Personal finance: “FIRE” doesn’t really mean “retire early”

True:

In truth, “FIRE” should be “FICC” for “financial independence change careers.”

Source: What I learned about the FIRE movement while making a doc about it

I have followed several “FIRE” blogs from people who save aggressively (generally a good thing) and “retire” at 30 or 40. I admire them for practicing frugality (something we have practiced too). I am now retired, albeit, at the age when many people have retired (old dude, ok?)

I too noticed that most FIRE practitioners did not retire, exactly, but often took advantage of their near financial independence to work independently, on their own schedule – instead of the usual corporate rat race. That’s not  bad thing either – in fact, it sounds like a great opportunity for many!

But there are some hidden “gotcha” expenses that may be lurking for FIRE adherents in the near future …

I also noticed that many might not be able to address their health insurance costs as they grow older. In the individual ACA markets, health insurance premiums are nearly flat from age 21 to about age 43, and then begin rising at a modest exponential rate. About 270% of ACA age-related price differential occurs after age 43. It is common for married couples in their 50s and up to see ACA premiums of $1,500 to as high as $4,000 per month for a “Silver” plan with high deductibles. What was a $400 monthly expense at age  40 becomes a $1,500 expense at age 55.

If they have kids, those premiums are even higher.

If you do not believe me, here is the HealthCare.gov premium costs for a 64 year old married couple in Laramie, WY, earning about $68,000 per year, which is just above the subsidy cut off level. (Click to enlarge). Yes, that’s about $49,000 per year, with a $12,000 deductible. On income of near $68,000 per year.

The unsubsidized individual markets are broken, badly. Not too many FIRE adherents seem aware of this challenge for their future plans. If their income falls below the subsidy cutoff, by as little as $1,  Federal taxpayers pay nearly all of the premiums, so there is that option – figure out how to reduce their investment income. Indeed, there is even a cottage industry of financial advisors to help people structure their investments and early retirement income to lower their income below the subsidy cut offs. They can do this by setting aside cash savings and moving their investment income into capital appreciation instead of dividends. There are also some tricks that can be done by setting up living trusts.

And for some FIRE adherents, retirement actually means one of the two breadwinners retires (And pursues new activities). This leaves one spouse with employer sponsored insurance and possibly family coverage as well.

Anyway, many FIRE adherents may not be aware of some big future expenses.