The podcaster and author of F.I.R.E for Dummies wants more people to know financial independence is within reach, even if they’re getting a late start or starting small.
Our guest on the podcast today is Jackie Cummings Koski. She is a certified financial planner, and she is the author of a new book, F.I.R.E. For Dummies. FIRE stands for financial independence, retire early. Jackie is also the co-host of a podcast, Catching Up to FI, geared toward people getting a late start on financial independence. She is founder and CEO of Money Letters, LLC, which is geared toward providing financial education. She received her undergraduate degree in communications and journalism from Augusta University and her master’s degree in personal financial planning and financial therapy from Kansas State University.
Background
Catching Up to FI podcast
How It Began/Resources
“Financial Independence, Retire Early (FIRE) Explained: How It Works,” by Alexandra Kerr, Investopedia.com, Aug. 16, 2024.
“This Women Grew Her Wealth and Retired by Age 49—Here Are 5 Major Steps She Took to Do It,” by Jasmin Suknanan, cnbc.com, Jan. 2, 2024.
Health Savings Accounts
“Health Savings Account (HSA): How HSAs Work, Contribution Rules,” by Julia Kagan, Ivestopedia.com, July 22, 2024.
“How an HSA Is Helping One Woman Achieve FI/RE Toward Early Retirement,” hsastore.com.
Other
“Most US States Will Soon Require Personal Finance Courses in School,” by Justin Boggs, scrippsnews.com, July 1, 2024.
“Jamila Souffrant: ‘What Type of Life Do You Actually Want to Live?’” The Long View podcast, Morningstar.com, May 28, 2024.
Christine Benz: Hi, and welcome to The Long View. I’m Christine Benz, director of personal finance and retirement planning for Morningstar.
Amy Arnott: And I’m Amy Arnott, portfolio strategist for Morningstar.
Benz: Our guest on the podcast today is Jackie Cummings Koski. She is a certified financial planner, and she is the author of a new book, F.I.R.E. For Dummies. FIRE stands for financial independence, retire early. Jackie is also the co-host of a podcast, Catching Up to FI, geared toward people getting a late start on financial independence. She is founder and CEO of Money Letters, LLC, which is geared toward providing financial education. She received her undergraduate degree in communications and journalism from Augusta University and her master’s degree in personal financial planning and financial therapy from Kansas State University.
Jackie, welcome to The Long View.
Jackie Cummings Koski: Thanks, Christine, and Amy. It’s great to hang out with you guys.
Benz: Well, it’s so great to have you here, Jackie. We wanted to talk to you for a while and we’re excited about your new book. And we will delve into the book, but we want to start with your personal story and your FIRE journey. You’ve said that you grew up in a family without a lot of financial resources. Your dad raised you and your siblings, and he didn’t have much education. Can you talk about how that affected your attitudes toward money? It sounds like it was a very formative experience.
Koski: Yeah, it really was. So, I was raised by a single dad with six kids, and being an adult now and looking back, I’m like, I don’t know how he did it. But he is and will always be my greatest hero, because to take on six kids and do that yourself—he worked a regular job, he was a factory worker, and then he had a part-time job. But it was amazing what he accomplished. And he did all that in my formative years because he passed away about three months before I graduated from high school. So, everything that I learned from him, everything that stuck with me happened under the age of 18.
And growing up in poverty, that just sticks with you. And poverty is certainly a mindset. And I think throughout my whole life the thing that kept creeping into my head was that I did not want to be in poverty when I grew up. I don’t want to be thrust back into poverty. So, a lot of times that was my big motivation to do some of the things I did, especially around money. So, fear is not always a good thing, but for me, it kind of was because I had that fear of being back into poverty because I knew what it was like. It didn’t feel good. Money was more of an obstacle than anything else. I didn’t do summer camp. Why? Because we didn’t have the money. I didn’t go to the theme park or get new clothes. Why? Because we didn’t have the money. So, it definitely has a theme throughout my entire life, the things that I experienced and felt while I was growing up.
Arnott: And you have written that going through your divorce was another pivotal moment in your financial life. Can you talk a little bit more about that?
