Důchod, renta a FIRE
Early Retirement: The Risks Nobody Talks About
Key takeaways
- A 40–50-year withdrawal horizon dramatically raises the portfolio requirements and safe withdrawal rate.
- Health and social insurance is a real, often overlooked expense when living off investments.
- Loss of human capital works both ways — it is easier to leave work than to return.
- Inflation over 40 years can destroy purchasing power even when average returns look fine.
- A Plan B — the ability to return to income or cut spending — is the key safeguard.
Early retirement — leaving work at 40 or 50 — carries risks that are systematically underestimated in the motivational stories of the FIRE community. The point is not that FIRE does not work; it is that it only works under specific conditions that are not guaranteed.
Horizon Length: The Hidden Killer
The 4% safe withdrawal rate comes from studies designed for a 30-year horizon. If you retire at 45 and live to 90, your horizon is 45 years. For such a long horizon, historical analyses recommend a withdrawal rate closer to 3–3.5%. That means a target portfolio 15–35% larger than the standard 4% rule suggests.
Health and Social Insurance
When living off investments, you pay health insurance entirely yourself — without an employer contributing. The amount depends on current rules and your status (self-employed, unemployed). This line item can easily run into thousands of Czech crowns per month and must be included in your income projection. More detail in the article health and social insurance when living off investments.
Loss of Human Capital
When you leave work, you lose not only income, but also updated skills, your professional network, and work history. Returning after a 5–10-year break is harder and typically at a lower salary. If the portfolio fails in the early years of retirement (sequence-of-returns risk), the safety net of "I'll just go back to work" may not be as easy to deploy as you imagine.
Inflation Over 40 Years
Inflation of 3% per year over 40 years cuts purchasing power to less than a third. An income plan must account for the fact that expenses will rise — and not just nominally. The portfolio must grow in real terms, otherwise you lose ground every year. That is why an overly conservative allocation over a long horizon is itself a risk.
Plan B
The best protection against a failing FIRE plan is to have a Plan B: a flexible portfolio, the ability to cut spending during a market downturn, and at least a rough plan for generating income if necessary. FIRE does not work as a "flip the switch and forget" solution — it is a dynamic plan that requires annual review.
FAQ
What is the biggest risk of early retirement?
The combination of sequence-of-returns risk (a market crash right at the start of retirement) and an excessively long horizon. Retiring at 45 and living to 90 means a 45-year horizon. The safe withdrawal rate for such a horizon is lower, which means the portfolio must be larger.
How does FIRE handle health insurance?
You must pay it yourself — your employer is gone. The amount depends on current rules and your status. It is a real monthly expense (thousands of CZK) that must be reflected in the target portfolio calculation. See the article on health insurance when living off investments.
Can I go back to work if FIRE fails?
In principle yes, but in practice it is harder after a 5–10-year break. Skills become outdated, your network fades, and earning potential declines. That is not an argument against FIRE, but an argument for an adequate safety cushion and a Plan B.
Is FIRE actually achievable?
For a sufficiently large portfolio and disciplined planning, yes. Hundreds of people do it successfully. The key is not to underestimate horizon length, inflation, insurance costs, and sequence-of-returns risk. And to build in a buffer above the minimum calculation.