I’ve been working towards financial independence for a few years, and for the most part I’ve been following straightforward, tried-and-true basics. This strategy has worked well so far, but lately I’ve been wondering… what if everything we assume about FIRE (financial independence, retire early) is about to change? What if the 4% rule, the career timeline, even the basic idea of ‘retirement’ no longer makes sense as AI slowly changes the economy?”
I’m not here to fearmonger or sell you some course that will fix your financial planning – I just know many of us are quietly wrestling with these same questions.
Let’s explore what’s our base case, and what MIGHT change, how do we adapt, what can we do to keep our options open?
Part 1: FIRE 101 Refresher
For those new to FIRE: The basic math is simple – save 25 times your annual expenses to hit your “FIRE” number. For example if your expenses are 60K per year, 25x is 1.5M. If your expenses are 100K, then your fire number is higher at 2.5M. At that point, when you reach this target FIRE number, you could withdraw 4% per year (you may have heard of this as the 4% rule, or the 4% safe withdrawal rate). In theory, your investment continues to grow and replenish that bit you withdrew. Your money lasts forever without you having to make additional income.
There are a few variants within the FIRE community: Fatfire, leanfire, baristafire, etc. Definitions are loose anyway, and these are primarily useful for consuming FIRE content/talking to the enthusiasts. My personal approach has been closest to Coast FI, whereby you save fairly aggressively early on to let the compounding of that initial sum grow into a reasonable retirement nest egg, and then as you move into mid-career, you get to “coast” and have options to…
- take the foot off the pedal on investing because you know your previous hard work will compound over time
- scale back on work to spend time with kids or travel
- have a mid life crisis and switch jobs and pursue other passions because you’ve already taken care of the financial piece of retirement; what you to today just needs to fund your daily expenses.
To figure out your numbers if you’re interested in Coast FI, decide what age you want to “really” retire and how much you’d need at that point. For example, if you want to never work again at 60, and need $80K annual expenses at that point, 80kx25 is $2M. To have $2M at age 60, working backwards on an investment calculator, if you had $500K at age 40, you can still hit that $2M number when you’re 60 even if you stopped investing any further, after age 40. Or if you’re 30 and already have $250K invested, you can stop investing at age 30. Some people call this their Coast number or CoastFIRE number – think of it as just an earlier milestone before full/proper retirement.
This appeals to people because it’s not about racing to the FIRE number finish line and THEN live life/do nothing. It’s about knowing when I have enough invested so that I can start reaping the benefits of “financial freedom” and optionality, WELL BEFORE reaching that bigger fire number. (Because let’s be serious, who wants to work and save money forever? We all want freedom and security, as soon as possible; and realistically I’m not looking to fully retire and sit around starting at age 40 ANYWAY. I’d be happy to do productive things that make money, I just don’t want to be completely tied to one set of options.)
Regardless of which type of FIRE you’re targeting, and whether you’re making $50K or $500K, the principles scale. Higher income just means you can reach your number faster. This has worked well for SO many people, there’s no shortage of case studies, but will it continue to work well? That’s where I’m starting to have questions.
Part 2: The Cracks in the Foundation
To be clear, I’m not saying FIRE is broken and that I’m abandoning the basics of living within means and dollar-cost-averaging into the market and utilizing tax-advantaged investment accounts – if I were just starting out I’d tell myself to just get started with those right away. The core strategies still make sense, but some of the underlying assumptions might need updating, and this is more about long-term adaptations to add in once you’re already on that path.
Historical Returns Assumption:
The 4% rule assumes on average, historical market returns taken from 1926-2020s – and we’ve seen plenty of variation from year to year, that doesnt worry me. But so many things can challenge that assumption – what if AI fundamentally changes how value is created? Some sectors may become obsolete, some bubbles may burst; AI could also create a winner-take-all dynamic where returns concentrate on just a handful of companies. Even though we’ve seen plenty of volatile times before and things smoothed out in the long run, in those times, the US markets maintained a level of economic dominance that we can’t say for sure will continue 20, 30 years into the future. During that historical timeline we also didn’t have majority of trading being algorithmic and half of the investments concentrated in passive index funds – does that change things? I don’t know, and I think it’d be arrogant to not at least consider the possibility it might.