Koski: The whole being thrust back into poverty definitely popped in my head at the time of my divorce. And one of the big things I remember—I was married for about 12 years and had a daughter. She was about nine years old at the time. And I remember thinking, what I thought was going to be a shared journey is now a solo project with me and my daughter. And I wanted to make sure I was going to be OK, and my daughter was going to be OK. And I just never wanted her to know poverty the way that I did. So, the finances, that was a thing that really got my brain thinking, and it really turned on the light for me as far as the financial part of things. Because the huge thing that I remember at the time of the divorce is, basically, when you get a divorce, especially when you’ve been married for 10 years or more, anything you own is put in the middle, or put in a pot, split down the middle. And I just remember really the only money we had was in our retirement accounts, our 401(k)s. So, there was a huge gap. I had $20,000 in my 401(k) and he had $120,000. So, there was a $100,000 difference. And I didn’t understand why. We made around the same amount. We were doing the match, maybe a little bit more, but we weren’t doing anything vastly different. So, when I dug into it a little bit more, there were some different things he was investing in, and he started to make a little bit more than me. And I pieced it together. But boy, that was a hard time. I felt very financially ignorant. And that was a huge wake-up call for me. And from that day forward, I started doing a lot of things different with my finances because I never wanted to feel that financially ignorant again.
Benz: Yeah, divorce can be such a financial killer. And sometimes people don’t get good advice about which assets to actually ask for in a divorce. Did you get some financial planning guidance at that juncture to help you make good decisions?
Koski: I did not. At that time, I’m in my early to mid-30s. And I don’t know anyone that has used a financial advisor. I didn’t even know what a financial planner was. And so, I didn’t even realize that was an option. I’m trying to do it on my own, hoping that I would get a little help from my attorney, which I didn’t really. So no, I had to figure all this stuff out on my own. And, it was a lonely time too, because I’m thinking I have to do all this on my own now. So yeah, I didn’t have a lot of guidance or help. And I think in my head, I was probably thinking, well, we hardly have anything, so I don’t really need to go get help right now. Or that was my thought process at the time.
Arnott: I can imagine just going through all the emotional turmoil and probably worried about your daughter and then having the financial worries layered on top of that. It must have been really hard to have all of that going on at the same time.
Koski: It was. I think it took me about two years to really start to feel OK mentally and process things in my head before I ever started moving. And I’m a big proponent of the psychological stuff that goes on that will either allow us or prohibit us from making the moves that we need to make. So, it took about two years before I finally popped up one day and just said, I’m ready. I’m ready to do something different.
Benz: We want to talk about your introduction to the FIRE movement. You’ve written a book about FIRE, F.I.R.E. For Dummies. FIRE stands for financial independence, retire early. Do you remember your initial introduction to FIRE?
Koski: I do. Like I mentioned, during my divorce, I wanted to do some different things around my finances, but so many things were very confusing. And the traditional financial planning industry—myself included—sometimes we make things seem complex and I still was not, I wasn’t getting how to put it all together. And so, when I started hearing about—I’m a big podcast listener. And when I started listening to more and more podcasts, at first there was only a handful and more and more came on the scene talking about financial independence and then finally retiring early. And for some reason that clicked with me because the FIRE people were making it so simple. For instance, 25 times your expenses, that is what you need for retirement. That made sense to me more so than basing it off of your salary. And then the 4% rule, how it was being explained actually in dollars, giving examples, that was just the first time where things were clicking in a simple way that I could actually understand. And that allowed me to get to work on my numbers and craft the idea of what that would look like for me.
Arnott: Were there any individuals or websites or books that helped things click for you during the earlier part of your FIRE journey?
Koski: Yeah, I think one of the main ones, it was for a lot of people was ChooseFI. And their podcast, they had a lot of different guests. So, one of the voices that I really love that resonated with me was Mad Fientist. He has got this nerdy brain where he, I believe he has read the whole IRS code, but he is a genius and I love the way that he writes. But also, there wasn’t a ton of people that looked like me. I’m an African American woman and that avatar for FIRE is like young, male, high income, things like that. And I was just the opposite. So, there was one newer person that came on the scene with a podcast and that was Jamila Souffrant. And I loved hearing her voice. I love that I got to start with her when she first started her podcast and following her journey. Now she is huge. It was so great to see her grow up. But I learned so much from her. She is much younger than me, but I learned from her, and I consider her a mentor because in my mind, her voice was so needed in the FIRE movement, especially in the early days. So, there was a lot of people.
I think one other type of person in the FIRE movement that really helped me was anyone that was showing their numbers. So, there were some people that were very transparent, like Mr. 1500 Days, Carl Jensen, Root of Good was another one. So, I loved when I got to see the numbers because although I knew I wasn’t exactly like them, if I could see the numbers, I knew where I needed to make the proper adjustments to apply it to me and my life. So that was extremely helpful for me.
Benz: Was your job quantitatively oriented? Is that why you’re geared toward the numbers? What was your work background?
Koski: No, not at all. That’s part of the reason why instead of just shifting to another job or trying to work with my company, what I did had nothing to do with personal finance. So, I worked for a global data company, and I was in sales and account management. So, it had nothing to do with it. Maybe if I worked for like, I don’t know, a credit reporting agency, maybe I could somehow shift into financial education or something. But that was impossible. So, I really had to make the split and step away because it had nothing to do with what I wanted to do around financial literacy and education. I don’t know where these numbers and financial stuff come from.
