In Discussions, Money, Retirement, Wealth

Why early retirement FIRE people can sometimes be short-sighted

FI/RE or written as FIRE in short form, stands for:

Financially Independent / Retire Early

In this, it means if you hit your FIRE number, or your FI number, you are ready to stop working completely and to kiss that life goodbye.

BYE BYE CORPORATE STIFFS!!!!!

What is FI/RE?

Your FIRE number is calculated very briefly as this:

Annual Expenses X 25

…and you have these different FIRE paths of what you expect in “yearly income” versus what you have invested:

The problem I have always seen with this FIRE business, is that it takes a pretty short-sighted view. It only looks at your situation, as in your spouse and your immediate family, and doesn’t include anything that might happen.

Why do I say this?

Because we (the collective “We” as in people like me in our late 30s to late 40s) are in what they call the Sandwich Generation, or the generation that has to not only think about things like mortgages, education, healthcare, student debt and so on, but we also at the ‘peak’ of our lives and careers, have to start thinking about our parents as well.

Or do we?

I never see anything in FIRE numbers taking into account paying for parents and considering their situation.

All we focus on it seems is when WE can be financially independent.

So is FIRE selfish?

I don’t want to label it “selfish”, because I think that’s pretty harsh, so I called it “short-sighted”. It really only focuses on YOUR FIRE number and what YOU need to stop working so you don’t have to pay for YOUR daily expenses any more and/or your investments grow without adding more to the piggybank/portfolio.

It doesn’t consider that your parents might need retirement help, or your in-laws.

It doesn’t consider that they may not need just basic things paid (home maintenance, condo fees, food, utilities) but that you may need to hire someone to be hired to help them out part-time.

It doesn’t consider your parents may have an illness that requires assisted living. It doesn’t even consider that YOU may require assisted living, come to think of it because people are assuming in retirement you spend a lot less than if you’re working (true), but it doesn’t consider you may need more money for health-related issues.

It depends on your cultural background

As an immigrant, I was brought up to essentially consider my parents in everything. My mother would whisper to me as a little girl, her deep fear of being put into a home for the old and retired, as she called it “being put out to pasture to die”.

This all might seem a bit heavy to place on a child, but looking back, I just got the sense that I should help my mother be as happy as she can be into her last days, and I should aim to think about her as I age and get older. That’s it. I felt a sense of responsibility grow inside of me, but I didn’t feel burdened by it. I just assumed it would be what I would do.

It wasn’t just my mother by the way, it was also relatives who loudly proclaimed that their children would most definitely take care of them as they aged, and quite honestly, it was embedded in our culture.

We had a lot of intergenerational living, it was not uncommon to have grandparents (in-laws included) move into the same homes as their children.

It was not uncommon to think about elders when you took the bus, giving them your seat (it was a point of pride the day I could stand on my own and offer my seat to someone) and you absolutely never considered for a moment that elders could be anything but respected.

In return, elders, were generally not disrespectful back in the way I sometimes see, where they hurl abuse at younger generations or put them down saying things like: “IN MY DAY…” as a way to be derisive or condescending.

Then we moved to Canada.

Cultural shock

Here, it seemed like none of the other children had anyone talking to them about any kind of elder responsibility. People occasionally gave seats up on the bus, but it wasn’t a thing that others fought to do like: No no please take MY seat!

People didn’t seem as respectful of elders. I mean they weren’t rude by any means, but they didn’t seem to take them into account for anything, much like the way we treat children in society as well (have you ever seen a smaller handrail for children going up stairs? Or how about the lack of elevators/ramps for people with strollers, let alone handicapped people? Did not think so.)

As I got even older, I realized I was one of the few actually thinking about how I had to make money to pay for myself but also for my family. Of course, I never imagined making money for extended family, I thought about my parents only or my siblings if they needed help.

I realized that no one was assuming they’d have to take care of their parents.

They assumed two things:

  • The government (the country’s ‘parents’) would take care of it
  • Their parents would handle it

It was like magic, and a big black hole because many of them didn’t even know about their parents’ financial situation until it happened, which is already by that time, far too late unless you saved a fkload of money.

The all omnipotent government will care for us!

What an amazing country we live in“, I thought, as they told me about things like Canada Pension Plan (CPP), Old Age Security (OAS) and company retirement plans.

However, once you start actually looking into these plans, you kind of get this sinking feeling that it may not be enough… FOR YOU. So how could it be enough for your parents?

It’s one big pot of money. It depends on so many arbitrary factors like:

  • How many people are currently working to pay into it
  • How many people who are not working any more, are taking money out of it
  • How much there even is, as I think we are running out of money are we not?
  • What it would really mean in the future after inflation
  • Where you live and cost of living factors in greatly into how far your dollar goes

Umm….

