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Being a FIRE Millionaire Doesn’t Mean You’re Rich

FIRE millionaire

You’re a millionare? Cool! You achieved financial independence and retired early? Awesome.

Just don’t go thinking that makes you rich.

We’ve explored how the definition of a millionaire hasn’t really changed, but what it means for your wealth and your future most certainly has. Over the 100+ years since the term became popular, the spending power of one million dollars has been greatly diminished.

Jim from Route to Retire, the millionaire early retiree who moved his family to Panama when he retired, knows this very well. He penned today’s Friday Feature, a popular post from a recent Sunday Best. This post originally appeared on Route To Retire.


Being a FIRE Millionaire Doesn’t Mean You’re Rich


FIRE millionaire


There’s an interesting mentality that I notice creeps up periodically.  It’s the idea that some people think that being a millionaire makes you filthy rich with plenty of money to throw around.

Folks who aren’t as entrenched in the personal finance world tend to think that you actually have $1 million ready to spend if you’re a millionaire.  In other words, if you’ve hit that mark, you must be sitting on bushels of cash, just ready to be spent.

This is probably a common way of thinking if you don’t fully understand how early retirement works.  I know I thought the same thing before we continued to grow our finances.

However, that’s really not true, particularly with those who are LeanFIRE or regular FIRE folks.

In all actuality, many folks in early retirement are running around with the same amount of money to spend as they had when they were still working and saving.  If I wanted to, I could run to the local bank and come up with around $2,500, but that’s about it.  Everything else is tied up elsewhere – and purposefully so.


The Situation


Before I start this, be aware that this is not about most people in my life.  I’ve only heard this a few times overall, and it doesn’t really bother me – I just find it interesting.

Maybe we’re planning to go somewhere or do something with people we know, and the comment comes up, “Well, you guys are retired – you can afford it.”

Maybe we’ll be out to dinner or just at a bar for some beers, and you hear, “You guys should pay – you’re rich!”

These kinds of remarks are mostly jokes but with an obvious hint of sincerity behind the words.  The suggestion is that clearly, we’re actually rich and just have overflowing wallets.

And the thinking isn’t too foolish.  It’s just some naivety in not understanding the area of money and investing.  Ask me about why we don’t have carburetors in cars anymore, and you’ll likely see my own naivety in that subject.

P.S. What the heck do carburetors do anyway?



The Money “Problem”


A million dollars is a sizable amount of money.  It’s not the “most” money, and having a lot of those millions is certainly better than having one, but it’s still nothing to balk at.

I could have gone with a million different pictures, but I thought the Milky Way seemed the most appropriate… if that’s what this even is!

Regardless, once you start having money beyond an emergency fund, you need to start something.  If you stash it under your mattress, it’s going to disappear in one of three ways:

  1. Your “best friend” is going to have a fatter wallet after robbing you blind.
  2. A disaster’s going to happen, and your cash stash goes bye-bye.
  3. Inflation’s going to eat away at that money until it can’t buy you more than some Tic Tacs and a Milky Way.

That third one’s actually the most interesting, though, because inflation can hurt you even if you put your money safely in the bank.

So let’s say you save up enough money to live off of and keep it in the bank.  Most banks are paying ridiculous amounts of interest right now (our credit union offers up to 0.15%).  But even online banks like Ally (which I love!) offer rates of less than 2.5%.

Look, the online banks are much better than the rates at local banks and credit unions for sure (actually almost 17 times better in this case!).

But the problem is that these rates aren’t giving you enough return to save your money from inflation.  Cost of goods rise, and at an average inflation rate of 3.10% since 1913, the value of your money sitting in the bank becomes less and less over time.

So what do you do?  When you begin to understand this concept, you start to find other places to put your money.  You look for investments that will at least keep up with the rate of inflation, such as TIPS, but preferably you strive to do even better to get the most bang for every buck.

Put concisely; you need your money to keep making money.

Many of you probably already get this.  You’re putting money into the stock market, real estate, or other investments so your money can grow for you.

It would be great if you could just sit tight on your money and not have to worry about it.  Unfortunately, though, it’s really a situation where you invest it or lose it over time.

And when all’s said and done, the goal is to have your nest egg provide you with enough income to pay for your lifestyle.  Not only that, but it has to last until you die and possibly longer if you have a desire to pass some of your wealth onto any offspring.

Because of that, being a millionaire doesn’t mean that you’re sitting on buckets of cash.  It ends up meaning that you have your money invested and out-of-sight for the most part.


I've got my 2 acres of non-leveraged, crop-producing, cashflowing farmland via AcreTrader. Get yours.


The FIRE Millionaire Fixed Income


Because we made it to millionaire status a couple of years ago, we should have tons of money at our disposal, right?  Wrong.

The irony is that we’re basically on a fixed income now.  Sure, it’s not a fixed income in that we technically could take out a little more or less from our portfolio every year if needed.

