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The False Distinction Between Financial Independence and Early Retirement

Let’s start things off today with a question:

Do you think there is a meaningful difference between the terms financial independence and early retirement?

Tell us what you think in the comments. We’re going to make the case for one answer in this post, but as always, we love to hear opinions that are different from ours. And we’ve got a more important question coming later in the post…

The False Distinction Between Financial Independence and Early Retirement // Our Next Life - ournextlife.com

Over the weekend, I read a post by a blogger talking about how he had been saving up for early retirement, but then he realized, “Wait a minute! I don’t want to just sit on my butt for fifty years doing nothing! I should scrap this early retirement plan and start aiming for financial independence instead!” Obviously I’m paraphrasing, with probably a little more sarcasm than necessary. But this is just the latest instance of someone making a big distinction where we believe no difference exists. And — more importantly — we think the making of the distinction is bad for our community. But more on that later.

We put together a highly scientific (note: not at all scientific) chart to break down the very important differences between these two dueling concepts:

Financial Independence Vs. Early Retirement -- A Distinction with No Difference // Our Next Life - ournextlife.com

Basically, the difference comes down to one question, the second in this chart: Will you probably quit your job after you hit your milestone? For people who call their plan early retirement, the answer is probably “Yes!” And for those calling their plan financial independence, the answer is “Maybe.” But even then, the term you choose to use has no bearing on future work, only on the job you currently have.

In every other meaningful way, the two concepts are completely interchangeable.

You have the freedom to work on your own terms in both cases, working if you want to, and not working if you don’t feel like it. You may describe yourself as “retired” or “financially independent” or “second acting” or “pursuing your passions” or any other term you wish in either case. The poster child of early retirement, Mr. Money Mustache, still works plenty, though it’s on his own projects, which sounds like how most people would describe financial independence.

So now to that more important question:

Does the Distinction Matter?

Our answer: Yes, yes it does, and not in a good way. And we have three reasons why it matters, though there are certainly more.

Reason 1: We as the personal finance community have bigger encouragement to offer and bigger myths to dispel than arguing the semantics of financial independence versus early retirement. Thank goodness most of us just shorthand it all “FIRE,” which encompasses both concepts, though we also don’t love adding acronyms and jargon to the discussion when we should be demystifying the process. But big picture, we should be dispelling important myths, like why you shouldn’t be trying to save for a house or for retirement while you still have high-interest credit card debt (exception: get that employer 401(k) match!), instead of having to explain whether our vision for what happens after we hit a magic savings number more closely aligns to Thing A or Thing B, when both Things are actually the same.

Reason 2: The distinction is divisive. It encourages taking sides, when really we’re all on the same incredible team. There were separate categories at the Plutus Awards last year for FI blogs and retirement blogs. And while it would make sense to separate them if the retirement blogs were focused on “traditional age retirement,” while the FI blogs were focused on early retirement, four out of the five finalists in the retirement category (us included) were early retirement/FI blogs. In that instance, big deal — more awards! But why even foster a mentality of difference at all, when we’re talking about the same thing? This community is so amazing at supporting people, but dividing the FIRE crowd into two camps based purely on semantics puts an unnecessary barrier in place.

Reason 3: It suggests entirely the wrong thing about early retirement, which risks alienating some people. The very fact of the distinction has this weird way of suggesting that people aiming for FI like to work, while those aiming for early retirement just want to quit their jobs and sit around. It’s a bias that already exists out in the world, as anyone who has retired early or is planning to retire early knows. The question, “What will you do with your time??” is a pervasive one, when announcing early retirement plans to others. It takes some explaining to help people see that, no, we’re not just going to sit in rocking chairs, bored out of our minds, for the next half century. For those of us who are already well on our way to early retirement, this is so not a big deal. We aren’t going to be dissuaded just because some misconceptions exist. But what about people who are just starting to explore the concept? Who wonder if early retirement might be something they could achieve? If they pick up on that vibe, even in the most subtle ways, it could make them say, “Oh well. I don’t want to do nothing with my life, so I guess I’ll just go back to planning for regular retirement at age 65.” And given that most of us say our goal here is to inspire others to do what we’re doing, that would be a real shame. Let’s put all of our energy into that inspiration instead.

Answering the Most Important Question

To us, the most important question is not whether you’re aiming for FI or early retirement, or even whether you see FI as a prerequisite to early retirement (as it is in our case — we’re already FI, technically, but have a little ways to go before retiring). The most important question is:

What do you want to do with your life?