And none of it is in your name specifically. You aren’t guaranteed anything, and frankly, we don’t even know what we will actually get.

This is why I always say:

I will not ever rely on the government for anything. I consider them to give me $0 for retirement.

So if at this point, you are still thinking the government will care for you, and you do not live in a country where the government actually has what you have paid into the pension plans, with your name and your actual social security numbers assigned to specific amounts of the pot of money, you should rethink your retirement plans.

(No seriously.)

My parents won’t need the money!

If I had a dollar for every time I heard this and rolled my eyes, I would be rich(er). Honestly, unless you talk to your parents, or they bring it up to you, ASSUME THE WORST.

You do not know what will happen either. What if your parents saved a wonderful amount of money, but then:

  • Where they live, overnight the currency got devalued down to useless paper
  • They are unable to work any more due to health issues
  • They run into medical issues after they retire that no one foresaw (e.g. sudden need for assisted living, or at-home nurse – NONE OF THIS IS CHEAP)
  • They didn’t work enough / at all

The last one, is absolutely their fault 100%… but are you really going to let them live on the streets so to speak?

Think about it. Even if they didn’t save enough money. Even if they didn’t work most of their lives and then quit their jobs.

WOULD YOU LET THEM BE HOMELESS AND STARVE?!!?!?

I think not. You’d have to have some other family issues not accounted for in this scenario, to do that, and most of us would pay for them, or have them move in with us to care for them.

If you don’t plan for things, it doesn’t mean it won’t happen.

It just means it happens, and you’re caught off guard, sandwiched between high mortgage payments, stressed that you absolutely cannot lose your job or else you can’t pay, and your children are also costing you money in daycare, education, health, on the other end.

This is why we are called the SANDWICH generation, and as yummy as that sounds, it’s actually something we need to address early on:

Doesn’t that sound stressful?

Not only that, you may not plan for the fact that you were on track to FI/RE, and then you have to quit your job to stay at home to care full-time for your parents because you cannot afford the outside help, or assisted living.

Now, your plans to retire early are derailed because you only have one source of income, or NONE coming in if you’re single.

Why did we think everything would magically be fine?

It’s because we do three very ignorant things:

  1. We don’t talk about money as a society (it’s so impolite!!)
  2. We don’t ask our parents about their financial situations early on
  3. We do not consider our parents in our retirement plans, just in case

And this brings me to why I am putting the fear of Elder Care in you….

I am living it now but with extended family…

It’s because I did not plan necessarily, for my extended family to require any financial help.

See, I planned for my parents. They spent every penny, and still spend every penny they earn. I do not want to bother changing them, as they’re still working.

I have only warned my mother repeatedly that if she ever stopped working of her own volition, of health, of any reason at all, their lifestyle would drop pretty significantly. She would go from making over $100K to getting $30K at best from the pension plans and so on.

It is partly her fault and it is partly not.

What is partly her fault, is what she is doing now, in spite of what we are repeating to her are important issues. We are telling her: You do not have anything saved. You are not rich. Your house is paid but you would need to sell it to release the equity to be able to live off that money.

She isn’t listening, and at this point, we are all just resigned that she will do what she wants.

Believe me.

We have already tried many methods in the past to automatically save money from her paycheque into her retirement accounts and she has gotten so incredibly angry and we have had serious fights over it because she thinks we are taking her money away from her, her personal autonomy and agency, and she wants it back.

So we just stopped saving that money for her, and she spends every penny. Mind you, she also sends a lot of money back to her family.

I had this in mind:

  • We would sell the house (about $1M right there)
  • We would split them up and have one of them move in with each of us
  • We would contribute to their care if they required assisted living or a nurse once the $1M runs out to pay for them

That’s it. That’s the retirement plan. It isn’t perfect, but it is what it is.

…and then her extended family started aging. Now them, I’ve already written about here in some detail about my extended family being dirt poor and how it isn’t really their fault.

But now they’re running into health issues that a few hundred bucks a month won’t cover, so I sent back about $20K last year to cover expenses, and who knows if they need more this year.

Furthermore, I also have an aunt who lives in the U.S., one of THE WORST developed first world countries in the world bar none, for healthcare and assistance.

I got the news this week that she is developing or already deep into the throes of advanced dementia, seeing hallucinations and unable to live alone any more. I suspect it was already something that started years ago. Her whole story is here – Getting the worst news ever, and update on the worst news.

Long story short, we pay for her to live.

