In the last few years, I’ve seen a tremendous shift in the way people think about money…specifically about the concept of “financial freedom”. For decades, this was associated with the popular concept called “retirement” and the promise of a 20-year vacation after a 30-year career. If you worked for a company long enough, you would have a good pension and be comfortable in your old age. But what happens when you no longer have the promise of a good pension? Or even the promise of a bad pension? 401(k) plans became the retirement workhorse and allowed for an early retirement before the legendary age 65 of the pension. As a result, many retirements started lasting longer than the career. A wonderful yet financial straining result of the coveted early retirement. Was financial freedom truly found via an early retirement if this meant you had to eventually go back to work to sustain it?
About 10 years ago I read about the FIRE movement happing in the millennial community: Financial Independence Retire Early. This movement was led by young people looking not to wait until 65 (or 55) for financial freedom but pushing the envelope to have it earlier. These early adopters started blogging about “passive income” and how secondary streams of income, coupled with extreme budgeting, could lead to retirement in your 40’s. The bar was set higher by another decade. Extremely hard to be sustainable for the average American, but it was happening, and I was bearing witness to a shift in the concept of retirement unlike anything I had seen before. What was actually happening was a change in the concept of financial freedom.
When we ask people what financial freedom means we get all different answers…but most people will have some version of “not worrying” as it relates to finances and what that worry is seems to be different generation to generation. My depression era clients worried about the banks staying in business, my baby boomer clients worried about saving a big enough pile of money to last a lifetime and now my millennial clients worry about living an authentic life. Here is when pivot happens. No longer an old man’s game, they have found financial freedom in the journey not in the destination. To strategically travel in their 30’s, not waiting until their 60’s. Some call it being frivolous. I call it being smart. I know the Golden Years are not always Golden.
In my opinion, this is a huge change in the concept of financial freedom. These young people may never enjoy the feeling of the traditional retirement. To count down the years, then months then days to quit working at age 65 with a million dollars in an IRA. But maybe they can be the ones who find financial freedom early and never have to.
Kimberly Enders CFP® CWS® CERTIFIED FINANCIAL PLANNER™
Enders Wealth Management
37800 Van Dyke Ave, Suite 125
Sterling Heights MI 48312
Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker-dealer and a Registered Investment Adviser. Cetera is under separate ownership from any other named entity. All investing involves risk, involving the possible loss of principal. There is no assurance that any investment strategy will be successful.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½ may be subject to an additional 10% IRS tax penalty.