With my early retirement imminent, I’ve recently dipped my toe in the waters of socializing the concept of FIRE to friends and family.
I haven’t been forthcoming on just how soon, but I’ve at least laid the general idea of early retirement on the table. As expected, jaws dropped and eyes popped out of disbelieving skulls.
The main reactions I’ve gotten are as follows:
- Gee golly whiz, company X must have been paying you a fortune
- I don’t make enough to retire early
Obviously, I take exception to the assumption my wealth was somehow ill-gotten. There was no lottery ticket, inheritance, or sexy Google job. As I describe here, my average salary working in a blighted Midwest town has been pedestrian at best, and I became FI in just about 15 years.
But the few people I’ve told think I’m nuts. FIRE is fine for high salary people, they say, but not for Mr. Average Joe. A crummy cubicle desk with a ball and chain has his name on it, and he has to work until he is old and beaten down, right?
What’s Average Joe’s Salary?
Below is a historical chart of the average US full time salary. Average Joe made just under $40K in 2000, and by 2022, his salary has nearly dubbed at $78K. No promotion, no bonuses – just the same average salary year after year, growing solely with inflation.
Can Average Joe achieve FIRE on these earnings?
Time to FIRE
FIRE teaches that salary matters far less than your personal savings %. The higher your rate, the faster you achieve FIRE.
As popular blogger Mr. Money Mustache projected, this means you can retire as fast as 3 years, if you can save 90% of your income. Below is his simplified table.
Pretty simple stuff. Save and invest a shitload in passive index funds and retire early. Its as simple as that. All fine and good . . . if you have the cash to invest.
But how feasible is a high savings rate with Average Joe money?
Mr. Money Mustache, for example, was a high income software developer, who also happened to get in early on the Boulder real estate boom. I can certainly see why the Average Joe might believe Mr. Money Mustache’s stellar example is out of reach.
FIRE for Joe
Clearly, a 90% savings rate is unachievable for Joe. So what rate is more reasonable? Popular blogger and spiritual godfather of the the FIRE movement JL Collins famously saved 50% of his income without a hoity toity degree or salary.
Its a stretch, but Average Joe can do it too, as long as he rejects the usual American trappings of too much house, car, hedonistic consumption, and debt.
How fast can Joe FIRE on a 50% savings rate? And how much longer is his journey if he dials down his savings rate and just puts in 5% (enough to hit a typical 401K match) or perhaps shoots for the middle and just maxes out his 401K every year (~30% of his income)?
I ran my own simulations to find out. Rather than focusing on theoretical (just savings percentages), I instead created a FI goal of $1M, which can yield $40K of living expenses a year.
Below are the results of my projections on how fast average Joe can achieve $1M.
Savings % | Year to Retire |
---|---|
5% | 35 |
401K max | 22 |
30% | 18 |
Note: Simulations use BLS full time salary index, historical 401K limits, an assumed 5% 401K employer match, and an 8% market return.
A couple observations. First, interestingly enough my more detailed and independent projections reveal 18 years to reach $1M on a 50% savings rate, which is close to Mr. Money Mustache’s 17 year projection.
What was more surprising to me was that stretching the savings rate from 30% (or about the 401K yearly contribution limit) to 50% only shaves off about 5 years. Half a decade is nothing to sneeze at, but its clear that frugality begins to have diminishing returns once you already have a high savings rate.
Either way, its still pretty remarkable. You absolutely can achieve FIRE on average Joe money. You can hit $1M in your late 30s with a 50% savings rate, or by your early 40s by maxing 401K contributions only.
Meme stocks, crypto, real estate windfalls, and rare wine investments are not needed. Boring old Joe Blow can do it with zero hacks.
But what happens if he joins forces with Average Jane?
The X- Factor: Marriage
Let’s take all the previous assumptions about Average Joe and apply it to his spouse Average Jane. Assume both never make a dollar over average their whole adult working lives.
How much would marriage impact the time to FIRE?
Take a look below. The solid lines are the time to FIRE on 5%, 30%, and 50% savings rates I previously covered, whereas the same colored dashed lines project the same savings rates but for 2 identical salaries.
Incredible. Two average earners can FIRE in just 10 years by saving/investing 50% of their income.
Side note: even a paltry 5% contribution is amplified by marriage. Assuming an equal 401K match, our average couple can FIRE in just 28 years if both save 5% – that’s 15 to 20 years earlier than the average American.
Final Thoughts
The data is clear. FIRE is achievable on a single average income. It will undoubtedly take considerable frugality and sacrifice, especially with a family, yet its achievable. But the FIRE journey can be both faster and more comfortable for average earners who join forces through marriage.
Certainly, FIRE is filled with captivating stories of people who smashed average to pieces. A software developer retires at 30. A rental investor is FI in just 5 years. A burnt out financial analyst quits and launches a six figure blog.
If you are an avid FIRE reader, you know who these people are. They run popular blogs, publish books, host podcasts, and have endorsements from company X. Shouldn’t we aspire to beat the average like these superheros?
Maybe. But before you start 5 side hustles or start harvesting your own fire wood, stop and take a peek under the hood.
The truth is, nearly every FIRE guru I can think of has or had a working spouse. A second income provides a security blanket. It allowed them to multiply their savings, take more career risks, and in many notable cases retire early, while the other spouse continued longer.
I don’t point out the marriage x-factor to disparage successful early retirees, nor do I do it to discourage a single earner household. Though rarely acknowledged, however, marriage is an absolutely foundational x-factor behind some of the most notable FIRE voices. Certainly I wouldn’t be FI without my lovely life partner and wife earning a similar salary.
The bottom line is achieving FIRE on a single average salary is difficult. Average Joe can do it in under 20 years, but anything shorter than that will take a second income or a higher salary.
My advice? Marry for love; don’t marry for money. You have one life to live: spend it with someone that lights up your soul. But if you do decide to take on a life partner, you can significantly accelerate your journey to FI.