Arnott: In the book, you write that it’s important for people pursuing FIRE to have a why. So, it can’t be just I don’t want to work anymore, but you have to be moving toward something. Can you talk a bit more about that? And also about what you just mentioned as pursuing financial education as your key focus?
Koski: The financial literacy and education, that was definitely my why. And it just was a stronger pull toward something else versus just wanting to leave. And the truth of the matter is, a lot of people are in bad situations in their working lifetime, and they do just need to pull away. And that might be their why at the moment. That’s going to somehow get old. At some point, you have to think about, OK, what’s next for me? It doesn’t mean that you have to have it all figured out because it will probably change anyway. It doesn’t mean that you have to make some big grand gesture. It’s just, allow yourself to think deeply about what is it that you want to do? What is the mark that you want to leave on society or your family or whatever? And to be honest, a lot of us never get a chance to really think about that. When I was growing up, I was taught—you get a job to be able to pay your bills, not oh, do what you love. That just wasn’t it. And a lot of us have never been asked that question: What is it that you really love, and that you would want to do if money were not a factor?
So those are some deep questions to think about. Because if you have something on the other side, or at least some starting vision of it, it’s going to be a powerful force that will get you more motivated and working harder to say, you know what, I’m really wanting to go toward this versus just leaving your job. Sometimes leaving the job, you just need to do it. And that may be your why at the moment. But at some point, you’re going to be doing something on the other end. What does that look like? Sometimes just having the break opens your mind enough to actually think about it. If you can do it beforehand, that’s probably going to be even more valuable.
Benz: There are all different variations of FIRE. There’s Lean FIRE, Fat FIRE, Coast FIRE, and so on. And you get into these in the book describing what they are. But can you talk about the different key variations and then also talk about which one you think best describes your own FIRE journey?
Koski: I think we’ve been doing those labels over the last, I don’t know, five years or so. When I first started with FIRE, there wasn’t any labels like that. I’m not a huge fan of labels. But the reason why they are important in this situation is just that so many people had seen FIRE as this very restrictive, frugal, minimalist type of person. And that’s not all that it is. To be a part of the FIRE movement or to have some of these FIRE characteristics, there’s no doctrine that you need to sign. You don’t have to strictly follow any one of them.
But things like Coast FIRE is basically where you have enough money where if you don’t touch it until you retire traditionally, you’re going to be fine. And you don’t have to necessarily accumulate anymore. It will just go off the growth. Then you’ve got a Lean FIRE for someone that might have been lower income, they live a more stealth life, maybe lower expenses. And then the Fat FIRE is for those that probably are making a lot more money, probably have a lot more expenses. But again, that just shows the flexibility and how everyone’s journey is a little bit different, and you can customize it to what you want.
If I had to put myself in one of those buckets, I’m definitely not Coast FIRE. I wouldn’t say Lean FIRE. I fall short of saying Fat FIRE. So, there’s not a regular FIRE. I guess if I had to rename something, I would probably name it Late-Starter FIRE or Catching-Up FIRE, something like that. Because I started late, but it took right around 10 to 12 years to turn it around. And I actually was able to reach FIRE still way sooner than traditional retirement age.
Arnott: So, as you mentioned, you consider yourself kind of a late starter with FIRE and the podcast you co-host Catching Up to FI is geared toward late starters. What advice would you give to people who are attracted to the FIRE movement but are worried that maybe they’ve started too late?
Koski: We see that a lot. A lot of times people are like, well, all these people are retiring in their 30s. I’m 45. I can’t do it. Well, FIRE is not just for 20 and 30-year-olds. But that’s what you see in the headlines a lot. So, a lot of people assume that that’s what it is. And really retiring early is really anything before traditional retirement age—let’s say, use the Social Security number, 62.
So, the first thing is to give yourself grace. The average person is a late starter because we don’t have personal finance in schools. That is starting to change. We actually have 25 states now where the law has passed to require personal finance. But for most 40-somethings, it wasn’t available. And a lot of us didn’t learn at home, or it was a taboo topic, and it wasn’t discussed, or we picked up some bad habits. So that’s OK. I did my first net worth at the age of 38. I didn’t even know what a net worth was before then. So, give yourself a little grace and then realize that even if you’re starting in your 30s or 40s, even your 50s, it takes roughly about 10 or 12 years. Once you start to wake up and start doing some things different with your finances, and even if you don’t end up retiring early, you have still improved your finances. If you decide to put a focus and a little time and effort toward improving your finances, you are going to be better off. So, it’s not like you have to subscribe to every little headline that you’ve read, or maybe an avatar.