A lot of the unnecessary distinctions seem to stem from people’s answers to this question. For those who are happy to keep doing what they’re doing, or who want to do something similar in the same sector, it’s easy to think about FI as the ideal goal. Same goes for people who don’t quite know how to answer the question yet — our 10 questions are a good starting place if that’s true for you. But for those who would say that what they want to do with their life is nothing like what they’re doing now — like in our case — early retirement feels like the right way to describe it, even if “retirement” doesn’t begin to connote the what we’ll actually be doing with our time.

So let’s focus on answering that question instead, and mapping out opt-in lives instead of default lives. Figuring out if what we need is a little safety net to protect us in a little leap, or a parachute for a major one. To us, that’s the only distinction that matters.

What Do You Think?

Please weigh in here — do you think there’s an important difference between the two halves of “FIRE”? Do you think it matters that some people imbue that distinction with meaning? And do you agree that the most important question of all is what you want to do with your life? Bonus points if you have a better idea for a term that we should all be using that encompasses everyone equally! :-)

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70 replies »

  1. I’ve used the terms interchangeably for the most part. Honestly, I feel a little uncomfortable with each term because they can be easily misunderstood. As you said, early retirement suggests a laziness that few with the drive to get out early would likely embrace. On a more personal level, I believe God is our ultimate source of provision (through our jobs or other means) and the term financial independence could suggest we don’t need His provision after saving a certain amount. I realize practically this is not what is meant by the term, though. I like talking in terms of financial flexibility, or the ability to react to unexpected expenses or opportunities. It’s something to aim for regardless of what your end goal is, and regardless of where you are in the process.

    • Totally agree with you — both terms are far from perfect. If you have thoughts on a better replacement term, let us know! :-) Your point about God and FI is one we haven’t heard before, but makes great sense. And yeah, we’ve heard that retirement laziness misconception plenty! We sometimes joke that what we’re after is “handling our business.” We should have enough saved to provide for our lives, without needing the help of others, which also includes being able to repair what we own and care for loved ones. But “handling our business” just doesn’t have a nice ring to it. :-)

    • I appreciate your comment about God as the source of provision. In a sense, I believe the same as you. Also, I tend to make big decisions based on what I believe my higher power (though I’m not sure you’d use that term) wants for me.

  2. I’ve never really understood the arguments between whether someone is going after FI or ER. There’s isn’t a difference. Even people that retire at the traditional age don’t typically just sit around all day. My grandfather was active and routinely gardened and did other things he enjoyed well into his 80’s until he physically couldn’t do it anymore. There’s no doubt in my mind that he would have continued to do it if his body would have let him. He actually still tried to go out with his walker and his scooter against the wishes of my grandmother.

    I’d also venture to guess that 90%+ of those seeking FIRE are naturally more active people. They aren’t going to be able to sit still even if they wanted to.

    Based on the distinction you made between the 2 I’d technically fall into the ER category because I will in fact quit my job, assuming I stay at my current job until then. My current job has me away from home anywhere from 2 weeks to a month at a time. I can guarantee you that I’ll be out of here as soon as I feel comfortable with our FIRE situation. Sadly that’s much further away than I’d like. But that doesn’t mean I’m going to just sit around and do nothing and I actually plan on working still but at a much scaled down rate and on things that interest me or do work that is more fulfilling on an emotional level such as working at a non-profit.

    It’s always funny to see the arguments that people get in over the definition of FI or ER. They’re the same thing people.

    • Exactly right — nobody who is planning for this big change is going to sit around all day, just like your grandfather! And you don’t have to choose ER or FI — just as you said, they’re the same thing! The only difference is whether you quit your current job, and that’s just a minor detail. Like you, we’ll always work in some way, we just may not make much money at it. :-)

  3. Clearly you can be one (FI), without the other (RE). Becoming FI is purely a financial matter. It is straightforward numbers and spreadsheets – and closely related with personal finance. Retiring early, on the other hand, is much more complicated and unique to each of us. Like it or not, work gives many people structure and purpose. It is a much more difficult thing to replace than and income stream. Believe me – I am leaving this morning for my last Monday at work (retiring on Friday!), and it is not a financial consideration in anyway!