I send money back, and I paid for her entire relocation ($10K). Mind you, we aren’t close. I have never met her in my life. I am only doing it because my mother is heartbroken over the situation and wants to help her sister so badly. She even asked her to move up to Canada but she refused because it was “too cold”.

Do I really have an obligation to help them?

I feel like I do because it’s my aunt, and my mother asked me to.

It is going a bit farther than I’d expect it to have been, as I was really only thinking of my parents, but my aunt has no children or anyone to help her, and though it was most definitely her fault she ended up where she is, it is also… not her fault in a sense.

It’s hard to say who is to blame, but blaming won’t solve anything or help her at this point, which is why this is becoming a kind of stressful situation, luckily not quite as dire as if I were let’s say, covering a massive mortgage, and having to pay for my own family as well.

But this is what I am grappling with now, and the reason why I think FI/RE doesn’t take into account issues that will inevitably surface as our loved ones age.

Elder care is not cheap by any means

Elder care, and especially advanced elder care is not cheap

If you decide to hire an at-home nurse, the rates are $30 – $50/hour. If you let’s say need them for 8 hours a day, that’s $240 a day to $400 a day. 365 days a year, works out to $87,600 a year or $146K a year.

If you haven’t planned for this for even YOURSELF, to make sure that YOUR elder care is covered at $87K – $146K a year (at today’s rates no less), it means you haven’t really thought through your FI/RE plan.

Let’s say at around age 87 (in 40 years or so) I start to need this nurse to come in and help, that would be in around year 2060, using this inflation calculator:

Conservative inflation rate of 2.5% tells me that $87K is now worth $236,651 and it would be $397,139 if I needed the top of a line nurse at $50/hour.

That’s the bare minimum I’d need to pay to cover for my healthcare if I wanted an at-home aide.

For assisted living, places start at $3500 – $6000 a month in today’s 2021 dollars or $42K – $72K a year. Again, $42K in 2060 would really be $114,245 upwards to $195,849 just to cover your care.

You could of course go with the cheapest option available but there are stories rife of elder abuse, horrific living conditions – is that something you really want to take a chance on?

This is especially important if you do not have children, close family members or anyone else to help you as a support network.

OR

If you retire VERY early like in your 30s or even 40s.

Or you rely on your government at this point to help take care of you, which for me, is a scary prospect.

So in conclusion:

  • Start talking about your money in detail
  • Start talking to your parents about their money
  • Reconsider your FI/RE numbers to include at least YOUR Elder Care
  • Don’t assume you’ll never have to work again once you’re FI
  • Don’t assume your parents/government will take care of you or anyone
  • Save more than you need
  • Come up with a plan – the worst case scenario one

RESOURCES (QUÉBEC ELDER CARE)

As mentioned in the comments below, in Canada & Québec you can get a tax credit for elder care.

Here are some resources (all links are valid and up to date at the time of the post):

Home assistance

The tax credit for home-support services for seniors allows individuals who are 70 years or older to reduce the costs of certain home support services in their area. This refundable tax credit is 35% of eligible expenses. The annual expense limit is $19,500 ($25,500 for seniors recognized as being dependent) for a maximum annual credit of $6,825 ($8,925 for seniors recognized as being dependent). The credit is reduced by 3% for each dollar of income of the senior and his/her spouse in excess of $59,385, unless the senior is considered a dependent senior.

Federal caregiver benefit

An individual may claim the Canada caregiver credit in respect of a spouse or common-law partner, minor child or eligible relative16 who is dependent on the individual because of a mental or physical infirmity at any time in the year. The dependent does not have to live with the individual. 

The credit is calculated using two amounts, indexed annually. The higher amount ($7,276 in 202017) may be claimed in respect of each eligible relative of the individual. 

Revenu Québec benefit

You may be entitled to a $1,250 tax credit if you meet all of the following conditions:

  • You lived with a person (not your spouse) 70 or over without an impairment.
  • You lived with this person in a dwelling of which you, your spouse (if he or she also lived with you), the care receiver or the care receiver’s spouse (if he or she also lived with you) was an owner, tenant or subtenant.
  • You lived with this person for at least 365 consecutive days, including at least 183 days in the year covered by the claim.

Canada Revenue Agency benefit

For your spouse or common-law partner, you may be entitled to claim an amount of $2,273 in the calculation of line 30300. You could also claim an amount up to a maximum of $7,276 on line 30425.

For an eligible dependant 18 years of age or older (who is a person for whom you are eligible to make a claim on line 30400), you may be entitled to claim an amount of $2,273 in the calculation of line 30400. You could also claim an amount up to a maximum of $7,276 on line 30425. See the note below.

