Suze Orman recently made an appearance on the Ask Anything podcast hosted by Paula Pant.  The interview was about an hour long, and it largely focused on the FIRE (financial independence, retire early) community.

I listened to the whole interview, but the parts I discuss below are not necessarily exact quotes from the podcast.  I encourage anyone to listen to the whole podcast if you want to hear exactly what Suze Orman said.

The interview started off with Paula asking Suze if she has heard of the FIRE community and what she thinks of it.  Suze quickly responded that she hates the idea of FIRE (she didn’t say she hates the people pursuing it).

For those who have listened to Suze Orman in the past, you probably know that she tends to hit on a lot of the same points over and over again.  I think Suze gives a lot of good advice, as does Dave Ramsey. I wrote on this topic a long time ago.  One major exception is that I generally don’t agree with their investment advice.  I recommend something similar to a permanent portfolio setup.  I certainly don’t advocate putting most (or all) of your investment money into a broad market index fund.

On personal finance matters, I think many people would be well served listening to Suze Orman (and Dave Ramsey as well).  They are very good about telling people to get out of debt (with the possible exception of mortgage debt).

The problem here is that the FIRE community tends to be a little more advanced than the general population in the subject of personal finance.

The FIRE community is still relatively small, but growing rapidly.  It is also a very passionate community.  The problem, if you want to call it that, is that there are a lot of varying opinions within the FIRE community.  My biggest disagreement with the FIRE community is on investing, as many people advocate the “buy-and-hold index funds” theory. But even here, there is some diversity of opinion.  In a financial independence forum, I recently saw a few people speaking of a major stock bubble and warning of a possible crash in stocks.  One even referred to stock investing as gambling.

When Suze said she hated the concept of FIRE, it was not about investing.  She said that most people should have at least $5 million if they want to retire (or possibly $10 million).  She said if you are like Bill Gates or Warren Buffett or her, then it is probably ok to retire.  If you have $20 million or more, then you should be fine as long as you aren’t reckless.  Of course, very few people on this planet have $20 million or more.

Throughout the episode, Suze kept hammering on the fact that things go wrong in life. Unexpected things happen, and even insurance can’t necessarily cover all of these things.  She kept pointing out disaster after disaster that could happen.  She said that she has basically seen it all and that anyone looking to retire early is testing fate. She thinks most people should work until they are at least 70.  She did add that you should find something you love to do so that work is not miserable to you.

Prepare For What’s Possible

The podcast episode was likely very interesting to anyone who is interested in personal finance. It has received a lot of feedback, particularly from the FIRE community.  I have seen many discussions on forums, as well as comments directly on the platforms where the podcast episode was published (such as YouTube).

Some comments really took Suze to task.  With anything on the internet that generates a lot of interest and discussion, there were a few nasty things said about her, although the majority of what I saw was at least respectful, if disagreeable.

There were a few comments that said Suze made many good points and that they were even reconsidering some of their own thoughts on the overall subject.

A lot of the comments I saw though were largely in between.  They disagreed with Suze on many points, but also conceded that she brought up some valid concerns that should be considered.  For this reason, I think it was a successful podcast episode.  You don’t have to get everyone to agree with what you said.  But if you get people thinking and reflecting on their own situation, then it should be considered a success.

I do with investing what Suze Orman does with personal finance.  She talked about all of the things that can go wrong.  It’s not that they will go wrong.  I say the same thing about investing.  I often refer to a Japanese investor who put all of his money in the Japanese stock market in 1989.  Three decades later, he is still down.

It’s not that it will happen again or that U.S. stocks will do the same thing.  It is just that it is possible.  I am not saying to invest for this scenario.  I am saying to prepare for this scenario because it is a realistic possibility.  Instead of asking what will happen or whether something can happen, just ask if you are prepared for it if it does happen.

The Misnamed FIRE and the Nuances of FI

After the interview, Paula Pant talked about the conversation.  She simply said that she does not think Suze understands FIRE. She said that Suze doesn’t understand the nuances involved.  I think Paula is correct.  I had been thinking the same thing throughout the interview.  I’m not sure why Paula did not bring this point up during the interview.  Maybe she thought it would seem disrespectful, but I still think it could have been brought up in a devil’s advocate kind of way so as not to sound disrespectful.

The misunderstanding is not all Suze’s fault.  Perhaps her only fault is that she has not listened or read more varying opinions the subject.

