees are the first to pay the price when times get tough. After that, I saved and invested as much I could to build a passive income stream so I don’t have to depend on an employer. I suspect most readers here still have a job, but that’s going to change if this recession drags on several more months. You’ll realize everyone is replaceable and no job is safe. Build up a cash cushion now while you still have a job.
What do you think? Will Covid19 kills the FIRE movement? Is this pandemic strengthening your resolve to achieve financial independence or scared you off completely?
More FIRE stories
- Several early retirees shared their views on Business Insider.
- Corona stories from Backpack Finance.
- Now is not the time to be smug from Accidental FIRE.
Let me know in the comment if you have a post about this and I’ll link to it.
Image credit: Tedward Quinn
Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!
Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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FIRE should be more mainstream. These uncertain times inspire people save more for rainy days. After 2008 crash, average household savings rate went up.. not a whole lot but any increment helps!
We basically did the FIRE movement from 2012 to 2017. At that time he was 44 and I was 35 to 40. Unfortunately he passed away in 2017 and I was left holding the financial bag, since he was the retiree/stay at home dad. I learnt the valuable lesson of a financial downturn before Covid. I dont regret the 5 years we travelled often with our 2 kids. You are correct in that DIRE is a much more realistic approach in this New World Order!
I’m sorry to hear that. Did he have a life insurance policy? Hopefully, you can get some social security benefits.
I don’t think anything will entirely kill off the fire movement. Even if a bunch of people fail on the financial side, they at least didn’t trade the prime years of their life for dollars that wouldn’t have made them happier.
What has the potential to make the Fire movement obsolete is 7 years from now this whole virus thing happening again, or the debt the world has taken on crushes the whole system. I would not feel confident if I were counting on equities to make the 4% rule workout. But then again nobody in the fire movement is actually not working, myself included.
Great thoughts Joe. I think introverts are doing well with this WFH an stay at home thing and extroverts are probably reevaluating their plans for FIRE.
What I thought about during this downturn is mainly obsessing about our health and COVID and the lack of PPE for front line health care workers, and also thinking that nothing is safe, even dividends! Everything got hit, dividend income (none so far for me but I anticipate it will), blog income, and side hustle income (can’t go and sell anything, landlords are having tenants not being able to pay their rent).
I think that cash flow is king but when cash flow stops, what is even better is having cash available to weather this storm.
You’re right. Passive income looks okay for March, but I anticipate a big reduction over the next few months. Luckily, our tenants have secure jobs so I don’t have to worry about that. Whew!
The stock market plunge might undercut the steam in some FIRE folks. Plans will be set back for many. But it won’t kill the idea.
“When I started blogging in 2010, there were only 3 early retirement blogs.”
There were a few more than 3 of us around 10 years ago. 🙂
Not that we all had readers but still..
There were quite a few retirement blogs back then, but many of the bloggers stopped writing during the financial crisis. May happen this time around as well.
There were also many REI blogs back then that I enjoyed.
Really? I only knew a few. Early Retirement Extreme, Lazy Man and Money.
Financial Samurai and Get Rich Slowly were around, but they weren’t really focused on early retirement.
The situation is precarious when you start feeling confident about just cash. By saying you have “X amount of months or years in cash savings,” you’re living off borrowed time.
There has to be a renewed focus on investment income.
Why do you think people have strayed so far away from the definition of FIRE: earning enough investment income to cover your living expenses?
Sam
Hopefully, the cash saving will last until investment income goes back to normal again.
This is why I don’t like selling the investment to fund your cost of living. When the market is down, you lose.
It’s just so much harder to generate enough investment income to cover your expenses. It’s easier to use the 4% rule as a guideline and aim for a number.
I think this may weed out some folks who were dabbling with FIRE but didn’t grasp the required planning for all contingencies. This a trial of FIRE by fire. It will perhaps strengthen its viability.
Spending less than you earn is always a good idea, and so is having a financial cushion. I think those are the key takeaways of a FIRE lifestyle. Hopefully these lockdowns will help people see the wisdom in that lifestyle. PS From the comments on many FIRE sites since last September, many people in the FIRE community saw the trouble in advance and rotated most of their portfolio into better assets, T-bills in my case. FIRE is not necessarily just about cash flow, it is about managing risk.
I don’t think it’s a pause to FIRE, because FIRE is mostly just sound personal finance which has been since Ben Franklin, probably before. It might take a pause or be much more difficult going forward depending on how we come of this (or when/if we come out of it.)