For an eligible dependant under 18 years of age at the end of the year (who is a person for whom you are eligible to make a claim on line 30400), you may be entitled to claim an amount of $2,273 in the calculation of line 30400 or on line 30500 for your child. See the note below.

For each of your or your spouse’s or common-law partner’s children under 18 years of age at the end of the year, you may be entitled to claim an amount of $2,273 on line 30500. See the note below.

For each dependant 18 years of age or older who is not your spouse or common-law partner or an eligible dependant for whom an amount is claimed on line 30300 or on line 30400, you may be entitled to claim an amount up to a maximum of $7,276 on line 30450.

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Sherry of Save. Spend. Splurge.

Am my own Sugar Daddy. Am a millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. I have worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I have 11 side incomes that are on track in 2020 to make me $50K - $75K. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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20 Comments

  1. Dar

    I have always wondered that – not just about FIRE adopters, but people in general! I find so many people take a hard line and say they will never pay living expenses or take care of their parents, in-laws or adult children because they are adults and they made their own choices. While they are unlikely to become homeless and starve, they could be limited to their old age pension, guaranteed income supplement, or income assistance. Some would say fine – due to their life choices, that’s all they deserve. And they will then criticize their extended family for living on government handouts which are paid through tax dollars.

    I am happy to support social programming with my tax dollars and I have come around to supporting a guaranteed minimum income. Nevertheless, home care and private medical care are so expensive that transferring to the public system is inevitable for most. As you say, $5K a month is on the cheap end and not many people have an extra $60K annually to support their parents.

    You would also know that most working adults in their 50s and 60s who plan to work to 65, end up retiring early with low incomes due to their own health, or care responsibilities for others.

    It is hard to forego vacations, home renovations etc. so you can set aside money for parents or in-laws who have spent money with no restraint for decades. I don’t have answers!

    Reply
    1. Sherry of Save. Spend. Splurge.

      I don’t have answers either. I only have questions that should prompt people to assess what/how far they are willing to go for those around them whom they are related to, or not. It’s not an easy thing to say “thou shalt always care for your parents” but consider if they had no money and were about to go homeless. What would you do?

      Reply
  2. Tim

    Very good post. I know several people that don’t consider this all that well in their plans for FIRE. I’m a bit lucky with respect to parents. My parents are more than fine….like actually going to leave me money (not to mention they changed their will to give half the estate directly to the grand kids). Then with my parents-in-law, another one is going to be just fine and we only really have one potential problem parent. So while it is a risk I’ve decided not to save anything specific for the problem parent. It’s just too wide of scale of potential issues that could or could not come up. Will I regret it? No idea. Ask me in 30 years…in the mean time I am being a bit selfish and not saving for every what if. At some point risk planning for remote outcomes because a bit of a useless thought exercise. You need to make your choice on the risk and live with the consequences.

    Reply
    1. Sherry of Save. Spend. Splurge.

      Yes – I already knew early on my parents would need help. I refuse to enable their gambling habits but if one comes to live with me, they’ll be taken care of by all of us financially but one or two of us will have to physically handle daily matters. I do think that we sometimes ignore even addressing the issue to begin with… especially in cases where your parents are clearly clueless (like mine) unlike yours.

      Reply
  3. FullTimeFinance

    For my mom I had a relationship such that I could just up and tell her she needed to get her stuff together, that I’d help her do it, but I wasn’t going to pay for the ramifications if she didn’t. I did that back when she was in her fifties. It worked, although I had to take over the investing portion of the process as that was her hang up. Not knowing what to do with savings was the root cause.

    Reply
    1. Sherry of Save. Spend. Splurge.

      Got it. This is a common problem with women. I have tried very hard with my mother but she’s stubborn like I am and just wants to YOLO. We let her because we know we can pick up the slack, for which she is very fortunate. For other women though, it’s why I’m so adamant they learn at any age what to do.

      Reply
  4. FullTimeFinance

    To add to this in some places there are laws that mean you are responsible for some of your parents assisted living bills (called filial laws). In the US they would kick in in some states if the parent runs out of money and doesn’t switch to the government run places fast enough.

    I know it’s a cultural difference but I was very clear early on with my parents that I would not help them financially. I do readily help them with managing what they do have. That motivated one of them to turn their finances around. I have however taken over some of their financial accounts at their request in recent years to position their resources for the long run since they were unable to do so themselves.

    Reply
    1. Sherry of Save. Spend. Splurge.

      How did you manage to motivate them to turn finances around or tell them you wouldn’t help?

      Reply
  5. Steveark

    Everyone in my family was/is a millionaire and very frugal. We are unusual in this respect and I think planning on having extra to care for family is a very smart idea many people overlook. This could be the most important post some will ever read.

