FIRE

Some days won't end forever
And some days pass on by
I'll be working here forever
At least until I die
--Huey Lewis & the News

A popular acronym among many millennials and late Gen Xers is FIRE (Financial Independence, Retire Early). The idea is to save and be thrifty in your first couple of post grad decades so that you've amassed a large enough nest egg to subsequently live the way you want--and primarily paycheck free.

While retiring early has always been an attractive proposition to many (due to the axiomatic preference for leisure over labor), younger generations seem more eager to pursue it than previous generations. Why this is so is not entirely clear.

However, the idea of early retirement for large groups of people raises concerns about its advisability as well as its feasibility. Retiring early by definition means that individuals cease production of economic resources even though they still have capacity to do so. Whatever savings that could be set aside to fund subsequent non-productive years spent in 'retirement' is thus prematurely truncated.

Because they have ceased producing and saving prematurely, early retirees are more vulnerable to unforeseen events that could require more economic resources than have been set aside. Illness, financial market calamities, inflation, family members in distress, and health care in old age are but some of the possibilities that could drain savings pools that are smaller than they otherwise would have been.

Not only will this situation reduce the standard of living of early retirees, but it will also put more pressure on social safety nets as early retirees who run out of resources seek government assistance. Fewer number of workers will be forced to support greater numbers of non-workers. Early retirement that leads to this situation literally taxes the system.

But even if those in pursuit of FIRE were able to do so without taxing the production of full-time workers, is early retirement a worthy goal? If that early retirement is to be spent by increasing leisure such as travel and hobbies and decreasing productive output (which could include 'non-profit' charity as well as 'for-profit' work), then those prospective early retirees might want to think twice. Production and exchange, whether it occurs in markets for economic or charitable resources, is how prosperity improves. Not working reduces overall prosperity.

Prematurely exiting labor markets in pursuit of leisurely preferences increases the likelihood of an unproductive life.