A quick tour of the blogosphere indicates that the most vocal proponents of financial independence and early retirement are American. So it was quite a find when I finally stumbled on The Mustachian Post, whose author has taken the trouble to put together a list of European FIRE bloggers. I am looking forward to slowly working my way through it and getting to know fellow financial independence and early retirement enthusiasts on the continent.
When we read the news we are constantly told that there is a pensions emergency. Governments all over Europe want us to work longer and longer, in order to alleviate the “pensions crisis”, as an increasing proportion of Europeans age and put the public coffers under stress. Our countries are going through a demographic tectonic shift, which will result in decreasing numbers of young people working and paying taxes (apparently we are not making enough babies) which fund an increasing number of old people who are retiring and withdrawing a pension. The numbers simply do not add up.
Retirement age is at an all-time high, but the plans are to go even higher. To take some examples:
- The retirement age in Belgium is currently 65 but it will be raised to 67 by 2030
- In France the current retirement age is also 65 but the plan is to raise it to 67 by 2023
- In Greece the retirement age is already 67, with no plans to raise it further (for the time being)
- In Ireland the retirement age is currently 66 and it will increase to 68 by 2028
- In the UK men currently retire at 65 and women at 62 (totally archaic but this is a post about retirement not gender issues!) – but plans are in motion to raise retirement age to 68 by 2046
The writing is on the wall; the way things are going Europeans are going to be working until they have one foot in the grave, unless they do something about it. What was considered a normal retirement age (60) just a few years ago has now become early retirement. So it is strange, to say the least, that there is not a stronger local movement advocating that people aim for financial independence and early retirement.
I think that part of the problem is that up to now the great majority of Europeans were fortunate enough to have generous pensions guaranteed by the State. We also never had to worry about funding medical care for serious health issues, since we have access to excellent healthcare that is government funded. My parents’ generation, for example, were never concerned about saving for their retirement or for health crises. They just assumed that when the time came they would start receiving generous cheques from the government that would cover all their living expenses, and that if they got sick they would get cared for by the national health service. Issues such as financial independence or securing different income streams to fund their twilight years never featured on their list of things to take care of. They went on to raise their children with the same mind-set: save for a house, pay it off, live a good life, and when you are old the State will provide.
Unfortunately the State can provide no more.
Our generation and the one coming after us are facing a totally different reality to that of our parents, even though many Europeans do not appear to have cottoned on to the fact yet. We pay our taxes and when the time comes we will indeed receive a State pension, but it has become painfully obvious that whatever money the State throws our way once we make it to the official retirement age, it will be pitifully inadequate to guarantee us a decent quality of life.
There are also rumbles in some quarters about the sustainability of some national health services, but universally available healthcare is a sacrosanct principle in most European states and it would be political suicide for any government to so much as hint that they intend to charge for healthcare, so it is highly unlikely that any major changes will happen in this area in my lifetime.
As this bitter reality sinks in, more and more people will start looking up online retirement calculators and putting together spreadsheets to calculate what their financial needs are going to be as they age. They will start researching how to invest their money and how much they can withdraw safely, referring to blogs and articles online for inspiration and encouragement.
And once they start to tot up the numbers and realise that they need not be dependent on government, it will dawn upon them that in such a situation they are no longer obliged to work till the “official” retirement age. All they need do is work until they reach their own magic number and after that it is totally their prerogative whether to continue working or not. Attaining financial independence does not oblige a person to retire and there will be many who continue to work because they enjoy their job (or the social interaction, or whatever it is that they love about their work) but there is no doubt in my mind that increasing numbers of people will decide to call it a day.
So what it boils down to is this. In the US people have grown accustomed to providing for themselves in retirement. Several generations of Americans have had to save and invest in order to secure a decent income in their old age. This experience is now being passed from one generation to the next – they are at a much more advanced stage on the retirement learning curve.
However Europeans are fast learners. The message is slowly starting to percolate in the public’s consciousness and the last few financially turbulent years have taught us that we can no longer expect generous hand-outs from our cash-strapped governments.
What we need is a few intrepid souls to take the plunge and talk openly about it and that will get the snowball started. With each newly financially independent person and/or early retiree, more people will get exposed to the idea and start to wonder if it is also possible for them. Once you know someone who succeeded in attaining FIRE, then it becomes clear that this is not an impossible dream, but something that you can strive for yourself.
And that is when our American friends across the ocean will finally get some competition in the FIRE stakes. It will be game on.