My belief is that ignorance happens from afar. So, if you’re standing on the outside and you’re an onlooker, things look very different. It might be scary; it might be confusing. But once you move in and you start to learn a little bit more, see all these different people, different things, different communities, and that’s why we created the Catching Up to FI community because there’s a lot of people in this bucket, and there was really nothing out there that was focusing on this demographic of late starters. It seems like everybody is focusing on the baby boomers because they got all the money or the millennials because they were the bulk of the workforce. So, what about us in the middle? There’s a lot to be said for being in these 40s, 50s, maybe even late 30s, because a lot of times we are moving past the bottleneck of younger kids and expensive daycare. We are making a lot more. Sometimes we’re in our peak earning years. There’s a lot of advantages that tend to come along with someone that’s a little bit older that is planning for retirement or retiring early.
Benz: I wanted to ask about your daughter in this, Jackie. What was her response when you’re like, OK, we’re going to FIRE, we’re going to do this. I assume there were some changes in your lifestyle. So maybe you can talk about her response as you implemented some of those changes.
Koski: By the time I found FIRE, my daughter was just finishing up high school. So, she was becoming an adult. But even a little bit before then, I didn’t do a lot of things different because I was always conscientious of the fact that I have a daughter. Now we as parents, we have a tough time between spoiling our kids and trying to teach them good habits and to be a good person and not giving them too much, right? So that was always a struggle. But I don’t even consider myself being the best budgeter. So, the way that I even came to learn what my expenses were, I did it backward. I did it backward. It was basically that I looked at how much I was saving and investing. And then I subtracted that out and then I subtracted out what I was paying in taxes and what was left, that’s what I was living off of. So, I never really had to make any major changes, which again is another thing that you don’t hear a lot in the FIRE community, or at least it’s not in the headlines usually. But I really didn’t make very many changes. And some of that stealth wealth or being conscientious about spending my money may have come from how I grew up. Growing up in poverty, you just always learn to be as efficient with your money as possible. So, everything that I bought or whenever I spent my money, I always wanted to make sure I was getting the best deal. I was very efficient with my money. And so that part wasn’t a hard part for me. And there was nothing I really had to cut out. I did take a look at all the pieces of my expenses. And there might have been a few minor things, but there’s just certain things that are just worth it. And having certain time with my daughter and making sure we were creating the experiences, I was OK because I was still able to max out all of my accounts and do all the saving and investing that I needed to do.
Arnott: It sounds like having that mindset of wanting to be frugal and having built-in savings happening automatically helped you make a smooth transition toward FIRE. Were there any other things that particularly helped you or were difficult as you went through your journey?
Koski: I think for me, generally, it was tough being a single mom because I knew it was just on me. And some of the things that helped me a lot was I had a pretty generous employer match with my 401(k). Like, if I put in 7%, they put in 9%. And that was unusually high.
Arnott: That’s great.
Koski: At the time, I didn’t realize it, but it was a thing. So, when I finally woke up after my divorce, after that two years, one of the first things I did was, you have to ask yourself, OK, what is it that I enjoy doing? What do I love to do? And I was very interested and curious about the stock market because I’ve kind of been afraid of it. So, I ended up joining an investment club and it’s supported by a nonprofit organization called Better Investing. So that was probably not the best place to start, but I learned a lot about compound growth. I learned a lot about the stock market. I learned a lot about investing. So, then I started to backtrack because all of this money stuff is intertwined. So, I said, why am I not maxing out my 401(k)? Why am I not maxing out my Roth IRA? Why am I not maxing out my HSA? I learned that you can invest in that. And most of this was happening right around 2008. So that turned out to be a really good time to start investing. So those are just some of the things that I thought was like the wind at my back. So, the way the stock market was performing had a lot to do with it. The fact that I wasn’t afraid of investing because I knew the money that I was putting into my 401(k) and all those other accounts, that meant I was investing and my money over a long period of time will grow. And I think that made a big difference.
Benz: I wanted to follow up on the health savings account thing, Jackie, because you were really an early adopter there. Maybe you can talk about how you used your HSA. And also, I’m curious how you plan to use it to draw down from in your retirement, or maybe you’re drawing down from it now. Maybe you can talk about that.
Koski: So, with the HSA, I think they originally came on the scene, I want to say, like 2003 or something like that. But for me, my company started offering them for the first time in 2008 with a high-deductible health plan because you have to be on a high-deductible health plan. And I just remember looking into it, I thought it was the same thing as a flexible spending account.
Benz: A lot of people do.