However, if we want to ensure that we have enough money to live off until we die and possibly leave some to our daughter, we literally can’t spend as we please.  As a regular FIRE retiree, we need to spend in the same ballpark as we always have.

The reason for this is that we’ve based our early retirement on the premise that we’re only going to be taking out X number of dollars per year for expenses.  If we take out any more, we could possibly be removing too much principal.  And that would mean less money in the pot that could continue to grow.  Spending more than our allocated amount each year could be throwing our future out the window.

The 4% rule in effect on a million dollars means that you would have about $40,000 per year at your disposal (adjusted annually for inflation) for all your expenses.  That’s great, but that’s not a ton of dough in your pocket.  In fact, the average American household blows through almost $68,000 per year!

If you go by those numbers, a millionaire early retiree household can actually seem poorer than most families in the U.S. overall.

P.S.  They’re not – they’re actually just a little more efficient with how they decide to spend their money!

In other words, it’s really a matter of choices.  And there are no wrong ones if what you do makes you happy and you’re considering your future.  But $40,000 per year is not necessarily the life of the rich and famous.


Net Worth ≠ Available Cash


The idea of “well, you can afford it” isn’t exactly true.  I could probably afford whatever it might be, but only if I wanted to take the chance of needing to go back to work again.  And I definitely don’t want to do that!

I’m not sure what this has to do with the topic – I just thought you guys would like to see a pic of me and Mrs. R2R naked on a seesaw…

Just because your net worth looks good doesn’t mean you have gobs of cash to throw around.  Many people think that your net worth symbolizes how much money you have sitting in your wallet or the bank… it’s not.

Most folks that have started to sock a decent amount of money away know that money is tied up in investment and retirement accounts, real estate, businesses, etc. – not usually in the bank.

People sometimes think – with no ill-will – that we now have money just to blow, but that’s really not the case.  Your net worth is not the same as your available cash.

Your net worth is definitely a crucial number and much more vital than just having a good income.  However, it’s not synonymous with cash on hand, or you could end up in a world of hurt if you spent it as such.


Net Worth ≠ Rich


Just a reminder, I’m talking specifically about “lean” and “regular” FIRE folks.  There are a good number of FatFIRE people who very well might have enough money set aside to live out their wildest dreams.  Those are the folks I like to hang out with!

We’re not rich – we have only enough to maintain our current standard of living.  And guess what – I’m absolutely fine with that.  I’m happy that we’re blessed enough to enjoy each day without the necessity of working in an office any longer.

But this millionaire doesn’t consider himself rich by our money alone.  I do, however, feel that we’re rich with the freedom to enjoy every day now as we see fit.


Route to Retire

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Do you think being a FIRE millionaire means you’re rich?

I've got my 2 acres of non-leveraged, crop-producing, cashflowing farmland via AcreTrader. Get yours.

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15 thoughts on “Being a FIRE Millionaire Doesn’t Mean You’re Rich”

  1. I think the following pretty much sums it up:

    “The idea of “well, you can afford it” isn’t exactly true. I could probably afford whatever it might be, but only if I wanted to take the chance of needing to go back to work again. And I definitely don’t want to do that!”

    Having a decent net worth is great – and it does mean you’re rich…if you don’t want to be retired anymore lol (or if you expect to only have a couple years left).

    Fortunately, I haven’t had anyone yet that wants me to pick up the tab “because of my net worth” — but I try to paint a very dark picture of my net worth by bragging about massive losses and keep mum about my wins mostly. Though to be fair, if someone did feel the obligation that the higher net worth person should pay, it’s sort of up to me to cut them off from all future social interactions (which I wouldn’t mind doing).

  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  3. Dear Readers,

    I am 47 y/o married with one 15 yr old daughter.
    I currently own a home worth approx 1.8 M (owe 1.2 M) and do Telemedicine from home. This year alone my taxes will be approx 225 k.
    One of my friends suggested to donate to a family foundation for charity and also help with tax savings.
    Another friend suggested I buy a house worth 2.7 M, since I do Telehealth, my wife does real estate from home, so home office deductions would provide a a significant tax break.
    I have two properties paid off valued at approx. 1 M (Property A) and 500 k (Property B) approx. and three other rentals generating minimal positive cash flow. Property A generates a cash flow of approx 5500 dollars a month before expenses.
    What do you think about the idea of buying the 2.7 M property for future and also to use a bigger home office space for tax deductions.
    I will be able to make sustainable income atleast more than 550 k a year for the next 10 years or so.
    Also how do charitable deductions work? for example if I am paying 200 k in taxes this year how much would I need to contribute to charity to reduce my tax burden and at the same time do good charity as I heard many charitable organizations spend more than 60 % of what they receive in overhead etc,
    I guess this is a multiprong question,
    any input, tax deduction advise, etc, would be much appreciated, (maxed out DB plan and 401 k profit sharing)


  4. Nice post. I am curious as to whether most people with high net worth find that others expect them to automatically pick up the tab when going out to eat, provide lavish gifts, etc. We are nearly at FI and are blessed to have family and friends that do not have their hand out or expect us to pick up the tab. Maybe it helps that all of our family live out of town and they know we live pretty cheaply. And we grew up very modestly.
    When we are able to get together, I love taking family out to eat and picking up the tab. No one expects it and it brings me joy to be able to provide the meal and experience . I just say we budgeted for it.