Career Timeline Assumption:
FIRE assumes you can work consistent jobs for 10-20 years. But what if AI compresses that timeline? Using my own job as a clinical pharmacist as an example – I feel pretty good TODAY about still having an edge over existing AI technologies – as of now, the risk of a medical error kinda requires multiple layers of machine AND people to stay involved – a bad outcome is just not acceptable.
However, I feel much less confident advising younger generations to pursue this profession. There is no way we have the same setup in 20 years. How much time it’ll take to change will depend on how quickly the systems can be developed, how much legal boundary will be put in for what’s safe and allowed, and that often ties into how much lobbying there is.. In other words – fully beyond my control. Yes there will always be ways to pivot but nothing is guaranteed.
Outside of healthcare, there are fields that AI will change even more quickly – think customer service, design, administrative work.. the question isn’t whether your job will change between now and retirement – it’s how quickly, how dramatically, will it be to your liking – and how that affects your earning years.
Expense Predictability:
Another big assumption of FIRE is predicting your expenses 20-30 years out. We’re already seeing everything move to subscription models – software entertainment transportation housing – what if that accelerates to food and other basic services?
Also, things we consider valuable and premium in society today may look completely different in the future; there may be new expense categories. Layer that on top of the possibility that inflation doesn’t follow historical averages and a slow shift in the dollar’s purchasing power.. and if you have kids, will higher ed be MORE important or less important, how much more expensive; and what would it look like to “set them up for success”, should I maybe budget more to.. fund multiple career pivots on their end, extracurriculars or access to.. SOMETHING?
I know this can sound like I’m overcomplicating things, I’m not even retired yet so why am i thinking about my children going to work- but if you’re a fellow parent, you know that feeling of just wanting the best for your kids, and what wouldn’t you do (if you can) to just make things a little better for them. Stack THAT on top of the collectivist culture mindset- there’s no way I’m on purpose leaving anyone to fend for themselves.
If your framework of financial planning requires a prediction of future expenses and all you have is this big range of 60K-120K per year for example, then it’s near impossible to nail down a specific FIRE number and timeline.
Stability:
FIRE assumes stable institutions – that banks, markets, government systems continue functioning as we have seen them do in the past.. and I know the historical assumptions have lived through some really unstable times like war and the great depression- but there are some structural elements that feel different, like the debt crisis, the scale of global interconnectedness, technological disruptions, and how easy info spreads in the current age. A lot of us are US-based, and the more I think about it, having ALL your faith put in one setup is like having all your eggs in one geographic or institutional basket might be riskier than it used to be
Part 3: It’s not all doom
I know I just listed out all the ways how our plan to retire early can fail, but it’s not all doom and gloom. Change can lead to new opportunities for those who are willing to take a risk and stay open minded. For example:
- If you are one of the few people in your current field who are early adopters of new technology, you could serve as the bridge between tech and your world, which can sometimes mean a higher income. Or at the very least, you can see what’s coming and not be surprised. We’ve seen this with social media and even the beginnings of the internet, and it’s possible it’ll go that way again.
- Using AI to support any additional income streams or a new business – if you have an idea but was previously limited due to your ability to code or make a website or research a market or extend a global reach due to a language barrier, AI can potentially help you achieve that extra income, enhancing your financial independence journey.
- New asset classes can emerge- think digital assets, intellectual property; it’d be fascinating to learn about these and see how they evolve.
- Lastly- and this one is maybe too optimistic- but with all the ways AI can help streamline everything, what if goods and services become cheaper and your actual FIRE number is lower? (I feel like that’s not how this works- any reduced cost in production will be pocketed by the company and not passed on as discounts to the consumer, but HEY. One can dream.)
Part 4: My Adapted Approach
With all this in mind, what should we do?
It is easy to be paralyzed with all the possibilities and whatifs, but we still have to take some action. I can’t give you financial advice, I’m not a financial advisor, I don’t know what the future holds, but this is how I’m personally approaching financial independence and retiring early.