Covid-19 threw us a bit of a curveball, but it’s not a drastic change. Financially, we may be stronger for it in the long run, since we are buying stocks low now. I’m trying hard not to focus on the financial aspects too much, because it’s much deeper than that. Everyone is in a different circumstance, so it’s hard to find some common ground to blog about.
RB40 –
Great and well timed article – also love the guest comments in your article, as well.
If anything, this has made me hungrier. I work at an organazation that had to make really difficult choices and what better way to take back control, so that you aren’t just a number.
Therefore, we are saving more than ever and looking at lower risk investment options, no doubt. Trying to turn out as much noise as possible and trickling in investment when the opportunity permits.
-Lanny
Thanks for your feedback. Keep at it and save as much as you can. Now is the time to invest.
Good luck!
I think FIRE will not be dead. The concept is attractive, people right now just have other priorities.
What might happen is, that some may rethink the 4% rule strategy and put in some more buffer. Also the portfolio mix could change from “maximum yield, buy & hold” to a more conservative balance with less drawdowns, especially in the later phase of the process. Counterstrategies to possible inflation tendencies may also play a role in the future.
Interesting times.
Right, the 4% rule just went out the window. It works very well when the market goes up, but your numbers turn bad quickly in a recession. There will have to be a lot more padding. These crashes seem to be getting more violent every time.
Hi Joe, we’re roughly the same age and retired around the same time with a working wife. Since my 2013 “retirement”, I’ve been transitioning my net worth from stocks to real estate so that now it is a 50/50 split. Covid-19 will be a serious stress test (I was also a former engineer) of my early retirement lifestyle.
I have absolutely no concerns regarding the stock market; I can just wait it out.
However, as a real estate investor, cash reserves has taken on a whole new meaning in a world where tenants cannot or do not have to pay rent without risk of eviction. With mortgages, taxes, repairs, insurance on every rental property, my expenses are $50K per month to keep that operation afloat. My cash flow was positive but not stellar before this. I will absolutely be hemorrhaging cash over the next few months. I fully expect 2 months of losses. I can survive 6 months. After that, depending on the % of non-paying tenants, I will be selling at a loss in stocks or real estate to cover cash flow. I also expect that many tenants, after the emergency is over, will NEVER be able to make up the back rent.
There is also a possibility that my wife be laid off which would apply additional pressure.
This all sounds grim, but it doesn’t keep me up at night. It’s been a REALLY good run since 2013, so I can’t complain too much if I have to give some of it back.
I’m sorry to hear that. We have 2 units and they’re doing okay because I got lucky with our tenants.
It looks like real estate investors will be hit even harder than stock investors.
Most renters think landlords are rich and make a lot of money. That’s not quite true in many cases.
Good luck.
FIRE is far from dead. For people that are in the accumulating phase, this downturn will help you to pick up more assets at a cheaper price. For people that are retired or near retirement, this downturn will make you triple check your numbers.
Yeap, if you’re young, this is a boon (as long as you have a job.) Save and invest during this downturn and it’ll pay off handsomely in the future.
I think the concepts behind FIRE are going to be more relevant than ever but I also suspect that it’s going to be extra hard for people who earn lower wages to catch up. It’s a crappy Catch-22 – they’re considered essential and must work to deliver food and services but also aren’t paid anything near the kind of money they need to get ahead more. I hope that imbalance changes during this time because it’s pretty inhumane to demand people to be on the front lines with minimal compensation, no sick time and no healthcare (looking at Amazon and other such companies). I remember when I worked for much lower wages putting myself through school. If this had hit at that time, that would have been disastrous. I have a hard time imagining how I could have made it out of the hole that, under good circumstances, were so hard for me to climb out of. We’re incredibly lucky that if it had to happen, for us, we happen to be more stable.
We’re focused on staying the course since we aren’t near retirement yet: preserving cash and steadily investing and doing our best to do our jobs well so as not lose our main incomes insofar as that is in our control, and keep supporting local businesses as much as we can. Hoping we can help people come out the other side of this.
You’re right about lower-income workers. FIRE is a lot more difficult if you don’t make a good income.
Good luck!
Although not everyone needs to be on the path to early retirement, this pandemic may help wake up more folks than ever to the importance of pursuing financial independence. Not everyone will get there, of course, but the further along they are on the path, the better they’ll be to weather the bad times. A black swan event that no one is prepared for like this has been is crushing so many people.