Koski: So, everybody gets it confused, even me, because I almost lost money in my flexible spending account at a previous job. I’m like, no, I don’t want to have anything to do with this. And then I started digging in a little bit more. Sometimes that curiosity really comes in handy. And I saw that, oh, wow, this rolls over from year to year. I can invest in it. And there’s no time limit to even use receipts. So, if I didn’t want to reimburse myself right away, I didn’t have to. So, that took away a lot. And the fact that I could invest in it, I think was like the thing that closed the deal for me. And then I wasn’t even thinking about the tax advantages at the time.
So, from 2008, I contributed the family maximum every year until I retired in 2009. I was able to do the family maximum because family is just you and one other person. So, for me, that was me and my daughter. So, I started investing as soon as I could with it. Me and my daughter luckily were very low consumers of healthcare. So, in a given year, I didn’t even spend $300 or $400 out of pocket. We mainly went to our regular annual visits and that was about it. So, the high-deductible health plan worked great for me because we never even met the low deductible when we were on there. I was just paying a high premium I felt like almost for nothing. So, after these 12 years, from 2008 to 2019, this thing has grown like crazy because I invested from Day One just in a straight-up index fund, a stock market index fund. And so just last week, I’m looking at my balance and it has eclipsed $200,000. And even when it was $100,000, I started thinking a lot about, how am I going to use this? What’s my drawdown strategy? Because who knew that an HSA could get that big?
So, I’ve had to think a lot about what to do with this because, one, if I pass away, the inheritance rules of an HSA are not that advantageous. It basically stops being an HSA if it goes to anyone other than a spouse. And I’m not married. So, I don’t have a spouse that it will go to. So, I’m like, OK, how do I do this? So, to me, things like this, it looks like a very negative thing, but it becomes a planning opportunity. So, what I decided to do, and my drawdown strategy is, as far as the inheritance part, this is the one account where I have multiple beneficiaries. That way, no one person is getting $200,000 or whatever. So, Fidelity is going to have a lot of fun parsing this account, But I’ve got, I think, close to 10 different beneficiaries on this account; they didn’t limit it. And I’ve got several nonprofits. So that’s going to minimize any tax implications of that HSA that no longer is an HSA once I pass away.
Right now, the way I plan on drawing it down, luckily, I still don’t have any really high healthcare costs. So, I plan on using it to, as soon as I start Medicare, which would be 65, well over 10 years from now, but I plan on using it to pay my monthly premiums for Medicare, you can use it for Part B and Part D, and you can even use it for Medicare Advantage; you just can’t use it for Medigap. So that’s a big chunk already. Adjusted for inflation, that could be anywhere from $400 to $500 a month. But you get a nice annual statement for that, and that’s very easy to keep up with and just file with your taxes. So, I plan to do that and cover any out-of-pocket costs for medical. But on top of that, we know that Medicare doesn’t cover—depending on if you get a supplemental plan or whatever, but it generally is not going to cover some of these other things like vision, dental, and hearing, but I can use my HSA dollars for that.
So, that’s how I plan to spend it down. And honestly, after 65, you can use the HSA funds for anything at all, and you do not pay a penalty. There’s normally a 20% penalty if you do it before 65. But at 65, you can use those funds for anything, no penalty, but you will have to pay taxes. So, it sort of starts to look like a traditional IRA. So that’s my plan on how I want to spend that down and the drawdown strategy.
Arnott: It sounds like you spent a lot of time reading and listening to podcasts to educate yourself, but you also decided to pursue the certified financial planner designation. Can you talk about that decision and how you’re using that formal education today?
Koski: That was not in the plan when I retired. I wasn’t a big fan of the financial planning industry. And when I did a little more research, I saw that there was a lot that was changing. And I could either be on the outside and criticize it, or I could be on the inside and be a part of the change. And I decided to be a part of the change. I really wasn’t looking to be a one-on-one traditional financial planner. But I knew I wanted to increase my knowledge. And I wanted to smooth out some gaps that I knew I had with what I had learned on my own. I was primarily self-taught. And I learned a lot in that process. But I knew I had some holes. So, one of the first things I did when I retired is I went back, and I got my master’s degree in personal financial planning and financial therapy at Kansas State. Financial therapy was an amazing program. I absolutely loved it. But part of that master’s was the six classes that would fulfill the education requirement to sit for the CFP exam. So, I’m like, I’m not planning on doing that. That’s not where I’m going. And somehow, I kind of got sucked in. And a few months before graduation, I had decided to sit for my exam. My biggest concern was the experience hours because I thought you could only do one-on-one financial planning in order to get these experience hours. Turns out it’s very broad now. They made a change about 10 or so years ago. And a lot of the education stuff that I was doing would qualify. And I did mostly one too many. I did talks, presentations, workshops, and things like that.
