Ryan Owens is managing director of Google Shopping Europe and a 20-plus year veteran of the ground-breaking and wildly successful internet giant.
He is also financially independent in his early forties — no mean feat, even for a high-flyer at a global technology group.
What got him there was a combination of self-discipline, careful planning and good fortune. He has a diverse share portfolio, including Google stock that he accumulated through performance bonuses, and continues to invest in the broader equities market. He is also loading up his pension pot with maximum annual voluntary contributions. But he’s not ready to retire just yet.
“I hope to retire at 55 or earlier,” he says. “If it is feasible by 50, I will do it then. Myself and my wife have no debt and don’t live a lavish lifestyle. Looking back, I wish I had started saving earlier.”
The notion of stepping away from the rat race, achieving financial independence and retiring early is the stuff of dreams for most of us. And Owens has achieved it.
What he may not be aware of is that more people are trying to put that dream into action for themselves. In fact, a movement has sprung up online to help them get there. Fire, an acronym for “financial independence, retire early”, is a loosely affiliated community of financial management gurus, life coaches and devotees all obsessed with the same goal: accumulating enough savings to make working for a living totally optional.
Strict rules
The concept first came to prominence in the early 1990s in the US following the publication of Your Money or Your Life by Vicki Robin and Joe Dominguez. In the 30 years since, an entire ecosystem has developed to make the idea a reality for people, mainly by advocating strict rules and sharing inspirational stories of a reaching financial escape velocity.
The community that has grown up around Fire advocates living frugally from the outset, eliminating all debt, putting up to 70 per cent of your income into an investment portfolio and then retiring to a beach somewhere before you turn 50, depending on how much you managed to save in the interim.
There are various flavours of Fire, from “fat” (save 70 per cent of your income from the outset) and “coast” (save early and then relax the purse strings over time) to “barista” (save to become financially independent and then work part-time in semi-retirement) and “semi” (work, save and spend as you go).
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A general rule of thumb of Fire is that you save at least 25 times what you estimate your annual outgoings will be upon retirement, with a withdrawal ceiling of 4 per cent from your total pot allowable in the first year after retirement, which is then adjusted annually for inflation going forward.
While Fire may look like solid financial advice in principle, however, its detractors say it is over the top and essentially recommends spending your most energetic and probably healthiest years in a sort of boot camp existence before reaping the rewards of a life in paradise later on — now where have we heard that before? The fact that many of Fire’s most vociferous advocates ply their trade via social media doesn’t help its reputation either.
Gabriel Makhlouf, the Central Bank of Ireland governor, is a notable sceptic when it comes to financial advice on social media. But regulation in the sector is only starting to catch up with the increasing numbers of so-called finfluencers, or financial influencers, who offer advice on everything from saving and investment to borrowing and pensions.
Financial discipline
Yet there is a lot to like about Fire, even if it is far from a “one size fits all” financial planning solution. Many people in their twenties and early thirties find its simplicity appealing. “I would have a fairly jaundiced view of the Fire movement, but there are good financial management lessons that can be gleaned from it,” Nick Charalambous, financial adviser at the Cork-based Alpha Wealth, explains.
“The full version is very extreme and involves significant lifestyle sacrifices,” he says. “You also need to be lucky with your investments for it to work. However, on the plus side it fosters financial discipline and encourages an awareness of saving from a young age. If you harness the power of compound interest early on and maximise your tax benefits, you will be amazed at how significantly your wealth will grow over time.”
Bob Quinn of the Money Advisers is equally sceptical about Fire, describing it as an “almost cult-like movement” that tries to get gullible people to sign up to a way of life where most of their time will be spent in misery while their friends and family are out enjoying themselves.
“Generic financial advice simply doesn’t work. It’s pure claptrap,” he says. “Personal finance is like a fingerprint — everyone has their own unique needs. It’s all about aims and ambitions, and no two are the same. My advice would be not to be controlled by your finances. Create a plan that allows you to live the life you want to live, and arrange your income and cashflows accordingly.”
Charalambous believes that retiring by the age of 30 or 40 is unrealistic for most people in Ireland anyway, but 50 is achievable if you have a good financial plan in place.
“The earliest you can access your pension pot here is 50, which makes retiring before then difficult for all but the very lucky few,” he adds.
“Pension income is one of the main pillars of any retirement plan. However, while your pension pot will continue to grow post-retirement, you will also need to have other income-generating assets such as property, savings or investments whether you are hoping to retire completely or planning to work part-time.”
Work-life balance
While retiring before 65 may not be achievable or even the ultimate aim, securing financial independence as early as possible is central to Fire and most other wealth management strategies. In fact, financial independence doesn’t have to mean stopping work altogether. If nothing else it may allow you to achieve a better work-life balance without having to worry about how you’re going to pay your bills.
“I don’t think I will give up work altogether when I do retire,” Owens, the Google executive, says. “I would consider consultancy or maybe working a couple of days a week. But we do have four children under the age of ten so we want to make sure that they are financially secure. My advice to [them] would be to put away at least 3 to 4 per cent of their wages every month and stay away from debt.”
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Another technology executive, also in his early forties, who spent more than a decade in Silicon Valley before returning home to west Kerry via Europe and Dublin, is delighted to have achieved financial independence by saving and investing from an early age, but has no intention of retiring just yet.
“All your friends are in work during the day, so there’s not a lot to do,” he says. “There’s only so much golf you can play.”
He was aware of the Fire movement from early on as it was popular in America when he was there and lived quite frugally despite earning a healthy salary over many years.
He describes himself as more of an advocate of “geoarbitrage”, earning at a level appropriate to one location, like Silicon Valley, but living in a much cheaper place, rather than Fire.
“Find something you love doing and do it in a place you love,” he says. “If you can do that, you will be in no hurry to retire.”
