Baby Boomers on FIRE | The Spark that Started the Flame
Baby Boomers may be new to the term, FIRE, but a portion of us have been participating in the concepts for the past decade, if not longer. When we turned 40 or 50, we realized the rules of the game have changed. We realized we needed to significantly increase our savings for retirement.
Pensions were no longer a given and jobs were becoming less secure and scarce for the older, higher paid Baby Boomers. Meaningful worker benefits began to vanish and health care costs were sky rocketing.
Financial advisers began telling us a million in retirement savings was no longer enough. We once spent under $80 for a typical wireless phone for the home, and under $50 for service. Now, your typical phone costs $800, and tack on a monthly service fee of $100 or more. Cable and Internet service, once a luxury, is practically a necessity now and another monthly bill at $100 or more. Our appliances talk to us now, and they cost significantly more to replace.
According to Fidelity Investments, the average 65-year-old couple, Baby Boomers, in retirement can expect to pay $275,000 in out-of-pocket expenses for health care.
Retired 65-year-old couples can expect to pay $275,000 in out-of-pocket expenses for health care, excluding long-term nursing care and rehabilitation — but only have a 50 percent chance of covering these costs.
According to some industry calculations, a person with a $40,000 annual income needs $1.5 million to comfortably retire (the higher your income, the more millions you need in order to maintain your lifestyle). If that weren’t steep enough, this figure doesn’t include health costs.
(SOURCE: CNBC, Health Care Dilemma 10,000 Boomers Retiring Each Day)
Baby Boomers on FIRE | More of a Necessity Than a Movement
For Baby Boomers, cutting wasteful spending was nothing more than a simple mechanism to increase our retirement savings and secure the family’s future. We built bigger emergency funds. We brought our lunch to work to save money long before it was a fad. We held yard sales and sold our extra stuff to millennials finally moving out of their parent’s basements. We paid off debt because we knew it was smart to do so. We refinanced our mortgages to very low interest rates, or paid off our mortgages completely. We increased our savings rates from 10 percent to 20 percent of our income or more.
With local bank savings account rates so low, we realized we could do better with online savings accounts. We moved our emergency funds and received sign-up bonuses from the banks for doing so. We know how to manage credit and our credit scores are very good to excellent. This allows us to build additional wealth by taking advantage of credit card offers that pay us sign-up bonuses as well (see Bonus Credit Card Deals to Build Wealth).
We can’t believe the credit card companies want to pay us money, but we’ll take it. Thank you for the cash Wells Fargo, AMEX, Capital One and Discover.
We didn’t fear the market. We became Bogleheads and no one needed to tell us to invest our money wisely. We started businesses and bought rental properties for the recurring revenue; we diversified our income and our investments. We shared our knowledge with the younger generation. They realized they could use these tactics to become financially independent and retire early. Some wisely ran with it and coined the term, FIRE.