So, I decided to go for it. I’m like, you can go back 10 years. I thought I could fulfill that. So, I took a review program. You spend three months of your life studying like a mad person and trying to prepare for this really, really difficult exam. This is a high-stakes exam. And so, I studied my butt off. But I was really, really concerned because this exam is designed for someone with three years of financial planning experience. And I didn’t really have that. And so, I’m trying to overcompensate to say, OK, I got to really buckle down because I don’t have some of the experience that I’m supposed to have going into this exam. So, I studied my butt off. The main thing I learned about myself is that I was an auditory and a visual learner. The exam review program was just printed books. And I knew that that was not going to get it for me. So, I had to incorporate all kinds of things.
Honestly, The Long View was one of the resources that I used. But I searched all these podcasts and YouTubes of professionals that really talked about the stuff in a way I could understand. And so, I go in to take the exam, and I didn’t know how I would do, but it’s a seven-hour exam, 170 questions. And at the end, it does tell you whether you passed or failed in tiny four-point font. And I saw it gave me a pass, and I was like, oh, my gosh, I think I almost fell on the floor. It was an unbelievable feeling. But I tell you what, I am so much better as a messenger, as an educator to have gotten my CFP. And I also have another designation that focuses more on education and counseling and coaching called an AFC, Accredited Financial Counselor. But both of those together, it really did fill in the gaps that I had. I was only learning for myself. And getting this additional education, additional training, helped me be in a position where I can educate and help people regardless of what issue there is, because now I have covered it all between my personal experience, my own self teaching, and going the professional route and learning so many other things. And I don’t really even call myself a financial planner. I call myself a financial educator, that’s what I am first, a financial educator that holds the CFP credential, because I just want to be able to touch more people than what I could ever do as a one-on-one financial planner.
Benz: Yeah, that’s a good way to frame it, Jackie. And we wanted to ask about one of your educational efforts recently, which is your book, F.I.R.E. For Dummies. Maybe you can talk about why you wanted to work on it and also some of the misconceptions of FIRE that you were hoping to clear up with the book.
Koski: Well, I’m really proud to be the person that wrote this F.I.R.E. For Dummies book. And it was just, again, an extension of my work, where I want to touch as many people as possible with this message, people that may not be exposed to some of this stuff. And there’s a ton of misconceptions. I mentioned earlier about it being young, white males that have a really high income. I think it was like that in the early days, because I was around in the early days—yeah, most of them were that, but things have changed so much, and the movement and the community have gotten so big where there’s niches for everything. I think there’s also a misconception about people being super frugal and maybe excessive minimalists and things like that. Do those people exist in the community? Probably so. But that doesn’t represent everyone.
And I guess another thing is taking things very literal, like you’ve got the financial independence start apart. And so, everybody wants to reach financial independence, but then you’ve got the retire early part. And some people will take that very literally like retire, never do anything. Well, the retire early to me means that you’re separating from a job, and you’re no longer depending on money from a job, and you want to do things on your own terms. That might look like a project. It might look like now you want to do real estate, or you want to do that thing that you love, and you don’t have to worry about the money part because you have that covered. So, retirement is not what it used to be in my mind. I feel like a more perfect way would be to retire in the middle of your life. You work for 20 years, maybe, and you get 20 years of this early retirement where you’re still young and healthy and able to do so many—you still got so much human capital. That’s something that you’re not going to have at 75. But at 35, 45, 55, your human capital is still probably going to be one of your greatest assets.
Arnott: And one thing we’ve heard from some of the other guests we’ve had on the podcast is that having a sense of purpose is so important during retirement that if you’re just going out and golfing every day, that might be fun for a couple years, but people tend to be happier and have much better outcomes, even longer lives if they have something that they can get up to do every day, that it could be a part-time job or a volunteer work or some other kind of motivating force for their life in retirement.
Koski: Yeah, that’s so true. I also think things like mentoring, like if you have lived your life, you’ve gained so much experience and things that could benefit others. And for me, I don’t want to keep all this stuff close to the chest. I want to be able to teach others, help others that comes in the way of mentorship, it comes in the way of touching people. And at this moment in my life, and I’m not sure when that switch turned on, but I am in legacy-building mode. And maybe that happens when you do step away from the job that has been your identity for much of your life. It’s like, OK, what do I want to be known for? What do I want my daughter to remember about me? What legacy am I leaving for this world, big or small? It doesn’t have to be grand, just even some of the little things. So that is where my mindset is now. And I think reaching FIRE, it really does get you to that point.
And it’s totally fine. I know some people that, I would label them FIRE, but they would never call themselves being part of the FIRE movement or reaching FIRE. But that’s exactly what they’ve done. We’ve put a label on it. And honestly, the concept behind FIRE is really not new. The acronym is new, the concept is not. The concept is live on less than you earn and invest the difference. And FIRE kind of speeds up that process.