    • SO EXCITED that it’s your last week! I agree that FI is about the money, ER is about the lifestyle. They are clearly different on that level, and you can have FI without ER. I think it’s the forced distinctions that bug us, when truly we’re all working toward some level of freedom, regardless of what we call it. :-)

  4. When starting out, I honestly was so ingrained in popular thinking that I never considered financial independence an option. It seems that we are all taught to think that we work and then we retire. Retirement is something that is defined by commercials for financial institutions and framed as people playing golf or sitting on a beach. I admit I was guilty of falling into this very narrow way of thinking for a long time and it made me question whether it was possible to do something so drastically different that I envisioned.

    My perspectives changed when learning of how retirement originated during the industrial revolution as a way to get rid of people who no longer served a purpose. They didn’t retire, they were retired. I now have a negative view of the word retirement. I try to avoid using it, but find that I do because you can at least start the conversation about financial independence.

    At the end of the day, I think we should all strive for financial independence on some level and at some point in our lives. I also think this is very achievable. On the other hand, I can’t think of a situation or time in my life where I ever would want to “be retired” from doing useful and interesting things.

    Here is hoping we can simply retire the word and concept of “retired”.

    • I think “retire” needs a rebrand. :-) You make a good case for getting rid of the word altogether because of it’s rather Soylent Green-sounding origins. We’ve been on the other side of trying to redefine it. But either way, yeah, it’s a loaded term for sure. I think FI is the more universally applicable term, as you said — just wish we could all talk about them as more obviously complementary, and not slightly opposed topics.

  5. I detest the term “retired.” Every time we fill out a form, or answer a questionaire or engage in a conversation and the subject of our non-employment comes up, someone or something categorizes us as retired. Retired, to me, is an antiquated word that was once used to describe someone who is no longer actively participating in life. Active through work, through social interaction, through hobbies or travel or family. Basically someone who has withdrawn from the world or is in the process of doing so. I don’t feel retired! I just no longer trade my time for someone else’s money. I am financially independent, but I was financially independent for two years before I left my last job, and if that job hadn’t deteriorated into a daily nightmare I might even have stayed there longer; I may even have still been there today. So are the two words different? To me, they are. FI means you may or may not still be trading your time for someone else’s money (including being self employed); RE means you are no longer earning money by working for anyone (including yourself), with the added distinction that you no longer need to do so. The difference between being unemployed and being retired is only an economic one; many people are unemployed who are not retired, and many people who are retired are still employed in some fashion. In addition, if you’re retired but dependent upon social security, Medicare and additional income sources such as pensions, dividends and interest, or you’re subsidized in any form or fashion, are you still FI? Or are you only FI if your sole income source is your own assets and you receive no subsidies of any kind? I consider us to be FI, but without social security and Medicare our version of FI would be very different than it is today. So are we retired? Yes, we no longer work for a living for anyone. Are we financially independent? Yes, we have enough of our own assets to support ourselves for the rest of our lives. Are we reliant upon any funds other than our own assets? Yes, pensions and social security supply the bulk of our monthly income. So are we truly financially independent? We think so, because we could live well without the income sources, but the fact that we receive them (and are entitled to do so), does separate us from those who do not. A fully unsubsidized person (no pension, no social security, no Obamacare subsidy or assistance of any variety), in my mind, is the only true example of financial independence because their financial lifestyle would not be altered by changes in legislation. Those people are much rarer than those of us crunching the numbers every time the government decides to change things up. Splitting hairs? I don’t think so. Lots of people live on social security and are subsidized in multiple ways and are unemployed, but have no assets of any kind. Where are they on the FIRE spectrum?

    • So many great points in here! You point out so many problems with the terms, especially “retired.” I think part of our de facto mission is to try to reclaim “retired” to mean exactly the opposite of what it means to you. It means ACTIVELY owning our lives, doing what’s important to us, and not just working for the man. And all of the FI questions regarding safety net programs — great points there, too! We’ll be reliant on Obamacare subsidies *because* the law requires us to have a certain level of coverage. If the law wasn’t in place, we’d buy a catastrophic policy like you used to be able to buy, and wouldn’t need the handout… but those policies aren’t available anymore. So that’s a weird FI grey area. And yeah, *are* people living on just SS FI? I don’t know the answer! But I think our community should be trying hard to be more inclusive, not trying to draw more distinctions.