  5. This is a great point to call attention to. It’s why people with a net worth of $1 mil + are still posting articles about how to save $5/month on streaming services. It’s about avoiding the Hedonic treadmill/lifestyle creep that often paralyzes high earners.

  6. This is so spot on and exactly why we never talk about our net worth to friends and family.

    I can only imagine the pressure or comments from family and friends thinking we have a ton of cash we can spend.

    I don’t want to throw my in laws under the bus, but I can just hear the asks for help even though they clearly make over a combined household income of over $300k a year. They need our “help”, because they have a spending problem and are always upgrading their house or car or travel.

    FI is more of a mindset than anything. It’s about choosing to live off a fixed income vs continuing to expand it!

    • It’s only been a little over 2 years since we FIRE’d, but this hasn’t really been too much of a problem for us. I think it’s more of a problem in my head more than anything since I’m always thinking that others might be wondering if we’ll pick up the tab. Most of the time nowadays, we’re actually hanging out with others who are already retired since we’re in Panama so before I even think about it, they’re already letting the server know that we need separate checks.

      But with other money, we haven’t run into a problem with anyone needing our “help” thus far. The good thing is that I don’t feel guilty saying “no” if it’s for someone who got themselves into a hole because of spending problems like you mentioned. If it was for another emergency, that might be a different story that we’d have to try to figure out if it would be feasible to help.

  7. I’m curious about the $2,500 number. That’s pretty small for an emergency fund, so I’m sure you have an idea of what you’d do if you had to suddenly handle a $5,000 emergency. I know some people hate having excess cash because it is losing value and they plan to use credit cards or a HELOC to bridge the gap until they can convert some of their longer term assets to cash. I’m not criticizing, just curious, you are obviously a thorough planner.

  8. I remember when my then boyfriend discovered I had $350K in my retirement accounts. He started pressuring me to retire! Said I had “more money than God.”

    Another said I should sell my farm and retire when real estate peaked in 2006/2007. That would have left me with a total net worth of about $1mil.

    Neither person did the math on safe withdrawal rates to see I’d be living on a modest income for the next 40-50 years, and income on $350K wasn’t even enough to cover the mortgage I still had. All they could see was the pot of gold.

  9. Perhaps the author wants to believe that they are not relatively wealthy despite retiring with more assets than the vast majority of Americans. The points made seem fairly obvious. No, his family cannot spend a million dollars and remains solvent, but they sure could survive any financial emergency without going in to debt.

    My question is for FIRE folks drawing down their portfolio. Do some of them reset their withdrawal amount each year depending on portfolio size rather than adjusting for inflation? If I FIRE with a portfolio of 4MM and it grows to 4.4MM with a good return, could I just reset my 3-4% SWR rate and feel pretty good about my chances with that extra spending? It would be as if I retired with that amount. If the portfolio shrank in a down year, adjusting for inflation should still be reasonable according to the data although you could simply reset as well if you had the flexibility in your spending.

    • adjusting your ‘take’ from the balance if doing the % withdrawal plan is prob the best course for many. I adjusted my 401k monthly draw from $6.5 to $5k/mo during mkt/covid downturn last Mar-Aug, then reset it higher ($7k) after re-evaluating assets. I have pension & untapped IRA & Roth accts too, arent elig for SS yet. My expenses are under my income, so I look at that vs the straight %age. I want to build up some cash to play w/stocks in an etrade acct too (fun money <$50k). But my adjustment during covid was smart reaction to minimize sequence of risk returns basically, without calling it that last summer. Preserving more capital to grow & draw from in ret. stay safe, & healthy, wealthy, & (FIRE) wise!

    • Hi TDZ – I’m the author of this post. Yes, we’re absolutely in great shape – I like to think that we’re set for life with our normal expenses, but not really rich.

      As far as the withdrawal rate goes, I’ve been digging a little more into that myself. If I’m not mistaken, the 4% rule was based on a set amount at that time that is just adjusted for inflation every year. For now, that’s the way we’re doing things (though a little less than 4%).

      However, I do know that Steve from https://steveadcock.us/ has said that he and his wife determine their safe withdrawal amount every year like you’re talking about. I’d love to find a study that digs into whether or not that would be a safer or riskier way to do things.

      • Thanks for the reply. I agree 1MM isn’t what it used to be. We just crossed that NW barrier ourselves and I certainly it don’t feel “rich” either. At the same time, we are fortunate to have made it this far, even if our target is a good bit further down the road.

        You’re right that adjusting for inflation was how the studies were performed. Will have to check out Steve’s work. Happy trails to you down in Panama.


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