The reason I say it is not all Suze’s fault is because I think the name FIRE does not represent everyone in the community.  It may not even represent the majority.  That is why I prefer “FI” to “FIRE”.  It should just be financial independence, without the retire early portion.  The people at Choose FI got this right when picking a name.

As Paula said after the interview, many people are not looking to retire.  They just want choices.  There are people who love their job who are pursuing FI. They want options in case something changes in their life.  What if the nature of their job changes and they no longer like it?

To many people, pursuing FI is more about having “FU Money”, for lack of a more eloquent term.  This doesn’t mean you are going to walk into your boss’s office and tell him to shove it.  It just means that you have the option of quitting and still being fine for a while.

Many people pursue FI so that they can do exactly what Suze recommended.  They can find a job they love.  Most people (not all) are not pursuing FI so that they can sit around on the beach for the next 50 years of their life.  They will still have goals, and they will likely still make money.  But having a relatively frugal lifestyle, coupled with significant savings, allows flexibility.  Instead of working at the corporate job that pays $100,000 per year, they can do something they love that pays $40,000 per year.

And as many have pointed out, there are people who consider themselves to have reached FIRE, yet they are still saving money.  They are still working and living frugally, and they are not drawing down their savings.

Praise and Warning are Appropriate

I do see some people who are pursuing FIRE who are a disaster waiting to happen.  It is probably this minority that Suze thinks is representative of the whole community.  Regarding these people, I think her warnings are highly appropriate, and I do think there are going to be some disaster stories in the future.

I have seen some people who say they can live on $40,000 per year.  At 25 times this (4 percent withdrawal rate), it is a million dollars.  I have even seen some people say they are going to retire with just $500,000 and live frugally. One major setback, such as a big medical expense, could completely shatter these plans.  These are the people who need to listen to this episode and take Suze to heart.

But for the group that is living relatively frugally, or who at least have a high savings rate, and are still planning to work for a while, they should be praised.  Now this group can also benefit from listening to this interview with Suze, but they will recognize where she goes wrong.

Let’s say someone has amassed a net worth (not including home equity) of $500,000 by the time they are 40 years of age.  But this person is still working and not drawing down the savings.  Even if they have to walk away from their job and find another one, that $500,000 in savings is quite a cushion.

In this discussion, we have to remember the comparison with the average person, or even the average American.  The average American who is 40 years old has nowhere near $500,000 saved up.  If he is lucky, he might have a retirement account with $100,000 and home equity of $100,000.  But even this might be stretching it.

A large percentage of the American population would not be able to afford an unexpected $5,000 expense without going into debt.  If Suze wants to hate a particular concept, she should direct her ire at the average American who barely has two pennies to rub together.

Even the irresponsible FIRE person seems to be in a much better situation than the average American.  If someone retires early with $500,000 and is hit with unexpected expenses, or inflation ends up being higher than what was accounted for, then this person will know they are in trouble before their bank account balance hits zero.  If this person goes down to $200,000 and realizes at that point that the situation is unsustainable, then they can go back to work.  They are still better off going back to work with $200,000 in savings than the person who has been working all along and still has close to zero with a more expensive lifestyle.

In the interview, Suze brought up a scenario several times of a person getting sick or incapacitated and being unable to work.  She stated this as a reason people should keep working until they are at least 70.  But again, compare the FIRE person to the average American.  Think of a guy who is 50 years old and is “retired” with $500,000 in the bank.  Then think of a guy who is 50 years old and working with $100,000 in the bank.  Let’s say they both get sick and are unable to work.  Which one is better off?  Sure, maybe the guy who retired early would have been better off in retrospect if he had kept working up to the age of 50 when he got sick, but he is still much better off than the other guy.

So while Suze brought up many great points in the interview, her message is even more appropriate for the rest of the American population who have never considered (or heard of) FIRE.  But it is only the FIRE community that will listen to her message and consider some of her points. Most other people are living in a different world and probably don’t spend one hour a month thinking about personal finance.

Therefore, the FIRE community deserves some praise, even if some people within it may not be making the wisest decisions.  The FIRE community is many leaps ahead of the average person when it comes to personal finance, and this should be recognized.  Now we just need to change the name by dropping the RE (retire early).  It is not about retiring early.  It is about having more freedom and choices.