  6. I had no idea you felt like this about FIRE – we can no longer be online friends…. Hahahaha kidding – but you’re right it does sometimes feel like a democrat v. republican or religious v. atheist sort of issue sometimes out in PF blog community. :) When we first started we realized pretty quickly, that “Early Retirement” wasn’t really what we were shooting for, but Financial Independence was more of the goal. That’s what led to us coming up with our Fully Funded Lifestyle Change (FFLC) concept. For us, it’s more about the freedom that having financial security brings and being able to change and improve our current quality of life.

    Mrs. SSC interviewing at a position that would dramatically reduce her income, while not necessarily reducing her workload is an example of having the finances in place to do that. I am sure if she gets this job, she will most likely parlay it into something outside of Houston in 3-4 years, so in the words of the “retirement police” we probably won’t be retired, just financially independent. :) I might even just be a Gasp! — stay at home dad!! Gah!!! but definitely NOT retired, lol.

    Whether we work or not, or hobby it up or not, or get super involved with the kids school, we can pick from all of that, because we’ll have the time and freedom to do so. Which is why I guess, we’re more FI than ER, even though for the most part I see it as tomato – tom-ah-to.

    • It’s like that moment in the movie, “The Blind Side,” when the tutor says to the family, “Before we go any further, there’s something y’all should know. I’m a DEMOCRAT.” Hahahaha. Maybe it’s just their weird election year, but we vote for less partisanship in all aspects of life! :-) I love your FFLC term, and actually think we should ALL be using something similar. Because it encompasses both the funding (FI) and the lifestyle (ER), which is the real difference between the terms. And, geez, retirement police aside, I think if you leave your main career because you’ve saved up a ton and can now do fun work, you still count as early retired even if you don’t identify with that term. So you’ll be an early retired SAHD, maybe! But I won’t give you grief if you don’t go by that term. :-)

  7. I’ve always found this to be an interesting topic, and one that I’ve actually written about before. We tend to link Financial Independence and Early Retirement together, but I am of the belief that they are two very different things. On paper, though, I definitely agree with your analysis that they both look very similar. In order to “retire early”, financial independence is a natural pre-requisite. The reverse, however, is not necessarily the case, and this difference I believe cuts to the heart of the matter.

    I believe the difference to be largely a state of mind. Achieving financial independence is primarily a numbers game. But early retirement is a mindset that we all have. We want something better in our lives. We don’t necessarily find fulfillment in what we are doing for a living. We have dreams of traveling the country, volunteering at a local shelter or learning Italian, or…we don’t want 8 to 10 hours of our day being taken up by some full-time job.

    Whatever the intent of early retirement happens to be, early retirement implies a deeper goal that probably transcends money. Yes, we all definitely need money in order to retire early, but money in and of itself isn’t the goal. It’s a requirement, but not necessarily the focus.

    Achieving financial independence is very much about the money. To a person who wants to achieve FI but not retire early, they are looking primarily for options. They probably do find satisfaction with their jobs but also understand that might not last forever. They want a way out, if needed. To me, this is about preparation. Achieving Financial Independence prepares us to do just about anything.

    I guess the element of this discussion that I’m most concerned about is how the general population views these two issues. There is no getting around the fact that they are very closely linked. But if someone has no interest in retiring early, then why achieve financial independence? I believe there is profound wisdom in achieving FI even if early retirement is not the plan, and the decoupling of these concepts might make it easier for people who may not be completely onboard to see the difference.

    In other words, I don’t want people to ask themselves, “If I have no interest in retiring early, then what’s the point of financial independence?”

    • You may a bunch of great points here, as usual, but I want to focus on the last one — it’s an interesting paradox, the idea of what the general population might think. I made the point that ER gets a bad wrap, and that could scare some people away, so argued for thinking of the concepts more interchangeably. And you made the opposite point, that not everyone might want ER, and so we shouldn’t try to combine them. Somehow, I think both points are true! :-) So perhaps it’s good to keep talking about both concepts as distinct, but just drop the “which team are you on?” mentality that exists in a few places.

  8. I put FI slightly ahead of RE on the saving scale. FI is enough money to cover your expenses indefinitely and RE is enough money to do something about it. I also think of RE as the what and why where as FI is the how. You can retire early because you are financially independent.
    As I’ve introduced Hubs to the concept, I’ve found its easier to lead with RE. How long do you want to work? Not until 65? We can do something about that. Becoming FI is what we have to do to get there.
    Being FI while continuing to work and save with no RE in the foreseeable future suggests to me that that person has either found their passion project or they were running away from something else more powerful.