Basics:
First of all – basic good planning is still good basics. This include good financial habits and living within means, automating my finances, taking advantage of tax-advantaged accounts, and dollar-cost averaging with the most basic index funds. This happens in the background and will continue to be my base case scenario, and none of my other things come at the expense of following this foundational basic strategy. If you found me through Airbnb content, real estate serves as a diversification/a hedge for me- it’s a side thing. My main thing is still the boring straightforward index fund stuff, and I’ve personally found that SO much less stressful.
Range Planning Instead of Fixed Numbers:
Because I can’t predict how long I’ll have my current income and what my future life will cost, I’m going to be targeting a pretty big range and not a specific FIRE number.
On the lower end, I have my base case, if FIRE assumptions hold and society continues as we have known it, great! But I’m also going to keep working towards a higher number just in case, and try to do that sooner rather than later, while I still can. (And I don’t mean this in a bleak way. To me, having that future optionality and security is well worth it, as long as I can balance enjoying life today and spending time with people I love.. so no I’m also not grinding and hustling to no end. The upper range is still a real number).
Asset Diversification Beyond Stocks:
Traditional FIRE mostly focuses on stocks/bonds, and if you’ve watched my other videos you know I also diversify through some real estate.
Beyond those, I’m actively learning to be better versed in other assets, whether it’s metals, cryptocurrency, foreign currencies, digital or business assets, or even staying with real estate but exploring the commercial side. None of this is done with a speculative get-rich-quick intent, and no I’m not going out to buy a gold bar from costco today, but just as an exploration of how much is a reasonable hedge in my portfolio? Like 5%, 10%, more? What mix of “alternative things”?
Every investment carries risk so I’d urge you to learn as much as you can; I have personally found it incredibly difficult to find unbiased high quality info on some of these topics, and there’s a lot of predatory content aimed at exploiting people’s anxieties and legitimate concerns.
Multiple income streams:
It’s been a few years since I’ve been working on building multiple income streams – I think this will be important especially now. Different industries are going to be differently impacted by AI and other societal changes, and so having multiple ways you can sustain yourself will de-risk any turbulence coming our way. I also think of multiple income streams as an opportunity to build different skills while earning that extra $ to add to my retirement savings.
Continuous Learning Investment:
I’m going to keep uptodate on new technologies. I think that’s a given for many of us, if not just out of curiosity. Some people may also seek more formal training – I’d just vet the programs to make sure it’s worth your time and money
Community/Network Building:
On the opposite end of the spectrum, it’s worth doubling down on the things that are so uniquely human – whether it’s in my career, in life.. the ability to actually listen, connect, develop trust with another person, build real-life communities, and the ability to ethically navigate gray areas. Relationships become a form of wealth in uncertain times – people who can adapt together, share opportunities, and support each other through transitions have advantages that no amount of $ saved can replicate.
Geographic Hedging:
I’m also thinking about optionality in terms of where I live and work. I like where I am today, but I also recognize having options is valuable.
Whether it’s economic opportunities, political stability, or just cost of living changes, having mobility give me more control over my financial future. In my planning, I have my base case of just being here locally, but also what would it look like if I were to move – and I build out financial models for moving for work reasons to a different state, moving to a different country, all sorts of probably less likely cases but good to include in my planning nonetheless.
I think through the logistics of making that happen, what are the potential costs of living and education and the move itself, how do I handle hard assets I can’t move. I don’t worry about the finer details, but in broad strokes I want to have an idea of the budget and possibilities.
Traditional FIRE says: accumulate enough to opt out of the economy.
My more adaptive AI-era version would be to build enough financial flexibility to evolve with the economy. The goal isn’t to predict the future perfectly, it’s to be positioned for multiple possible futures. To me, it’s not fear or escapism, it’s just about intelligent preparation, which is the same mindset that got a lot of us interested in any format of FIRE in the first place – taking control of our own financial future, rather than hoping someone handles it for us or just praying it works out.
What do you think?
Are you adjusting your financial planning and what kinds of things are you considering? Let me know in the comments, I’m genuinely curious how everyone is thinking about this.