Benz: You spend a lot of time in the book talking about the logistics of FIRE, how to do it. And you talk about this 4% guideline that many people inside the FIRE movement, and also traditional retirees, use to guide their spending. And you also cite the 25 times spending target in the book. So, do you think those are good starting points or should people perhaps be more conservative given that if you’re FIRE-ing, you’ve got like a 40-year-plus time horizon oftentimes versus the traditional 25- or 30-year time horizon?
Koski: I do think the 4% guideline is a great starting point and the 25 times as well as part of that—25 times your expenses—because people generally need something to anchor to or something as a reference point. Because if you’re retiring early—and honestly, if you’re 35 and retiring, that does look very different if someone that’s 55. The person retiring at 55, that’s still pretty early. But even if you’re retiring early, the 4% rule to me still applies.
I think what you have to be mindful of is building in other buffers and looking at the things that’s going to give you a little more room because you don’t want to be so close to the edge. I know I ended up working about two more years past the time that I reached my FIRE number, the 25 times my expenses, because I did need more of a cushion. And I guess one other natural cushion that I seem to see in the FIRE community is most of them do not even count Social Security. That’s a buffer right there, because I was overly pessimistic about it and so was I know a lot of other FIRE people, but we know that it’s not going to completely go away. So that becomes a very powerful backstop in your later years. And that’s a buffer.
And the fact that when you’re retiring much younger, that human capital that I talked about, that is going to be amazing. Like you said, you can only play golf for so long. So, after a couple years or something, even if you plan to not really do much of anything, that is probably going to change very quickly, because you’re not just want to lay on the beach all day long, maybe for a time, and maybe taking breaks. But your human capital is probably going to be put to work in some way that is going to get you an income. I love the idea of volunteering. But if you have a great talent or a great skill and things that you can do that generate an income, that’s a great thing to have as well. So, I believe in putting in buffers, because if you did that straight 4% for 40 years or 50 years by retiring early, that might get a little wonky, a little bit scary. But no one ever really does it in a straight line like that. We know that whether you’re retiring traditionally or early, you got to build in some flexibility and give yourself a little cushion because you don’t want to be stressed out in retirement. The whole idea is that you’re relaxing. So, building in some extra cushions and a few buffers to me will soften the ride where you end up coming out better than you even thought.
That’s how I feel at this point, one, because I didn’t include Social Security, and then two, that I’ve been able to use my human capital to have—it’s been different every year for the last five years I’ve been retired. But there is some income I have coming in and any dollar that comes in from work that I’ve been doing or projects, that’s money that I don’t have to pull out of my portfolio.
Arnott: So how should people think about Social Security if their plan is to retire early? Does it make sense for most people to defer claiming benefits until 70 so that they can get the higher monthly payments or are there people who might want to consider starting earlier with Social Security?
Koski: Well, we know that your Social Security benefit increases the longer you wait up until age 70. But for a lot of FIRE people that haven’t even included it, they may just think, this is icing on the cake, I didn’t even bank for it. So, I’m going to go ahead and get the money at 62, because I didn’t even think about it in my budget. There are some strategies around it. I think because a lot of the FIRE people are pretty young, let’s say 30s, 40s, even 50s, they’re far away from retirement. So, I don’t think that a lot of them have thought a lot about strategies for it. But I’m a little bit older. I’m in my 50s. So, I have thought about it from the perspective of someone retiring early.
And I even did my own little casual research, definitely not to the level of Morningstar, but I wanted to take a case study. What if someone worked for 10 years, because all you need is 10 years to qualify for Social Security, or sometimes it is expressed in 40 quarters. But typically, if you work full time for 10 years, you’re going to qualify for Social Security. That’s really all you need. When a lot of people talk about Social Security, they talk about the 35 years that it’s based on, which is true. But if you have 10 years, and you don’t have the full 35, it’s just going to be replaced with zeros any years. But when I did the math, I took a case study of a person making $60,000 a year, they worked 10 years, and then they stopped working the rest of their life. No income that was subject to Social Security. I applied all the bend points and all the different factors that go into it. And that person, even if they took their benefit at 62, they would still get about $1,000 a month for the rest of their life adjusted for inflation. That’s nothing to laugh at.
So, it’s just interesting how some people think that just because you retire early, oh, you’re really messing up your Social Security. Well, one, most FIRE people don’t include it at all. But two, if you work full time, at least 10 years or more, you’re more than likely get a little something that’s going to serve as a powerful backstop in your later years. So just taking that apart was really helpful to put it in perspective for someone that’s retiring super early.
Benz: How about healthcare, Jackie? It seems like that’s a huge dimension of this. And to the extent that you’re comfortable talking about it, how are you covering healthcare given that you’re well under the Medicare age?