    • I think you’re right — they’re obviously concepts that have slightly different meanings, but we shouldn’t treat them like they are so different. I love how you put it to your husband of using ER as the WHY, FI as the HOW.

  9. You make some good points that the distinction is very minimal.

    I had some confusion when I started down this path and wanted to quit my job and just figured it was retiring early, but lately I’ve been thinking I’ll probably do some other things such as writing a children’s book, keeping up with my blog, and maybe some other fun things that will bring in some money.

    I think MrFireStation brings up a good point that FI is entirely a numbers game. What you do with early retirement is entirely up to you.

    — Jim

    • I think you guys are right that FI is sort of like the financial precursor state, and then ER is the life part that actually includes your decisions. And your first point — that at first you just wanted to quit your job — is one of the central myths that we all need to work to dispel. ER is about retiring TO something, not jut FROM something. Let’s keep spreading the word! :-)

  10. Great topic for discussion!

    When I get to my big milestone, if I’m still happy working full time, then I will consider myself to be FI and continue to work.

    If I’m no longer happy, then I will stop working and will retire early.

    If I then take on another paid job (even part-time), then I would see myself as no longer retired but I would be FI.

    If I took on an unpaid/voluntary job, I would see myself as retired.

    This is just how I see it working for me and of course, it’ll work out differently for everyone else.

    Also, I think the perception between FI and early retirement is to do with age.

    Certainly, someone who has achieved FI in their 30s will not be seen by general society as having ‘retired early’ – they will think these youngsters have not worked long enough and will likely change their minds and go back to full time employment because they are young enough to be able to do so.

    Someone like me however, who hopes to achieve FI by my mid-50s will be seen by general society as having retired early, especially as some of my pensions at that point will be accessible.

    Both my parents retired early and are living life to the full so I already have a good idea of what I want to do – sitting around doing nothing is not one of them!

    • That is a viewpoint I haven’t heard before, and quite refreshing — that you’re comfortable jumping back and forth between the labels as your whims or the situation dictate. :-) I think most of us want to have our label and be settled already. (Or, in our case, just not have to argue for one or the other.) And such a good point, too, about age — “retirement” is easier to accept in someone with a bit more gray hair! :-)

  11. I try to only use financial independence since people get all up in arms when you talk about retiring early. They might also call you a cheat if you plan on quitting your professional job, but still earning income after. That’s why I use only “FI”. Just because I will retire from working for the man, I still have plans to earn SOME income along the way.

  12. I 100% agree with you. I almost feel like “early retirement” has been given this negative vibe that some of us have chosen to maybe not associate with, but….we are already a rather tiny minority of people, do we really need to divide the lines and create sub-cliques within our community?

    My parents are in their early 60s/late 50s and they seem busier than ever. I’ve always had a rather low-key, laid back lifestyle myself.

    At our Easter gathering yesterday, we were talking about how I tend to play the credit card game for signup bonuses and such and someone was like “you should start a blog!” and I was like “Nope. That’s way too much work. I hate SEO” and our family friend was “Yup, that sounds like TJ…” I’ve always been known to get excited about finding bargains and live a comfortable life based on minimal effort. I don’t see that changing whether I’m “retired “or “not retired” or “financially independent” or “not financially independent”, although I did recently have an amazing date with this badass woman in the oil industry (who also is a proud bargain shopper!) who is definitely encouraging me to indulge a bit more.

    The question of “What do you want to do with your life?” is the far more interesting question, I think. It’s a question that I do not currently have the answer to. The hope is that when I do have the answer to “what do you want to do with your life?” that the choices I make today won’t cause any financial impediments when I do reach that point of greater certainty and confidence. :)

    • Okay, well you don’t HAVE to worry about SEO to have a blog. :-) Haha. Glad you met a cool women, too. And yeah, the “what do you want to do with your life?” Q is the most interesting to us on every level. It’s what I’d rather know about someone at a cocktail party than “What do you do?” And it’s what everyone should be planning their finances around, whether or not “freedom” is part of their equation.

      • I actually stopped minding the “What do you do?” question, maybe when I stopped approaching the answer in terms of how I spend my 9-to-5. :-)

        I often responded to that question with “I travel”….yet now I haven’t left the country in a year and a half. I told that to someone yesterday, and they said “that doesn’t like you”….I suppose I would agree. :)

      • Haha — great point. I answer the question differently based on whether I want to talk to that person or not… once I said, “I’m really into puzzles.” And got exactly the response I wanted, which was, “Oh, that’s nice. Uh, excuse me…” But other times, I love giving a truer answer than my day job to kick off a much more interesting convo!

