A Critical View of Flamingo FIRE
A popular approach to financial freedom, Flamingo FIRE offers a seductive combination of early retirement and ongoing investment development. The dream combination of any working individual, am I right?
While their investments continue to build towards full financial independence, people can semi-retire, cut back on their workload, or pursue passion projects by reaching half of their goal FIRE amount. A deeper examination of Flamingo FIRE, however, exposes several important factors that cast doubt on its seeming simplicity and possible drawbacks.
Illusion of Control
Flamingo FIRE is predicated on the idea that investment returns would keep rising faster than inflation, enabling market growth to account for the other half of the FIRE figure. However, this assumption is based on a shaky basis. Even though they are frequently good, historical market returns are not always reliable and might fluctuate. The timetable to complete FIRE or even the initial nest egg might be seriously impacted by a protracted bear market or a notable market decline during the “coasting” phase.
The “coasting” phase is a component of Coast FIRE where one saves the green papers with the aggressiveness of a bloodthirsty shark for an early retirement. Once they reach their significant savings milestone (often around 50-75% of their desired retirement nest egg), they enter the “coasting phase.” During this phase, they significantly reduce their savings rate or stop contributing to their retirement accounts altogether.
Coming back to the 4% rule and the market volatility, during its protracted times, the 4% rule—a well-accepted guideline for prudent withdrawal rates in retirement—might not be applicable. The 4% rule does not take into consideration unanticipated circumstances such as economic shocks or extended periods of poor returns, while being based on historical evidence. Hence, relying simply on the 4% rule during the coasting period is dangerous, particularly for people who have shorter time horizons to complete FIRE (Financial Independence, Retire Early).
Whimsicality of Healthcare Costs
In many wealthy nations, including the US, the expense of healthcare is increasing more quickly than inflation. For people who depend on a fixed retirement income, such as those in the Flamingo FIRE phase, this is a serious obstacle. Unexpected medical costs have the potential to rapidly deplete resources and sabotage the goal of complete FIRE.
On a side note, focusing on health is just as essential in achieving the heights of Flamingo FIRE or any other form of FIRE as being frugal and having saved funds. Unexpected medical crises can happen at any moment, regardless of age or health state, despite the claims of some that healthcare expenditures can be reduced by meticulous preparation and preventive actions. The Flamingo FIRE technique is made further riskier by this uncertainty.
Psychological Impact of Reduced Income and the Pressure to Achieve FIRE
Money, an ordinary-looking piece of paper, can control people like puppets attached to strings if mishandled. The mental implications of going into semi-retirement can be profound. Many people would be thrilled about their newfound flexibility and independence, while others might find it difficult to adjust to the loss of their former occupations’ social and professional identities, as well as their money. Feelings of anxiousness, despair, and a lack of direction may result from this.
Furthermore, there can be a lot of pressure to reach complete FIRE, particularly for people who have made significant investments in the Flamingo FIRE plan. Unhealthy behaviors like excessive risk-taking in investment portfolios or an unwillingness to modify spending patterns in reaction to market changes might result from this pressure. Hence, it is essential to identify an amount that works with your daily spending and consumption and create a balance such that money doesn’t become a hindering factor.
The Overlooked Importance of Skill Development and Career Adaptability
Flamingo FIRE often assumes that people can follow their passion projects or move to a less demanding position without experiencing a major disturbance to their careers. Such a theoretical view might not be the case for everyone, though. Many people might need further education or training to learn new skills or adjust to a shifting labor market.
Additionally, pursuing passion projects might not necessarily result in a steady or dependable source of income. Such is the sad reality, but not everyone is capable of cultivating a side hustle and maintaining it. Financial instability and disappointment can result from underestimating the time, effort, and money needed to create a profitable side business or entrepreneurial endeavor, making it important to do your research before sailing the ship of passion projects.
Unintended Consequences of Early Semi-Retirement
Flamingo FIRE certainly appealingly portrays retirement. It has its ways of convincing people to follow this financial plan. But, it is vital to take into account any potential unforeseen repercussions. Reduced cognitive stimulation, a loss in physical health, and social isolation are all consequences of early semi-retirement. Sounds surprisingly scary, but it’s true.
These elements have the potential to greatly affect one’s general health and standard of living. After all the hard work and efforts you would have applied to reach your goal, you could be sent back to square one.
Early semi-retirement might also limit chances for both professional and personal development. In the quickly changing world of today, lifelong learning and skill development are essential. People who choose early semi-retirement may lose out on worthwhile chances and experiences that might improve their lives and professions.
Conclusion
Despite its theoretical attractiveness, Flamingo FIRE has some important issues that cast doubt on its apparent ease of use and possible drawbacks. Since good looks aren’t everything. Before implementing this financial independence strategy, careful thought should be given to the following factors: the dependence on market returns, the uncertainty of healthcare costs, the psychological effects of lower income, the significance of skill development, and the unforeseen consequences of early semi-retirement.
Given the inherent dangers and uncertainties involved, it is imperative to approach Flamingo FIRE with a critical and realistic mentality. Navigating the difficulties of this strategy requires a well-rounded approach that includes a flexible retirement plan, a diversified investment strategy, a strong emergency fund, and a proactive attitude to health and well-being.
Making well-informed judgments about your financial future and selecting a route to financial independence that matches your particular situation, risk tolerance, and personal objectives by carefully balancing the possible advantages and disadvantages is the key.