Koski: That is a big one, Christine. When I do my talks or workshops, the main thing people are asking about is the healthcare part. It’s very scary. It was scary for me. And the main thing is because in the US, health insurance is so closely tied to your employer. Well, to be honest, there’s a lot of other type of people that have had to think about this too. So, the FIRE community is not the first people that have had to think about it. Entrepreneurs, small-business owners, self-employed people, they’ve had to ask themselves this question. And guess what? They figured it out.
So, for me, I had to do my own research. The Affordable Care Act was something that was kind of on the shortlist. And I had been just in forums and different groups having people either they loved it, or they hated it. And the thing I quickly found out was usually there were political undertones for people that were talking about it and sharing their opinion on whether it was good or bad. So, I finally decided, OK, I’m going to have to do my own independent research and look at this for me. So, I looked at my state, my zip code, and my family makeup. And when I did that, I learned all about the Affordable Care Act subsidies, and that it’s based on income. It’s not based on assets at all. It started making sense.
Out of all the choices that I looked at, I ended up going with an ACA plan for my state. I live in the state of Ohio, and they had many great options. They had several different health insurance providers. They had several different plans. I ended up going with a traditional plan. I didn’t stick with the high-deductible health plan, because I was able to get it at a very reasonable cost. I qualify for healthcare subsidies, or the Affordable Care Act subsidies, that is extremely helpful. So, I pay very little each month, almost less than when I was paying for a high-deductible plan when I was working. So that’s worked out pretty good.
I know that it’s a political hot button. So that could certainly change at any time. But you pick your healthcare once a year. So, every year, there’s going to be something different to look at. But right now, that’s what’s been working. And this is my fifth year, and I’ve been very happy with it. It is certainly going to vary by state and to an extent by zip code. So, you really have to look at your situation, your family makeup. But I would hear people saying, oh, my gosh, I’m on the Affordable Care Act, and I pay $800 a month. I’m like, wow, that’s a lot. And then, after a few comments, you’ll see that this person has a spouse and four kids, and they live in New York. So, that’s very different than my situation. I really had to look at my own numbers and my own situation. But yeah, that’s what I’ve been doing. I’ve been very happy with it. I mentioned my health savings account. That still serves as a buffer. Certainly, anything can happen with our health. And that’s the bigger picture, our healthcare and proactive wellness. So, if there is something that happens, catastrophic, or have a big accident or have to somehow have a lot of out-of-pocket costs, my health savings account is there to soften that blow.
Arnott: Well, Jackie, it’s been great to hear about your FIRE journey and how you’ve been able to use your experience and education to reach so many people through both your podcast as well as your new book. If you’re looking ahead, what are some of the key things that you hope to accomplish in improving financial literacy and helping people on their own FIRE journeys?
Koski: That is still very important to me. And that’s actually something—that work that I’m doing, I’ll never want to retire from that. So, this has been a great transition for me. So, the book is a big deal. It took a lot of time. I learned that I don’t write really well on demand. But I got through this because it was so important to me to get it out in the atmosphere. I would love to use that as a conduit to educate so many more people, so many more communities that really don’t even know what FIRE stands for or what financial independence is. So, I think about some of the underserved communities similar to the ones that I came from. I want to touch many more of those people because there’s some smart people there. But if they weren’t exposed to that, the financial education and things like that like I wasn’t, I want to try to be that messenger and somehow make that connection for a lot more people. So, the book, F.I.R.E. For Dummies, is available for anyone. They can purchase it on Amazon, or they can go to their local library. It will be in audiobook. But already, it’s in print, e-book. And then the work that I’m doing on Catching Up to FI, the podcast, I was that late starter. So, me and my co-host, Bill Yount, we really love our community, and we want to make it bigger and touch more people that feel like it’s too late. Because if you feel like it’s too late, sometimes you just want to give up. But you don’t have to. And let us help you put things in perspective. Let us hold your hand, come join our community, and listen to some of the great guests we have on the podcast. We had you on there. So, we’ve got plenty of experts. But then we’ve also got plenty of late-starter stories. So those are the things I’m working on, helping to touch a lot more people. And so far, it’s working out pretty good.
Benz: Well, Jackie, we’ll look forward to seeing what you do next. Congratulations on this book. Thank you so much for joining me and Amy on the podcast today.
Koski: Oh, Amy, Christine, this was awesome. Thank you, guys, so much.
Arnott: Thanks again, Jackie.
Benz: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.
You can follow me on social media @Christine_Benz on X or at Christine Benz on LinkedIn.
Arnott: And at Amy Arnott on LinkedIn.
Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.
Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com. Until next time, thanks for joining us.
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