      • I love that! I will have to put puzzles in my back pocket for fending off the undesirables. :-D Of course, if that inspires a whole discussion on the awesomeness of puzzles, i might feel bad for pre-dismissing them!

  13. I’ve decided I don’t really care. This isn’t a topic I think is all that important to decide between. I agree it’s a bit divisive and leads to turmoil for people like us – What category of blog are we? We said we were early retirement, but now we plan to retire early, but not necessarily FI, which means are we really early retiring at all? Will we actually every be able to declare FI? Now we’re just passionate people looking for more freedom – lame – scratch us off the list! :)

      • I think we can learn from everyone’s journey. And I think sometimes one leads to the other, but sometimes it doesn’t. And thanks for keeping me on the blogroll even if we won’t technically qualify (but then again, maybe we will!).

      • I think in a way, the calculations and thinking you guys are going through are exactly my point. Realizing that maybe you want to work a little, have more freedom, or that you want to be able to quit entirely, or whatever, doesn’t fundamentally change what you’re doing day to day. I think this is the point I wanted to make but failed to. :-) You’re still living way below your means, saving up as fast as you can, creating future income streams, etc. It’s all the same journey, regardless of what your “after” looks like, or whether it happens in stages, and I think that’s why we want to de-emphasize the FI vs ER distinction. You guys doing some new calculations doesn’t suddenly switch you to a new team — we’re all still on the same team. Does that make sense? And haha — you’re a lifer on our blogroll. You’re stuck with us! :-)

      • That absolutely makes sense and I agree. I recalculate all the time, but the process is always the same. We are all saving hard and seeking our own versions of freedom. You guys are the best!

  14. Hmm. Before this article, I considered the two to be distinct but related: FI as a financial capability; RE as a lifestyle transition.

    Now that I’ve finished up with a six-month sabbatical — and continuing to milk it! — I think I’m coming around to your “two sides of same coin” attitude.

    In a very real sense, I’ve been acting “early retired” since July 2015. (My wife acts it too when she’s not the breadwinner.) I’m not yet FI and can’t sustain RE, so back I go to earning active income.

    • That’s so interesting that actually living the sabbatical is what changed your mind! And there’s for sure truth to the notion that FI is the financial piece, ER is the lifestyle piece. But they definitely go together. :-)

  15. To truly Retirement Early you need (quit the major income producing work) you need to have reached some level of Financial Independence.

    Now what is Retiring Early? 5, 10. 15 20, 30 years? All about personal choice. I don’t want to work until I’m 65.

    I’d love to reach FI and give myself more choices, I’m sure I’d continue to do some type of work, volunteer, etc.

    Once leaving the thing you did for 10,20 30 years-40 hours a week you better have a plan or you might find yourself going a bit crazy filling that void.

    • The plan is *crucial.* I often think people who say they want FI instead of RE just haven’t figured out their plan yet, because there’s nothing about RE that says you’re sitting around doing nothing. That’s a recipe for true unhappiness!

  16. Quite soon after reading FIRE blogs it was clear for me: I go after FI, not RE. Probably a year of travel or so, until I am bored of that. As I do not have the character to sit around and do nothing, I imagine myself looking for some challenges that drive me and make me h-get out of bad so I can contribute.
    Now that the plan i sin place, I look more at options that allow me to be partially FI. To mean, it means I decided what and where to work. The way forward would be freelance. Deep dow, this would be my first milestone.

    • I think you’ve fallen victim to the false distinction! :-) Retiring early is NOT about sitting around and doing nothing. I am incapable of doing nothing, but we see ER as just meaning we don’t have to work for money, and we’ll leave our current jobs. Pretty simple definition. But yeah, I agree with your life plan — travel as much as you need to, then find other things that excite you, and pour your heart into them. :-) Or decide when and where to work — that’s no different between FI and RE. :-)

      • Well, it is the word retirement that confuses me.
        Can I rant a little? For me, retirement is stopping an active career. And a career is a sequence of jobs that you do to advance in hierarchy or to become a subject expert or to realise things you value. The fact that you take on a job after FIRE that allows you to achieve something means you progress in your career. Thus, you are not retired. It also probably means I will only retire when unable to move or think :-)
        Maybe it is sentiment, I prefer the word FI better. It has more positive vibes.
        And in the end, it does not matter a single thing to me how we call it. The only thing I value is that I feel happy with what I do and that I have no regrets of things I did or did not do. For now, the easy word for that seems to be FIRE.