    Reply
    1. Sherry of Save. Spend. Splurge.

      I hope the incendiary title makes people clickbait on it so that they read it and think about the future. I have been thinking about my parents, but never expected extended family to need help until last year.

      Reply
    2. NZ Muse

      That is awesome!

      My parents I believe will be just fine. In laws no way, but I have boundaries there.

      Reply
      1. Sherry of Save. Spend. Splurge.

        In laws I’m fine with but ironically, they will not need any help. It’s my parents who are the issue, plus extended family

        Reply
  6. Dublincalling

    Very good post. A few things to mention since I am in this situation as in I am the caregiver for a parent with dementia in Canada. Fortunately, there is a bit of a tax break for getting help when you are older in Canada. I hired private nurses and paid for it using my parents money (when that runs out I will pay for itJ There is a 35% tax credit for things like paying for caregivers or any other services that elderly cannot do on their own and is for their care and upkeep. Think snow removal, house cleaning , food preparation, etc. Yes I know not a lot but every bit helps and when all they have is government pensions it is a huge help. There is elder care insurance however I have not looked into it to determine if it is worth having considering the cost. Also please do not assume that care is always better the more you pay for it. There are horror stories everywhere. Here in Canada we have all seen in the news horrible stories like Herron where people were paying over 5k a month and the care was terrible. You have to consistently monitor where people are placed to ensure that good care including personal hygiene and decent food is being given. I agree that private residences are better overall but it does not mean you can trust them blindly. Finally, please know that even private residences at least in Canada at one point may not keep the parent if their situation is too great for them to handle unfortunately and in that situation you will either have to find one that does at an even greater price per month or go into the public system.
    My friends and I joke that we will be like the golden girls since a few are single and the married ones know that statistically their male partners will probably die before them so we will pool our funds and live together as long as we can in a huge house with no stairs and have private help brought in. I have also made arrangements that will make sure that my life is not artificially prolonged if certain situations arise.
    Thank you for the post as many people do not take these important issues into consideration.

    Reply
    1. Sherry of Save. Spend. Splurge.

      Thank you for all of these extra details. I did not know about the 35% tax credit for caregivers, nor the elder care insurance (I will look into this one and see if it’s worth it).

      Yes – like with all things, paying more doesn’t mean it’s better. I can see that happening for sure and obviously I would choose a home close to me or one of my siblings if possible so we can go and constantly check on them to make sure things are going well (this is the very last resort as I am planning on an at-home nurse if push comes to shove.)

      I AM ALL ABOUT THIS GOLDEN GIRLS PLAN! My best friend and I have already decided we will do this and maybe I can add more friends 😉

      Reply
      1. Dublincalling

        Just a clarification. The 35% credit is for the person receiving the service hence reason they have to pay for it. Caregivers get other federal and provincial credits which I am reviewing now as I am now the official caregiver. It is such a maze of information to go through and figure out if you are eligible or not to receive it. But I agree with your other reply above I hope lots of people read this post and that it makes them think about their family situation as well as their own when they age and will need care.

        Reply
        1. Sherry of Save. Spend. Splurge.

          It’s a lot but at least there is something as a credit. I am reading through it all and it seems quite dependent on relationship & then age. AT LEAST THERE IS SOMETHING HERE.

          Reply
  7. Hawaii Planner

    The two plans are not mutually exclusive (FIRE & helping family). Most people I know who FIRE have built in the unexpected, as much as they can. The unexpected could come in many forms, and helping family is one. I know quite a lot about my parents finances, and while they will never be wealthy, they’ve planned as best they can & have LTC insurance, etc. We will step in as needed, and that’s part of our FIRE plan. To be more accurate, my FIRE plan, as my husband has no plans to ever quit working.

    Most FIRE plans I read about have multiple options available as needed should something change. If you’re planning to be “retired” for 30+ years, flexibility is key regardless of what drives the change in plans.

    Reply
    1. Sherry of Save. Spend. Splurge.

      That’s true – If I am honest, I made the article clickbait-y so that people would read it 😉

      I definitely know however, that many people who retire early and young, are not thinking they will help their parents. This, comes from casual chatting with friends.

      Reply
  8. Gail

    Fortunately, our parents had, and now we have, long-term care insurance. It is costly, but when/if we need to be relocated to an assisted living facility or to have help at home, we are covered.
    I would agree that it is naive to count on govt. help. I also agree we are obligated to help family and should prepare to do so. You cannot over-plan.

    Reply
    1. Sherry of Save. Spend. Splurge.

      I will be looking into long-term care insurance as an option for us as well. It could be worth it.

      Reply

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