I actually think the FIRE movement will grow more as people realize that they need to be in a better position financially.
Thanks for quoting me in your post, Joe – very much appreciated!
I hope the FIRE movement grows too. Financial independence is great. People need to have some options instead of depending solely on their employer.
i think people already pursuing financial independence have put themselves largely in a good spot to weather the financial storm. i hope this wakes some others up to the employer/employee relationship. your employer is not your friend. i work for a large US company like you did and am waiting to see what weasel maneuvers they try to pull when i get back. i’m sure the salaried workforce is in for some major layoffs or pay cuts. i’m fortunate to have a lower level job with a union so they can’t easily get rid of me due to seniority. my biggest concern is a cutback to r+d could mean me going back to shift work. it pays more but i don’t want to do it at this point in life.
Good luck with your employer. I’m reading about a lot of layoffs already. Mostly the retail and hospitality sectors right now, but I’m sure it’ll spread to all sectors soon.
FIRE is fine in this environment itself. Our problem is being unable to order anything other than groceries or medicine (no furniture, hardware for DIY or new clothes for us while in lockdown)!, and secondly not being allowed outside into nature at all is horrid.
Otherwise, FIRE is great!! And to be fair, nothing of the above has anything to do with FIRE, but rather government =)
You can order stuff online, right? Just leave everything in the garage for 72 hours for any virus to die off.
In our area, we can still go outside. Many trails are closed, but there are still some green spaces we can visit. Keep your distance, though.
Hey Joe,
We’re in a very similar position to you. I think that not only won’t this kill FIRE, but it will create a whole new generation of people who will understand the importance of mastering their personal finances, making themselves less vulnerable and dependent on employers, and thus more resilient. I wrote about that a few weeks ago when things started blowing up. https://www.caniretireyet.com/chaos/
IMHO it won’t be COVID to kill the FIRE community, it will be the inflation to kill it. A market like 1965-1982 with strong inflation would kill many money savers, in 17 years an entire FIRE community would be slaughtered, unless they started the journey with a huge amount of savings. And even the ones who retired with a huge amount of money will feel the pain of getting poorer and poorer in a world where everything will be more and more expensive.
Money savers should fear inflation more than anything else.
FED/ECB insane money printing each time the market does a -15% might create a strong inflation, they want to monetize the governments debt (now even the corporate debt) leaving the ones who saved money making many sacrifices to pay the bill.
You know the fable The Ant and The Grasshopper. 🙂
We’ll see how it goes with inflation. I hope it doesn’t get as bad as in the 70s. That will really kill it.
With unemployment claims at 3.3 million for March alone, I highly doubt we have to worry about inflation for years to come.
And if inflation does come, everybody with real assets are gonna get rich.
For the first time in 40 yrs I DID panic sell. Here is why. I have been saving diligently and working hard to have a comfortable retirement. Not early, just stress free when I hit my sixties. I left the marketplace at 62, with $900k in an IRA, and had already moved to my dream retirement town and pd. cash for my downsized mountain cottage. I went back to work at 64 part time as 1.) I found out I really missed my work, I
was an accountant and 2.) Got way too bored. I now work 20 hrs/week doing bookkeeping and budgeting for a great small company here in town. I am now 68. I have not yet touched the IRA. So in my opinion I had already won, so why continue to gamble? When the market started going down so fast, I said I would hold tight until I lost 20%. That happened in a blink as I was still 65% in equities. I feel I am too old now to wait another 5-8 years to recoup. It took me 8 years after 2008 crisis. I still have balance of my IRA, I am now getting SS and have the part time job which I hope to continue for several more years.. I have no debt other than groc, utilities, ins. I want to get back into the market as I have one son who I would love to leave a good trust to, as his generation has nowhere near the benefits mine did. What do you all think? It is so different when you no longer have age on your side. BTW-I am in excellent health for my age. On no Rx yet.
Yup, I saw a slowdown in blog traffic too Joe. I don’t think it’s because people aren’t interested in financial independence or retiring early though. I think it’s like you said – they’re just busy with more important things right now. Like staying healthy and dealing with this new world we find ourselves in.
Eventually I think the tide will turn and the blog traffic will come back. The themes of FIRE are pretty universal and appealing.
It’s actually a good opportunity to show the world just how robust a FIRE lifestyle is. Most of the FIRE bloggers I know are pretty unaffected by this whole situation.