      • You are always welcome to rant. :-) I think the problem is with the word retirement itself, and all that it suggests. It also seems to be a question of whether the things you want to do after you save your magic number are related to your current career path or are different. Like we still plan to do lots of work but it won’t be what we’re doing now, though in some ways it will build on what we’ve learned over our careers. Does that mean it’s still a career, or no? To us, whether you’re doing something related to your original career shouldn’t be the measure, because most people work in “traditional retirement” too these days. But I completely get that you just prefer the term FI because of all the baggage that comes with ER, or just R — as you say, most positive vibes with FI. :-)

  17. I see enough of a distinction to merit the use of the two distinct phrases (FI vs ER’d). It is definitely a grey area though when you come to someone who still works more than a couple hours per week, even if it’s something they love.

    I know I’ve seen plenty of comments online criticizing Mr Money Mustache because he “still works full time” as a carpenter/builder. Firstly, I really doubt he’s putting in a consistent 40 hours per week or anything close to it. And secondly, it’s pretty obvious to me that if he’s doing it, it’s for the non-monetary rewards (it’s fun; it’s challenging; he’s helping out others; it’s good fitness activity, etc).

    Is he early retired or just FI? Though question. I’ll leave it to the internet police and get back to my own early retirement (even though I spent a few hours last night banging out a 2000 post article instead of watching netflix with the wife and my blog produces the equivalent of two minimum wage earner’s salaries every year). :)

    • For sure there is a functional difference, as FI is a financial state and ER is a lifestyle choice. But to illustrate the problem with making a big deal about the distinction, one of the early comments on this post was that a person could be ER for a little while, then FI while working, then back to ER while not working, then FI when working again, and on and on. That is, to me, where the problems in the distinction lie. Who cares if MMM is working, and how much. He did his career, saved up, now does what he wants — early retired is a good label, even if the internet police want to argue about it. Same with you, even though you earn money from your blog. We don’t disagree with the functional distinction, but more of this philosophical notion that it’s super important to put everyone in this clearly defined box, when nothing is that cut-and-dried. We’re all after the same thing — freedom — and that’s the important part. :-)

  18. This is exactly why I refrain from using the term early retirement. People think early retirement means quit working and sitting on your butt all day. That’s not true at all. FI, I think, is a better term. It’s more empowering and when you reach FI it means you can decide what you want to do. You can certainly continue working at the same job if you choose to.

    • I think that’s smart, although we’re a good case where FI is just the precursor to the real fun, and isn’t itself enough to retire on. But probably most people don’t need that level of detail, though it’s certainly an important detail here on the blog! :-)

  19. I’ve see the bad image that “RE” gets enough that I’m now using “FI” to describe my own plans.
    To friends, I try to describe it as “I won’t need to work for money anymore” rather than “I’ll be financially independent” (tougher to explain) or “I’ll retire early” (at 35, makes one sound like a lazy dude)

    • I completely get that — retirement is such a loaded word. We’ve been saying FI more, but even that doesn’t really tell the story since we’re already technically FI but still have quite a chunk to save before we can retire. Oh well… I suppose this is the very definition of a first world problem, trying to figure out how to explain our enormous privilege. :-)

  20. I agree w/ with the lifestyle camp. I classify FI as having base expenses covered (i.e. we can keep our kids fed with a roof over their heads), but RE adds travel and some of the fun things. Even though we are FI, we continue working, not because we love it, but because it is the most efficient way to have the lifestyle we want without ever needing to work for money again. We will likely make some money after pulling the plug on our corporate gigs, but I sure don’t want to be in a position where I have to work to fund travel, kids college, etc.

    • To your point about RE adding the fun things, maybe we should call it “FI Plus.” :-) And yeah, your situation is like ours. We’re technically FI, but not yet at a point where we can cover expenses at our ideal standard of living for life, so we’re sticking with the corporate gigs a bit longer. Totally get it!

  21. Oh wow, I didn’t think there was such a debate on the topic, interesting :)
    To me, it feels like FI is a necessary requirement to RE, like you need FI before you consider RE. Sometimes, they can come together at the same time and FIRE at once. So on the first leg of the trip, FI and RE really are the same.

    But then, as you rightly point out, it differs on what you’d like to do next.

    I’ll give you an example, one of my neighbors is retired, the normal kind. He spends his days socializing with the neighbors, plays bridge several times a week, takes several vacations a year to new destinations, invites family over, takes care of his grand-kids, … Since he was previously a teacher, he also tutors several times a month to help out and hustle.
    I could totally see myself retire like this, early or not (or late, if I need to take care of potential future grand-kids). Should he not call himself ‘retired’? If this was 10 years earlier, could he say ‘retired early’?

    Another neighbor runs his own company. He is FI multiple times over and he loves what he does. He goes to work everyday, he’s only 55. Could he call himself ‘retired early’?

    So I think the distinction comes after you reach the “FI inflection point”, but not so much if you keep a job or not. I’m pretty sure everyone in this community will remain active after FI, working or not.
    However, I’d say that if you actively keep pursuing money after that, you’d only be FI.
    If you give up pursuing money for something entirely new, a different lifestyle, I’d call this FIRE. I would have the highest respect for someone who FIRE, I can see how much of a mental leap would be required to flip the switch.

    Everyone should be proud to be on this journey and I agree with you that being divisive on the topic wouldn’t reflect the general creativeness and wit that the PF community displays so regularly. Eventually, what we all want is a richer life and most of us do.

    • If there’s anything that today’s comments have proven, it’s that “retirement” is a crazy loaded word. Even more so than I thought when writing this! Even among people who sometimes write about early retirement, there really does seem to be a mindset that you have to be done earning money, at least for the most part. It’s super interesting! You point about the neighbors fits right with that. Thanks for chiming in!

      • Well, the definition of retirement is “leaving one’s job and ceasing to work” so earned income would have to be passive and not actively sought. What do you think?
        Interesting discussion indeed!

      • The definition of retirement itself has changed so much! Traditional retirees often do second act careers now, or do other part-time work. So I think that’s influencing our definition of early retirement a lot. :-)

  22. Totally agree the division is not helpful.
    I love SSC’s definition of FFLC, that is what I am aiming for. It may involve paid work it may not.
    I had chuckle at your chart with ‘Plan to sit around doing nothing’. Last time I checked you can’t ski sitting down :) and I couldn’t imagine you doing that!

    • I love the FFLC, too! Maybe we can make that the more widespread term. :-) And yeah, I don’t ever see us doing nothing for more than a few minutes at a time!

  23. I used to think I was financially independent, because, you know, I never ask anyone else for money. I honestly thought FI is simply about supporting yourself and adulting well, apparently, it’s a lot more than that. Haha! I have to admit that although I used the 2 terms interchangeably most of the time, I will only use FI when I’m talking about my own plans. And yes it’s because I haven’t considered quitting work at an early age. I feel that FI gives me a choice of continuing work with the ability to walk away when circumstances ask for it, while RE sort of makes me anxious just thinking about what I’d do once I quit forever (because I get bored very, very quickly).

    • I think that’s a perfectly valid definition of financial independence! :-) And I think FI is a great term if, as you say, you don’t have some clear vision for your future. That’s a great thing, actually, because it keeps you wide open to possibilities, whereas I sometimes wonder if we’re boxing ourselves into one vision (I doubt it, but I do wonder).

  24. Even though I often use the terms interchangeably, I think of them as being slightly different for the reasons several have noted above.

    I consider us now to be nearly FI and will think of myself as RE once I leave my job in August. To others, I’ll just look like a SAHD who works part time and blogs a little bit. Either way, we have the flexibility where income from an employer is not a main driver of our decisions.

    • That’s a pretty small gap of time for you between FI and RE! :-) But I’m so, so excited for you to get this new level of freedom and flexibility, and the chance to travel all over Europe without having to hop a transatlantic flight!

  25. I definitely think of them as 2 different concepts because I’m in my mid-late 50s, so it’s too late for “RE” for me, but never too late for “FI”. :)

  26. To me the terms are interchangeable, I just think that society in general views retirement as not working for money any more.

    If I ever get to that point where I could use either of those terms I’d probably go with early retirement when I talk to people. It’s just something crazy and weird that most people don’t even consider for themselves. I like to be weird and different! Being normal is having debt and keeping up with the Joneses!