I think it will whittle away at the FIRE movement, probably go back to strengthening portions of FIRE that have not been emphasized which is frugality and minimalism. I hope this dovetails with what the environment needs. I think sites like yours will be fine but a lot of the Johnny come lately (not sure if I even used that right) will fade away as some of them are not ready. I am hoping they will find meaning in their work. Anyway, I thought your post about COVID19 and racism was really passionate! Best post I’ve read in a while. Thank you Joe for #flatteningthecurve and helping to pass on the seriousness of this epidemic. I’m personally less stressed as an MD. Initially we were thinking 2 million in the US would die, so 200k is still horrible but it’s a lot less than 2 million. California and Washington States’s early social distancing is working to slow the spread. Wash hands!!!
Thank you! You’re right about the frugality part of FIRE. Lately, it was all about making more. We need both to succeed with FIRE especially through tough times.
2 million? That’s basically everyone infected. I hope not.
It’s funny how the population is going through the same thought process because I saw a post on Market Watch or something along the same lines. I had written a quick post on my blog too and mentioned that I thought you would do fine, but some of the others would not. If it’s okay, I’m going to cite this blogpost so that some of my readers can circle back to your blog. My blog is more on the environment and for my patients, kind of free entertainment. My blog traffic has shot up, but its nothing to the order of magnitude that you guys are going through. Hope you are well. I kind of regret now not going into pulmonology. I’m general outpatient but I had always wanted to go pulmonology but for some reason did endocrine instead. That’s great job security after COVID-19. Pulmonology. Even survivors are going to have some decreased pulmonary function. Stay safe Joe and wash hands! I personally think it’s airborn and am masking with each patient and having my family mask in the grocery store.
I wrote about this too and it’s clear the financial independence movement is more relevant than ever. If anything this is teaching people that maybe it’s not a good idea to live paycheck to paycheck when they have a choice.
When the dust settles this will only expand our ranks and more will come on board to a smarter relationship with money and consumerism.
I really hope so. Americans need to have a better consume/save balance. This economy has been driven by the consumer for a while now.
I guess an interesting point is that many people following some of the popular FIRE ideas will be the ones best prepared for recessionary times as they probably enter with less debt and a lower cost lifestyle than a lot of other people
You’re right. We’re a lot more prepared than the average household. So many people are really stressed out about finance now. Hopefully, they’ll be better prepared next time.
“Will Covid19 kills the FIRE movement?”
My opinion is that the FIRE movement will not die. There may be fewer people pursuing FIRE for a year or two. But there will always be a certain percentage of people pursuing FIRE as long as there are people working. Of course, the number of individuals being able to achieve their financial goals will be another matter. Things will not be the same as they were a few months ago for a long time, if ever again.
As an aside, I got quoted along with the likes of John Maynard Keynes, Adam Smith, Isaac Newton, Richard Branson, and Warren Buffet on this webpage a few days ago:
The Greatest Investment Quotes of All Time (Posted on Dollars and Data March 26, 2020 by Nick Maggiulli)
https://ofdollarsanddata.com/investment-quotes/
Not too bad for a guy with an IQ of a ditchdigger, wouldn’t you say? (Heck, I can’t even spell IQ.)
Cool, I read the article but did’t know it was you.
I’m surprised there is no quotes of William J. Bernstein at all in that article.
I really hope we get back to normal soon. Once we have a vaccine, it’ll be much easier.
For now, I think it’s okay to pause for a bit. It’s best to stay employed and conserve your money.
Great quote!
In an ideal world it should motivate more individuals to save and invest towards Financial Freedom. They may chose to not pursue RE.
However, on one hand, people who want to spend will spend even more since this would be their YOLO moment.
On the other hand, Savvy individuals who value the time at home will save more.
Financial freedom is the main goal. Early retirement is the fringe benefit. 🙂
Hey Joe, glad everything is ok with you guys.
I honestly think that this virus event will not change anything with the FIRE movement. Quite the opposite. People may not be interested or cannot think about financial independence now, however bear markets historically only last 6-36. A new generation of FIRE warriors will be born after this is over. When the economy stabilizes and people’s basic needs are met once again, I anticipate a huge resurgence in the movement.
Not being dependent on an employer for your livelihood never grows old 🙂
Cheers
Thanks for your input. I think we’ll see a big resurgence too. Lots of people are going to realize you can’t depend on your employer.
Stay healthy!