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Barely a week passes without mention of the powerfully appealing phrase “early retirement” - on social media and news websites, and among bloggers and podcasters.

Escaping the rat race has always held appeal but the allure appears to be growing and becoming more intense. I checked on Google Trends, just to check the rise is real. And yes, the number of searches for “retire early” has risen three-fold in a decade.

At the sharp extreme end of the ‘retire early’ movement is the 'FIRE' brigade. Coined by bloggers, the acronym emerged in the aftermath of the 2008 banking crisis and captured the aspiration of many young workers who wanted 'Financial Independence and to Retire Early'. They still do and in ever greater numbers, the Google data tells us.

The simplicity of the approach is appealing. You spend less than you earn and invest the excess. That is a sound concept. But over the years, savers are increasingly following it to excess.

FIRE acolytes advocate extreme frugality that enables them to save 70% of their income. They should invest this aggressively, some in accessible investment accounts such as an ISA, and hope to generate a replacement salary. Some blogs even come with tips on how to manufacture redundancy once they are in the right financial position. Online stories of people who have ‘retired’ in their forties or younger proliferate.

But how many people have paused to wonder why they are so desperate to retire?

Beware ‘focusing illusion’

The behavioural bias of “focusing illusion” helps induce such a pause. Nobel prize-winning psychologist Daniel Kahneman and colleagues developed the term a smidgen before the FIRE movement emerged. In the financial manifestation of this brain bias, the importance of money in happiness is wildly exaggerated; an unflinching belief takes hold that more money will make you happier. The reality, according to Kahneman and co, is that higher income does little to improve life satisfaction, at least in wealthy countries, and may increase anxiety and stress.

These academics have effectively academicised a familiar notion: that the grass is always greener on the other side.

It is highly likely that social media has intensified such feelings. Scrolling posts of people’s ‘better lives’ makes us want more - more money, more nice things, a better life.

This is the cognitive bias that fuels the FIRE movement and certainly thrives in the hotter fringes.

It seems timely to raise this in Mental Health Awareness Week (13-19 May).

Even those who don’t consider themselves FIRE acolytes are determined to retire early at any cost. For some, the need to spend less and work more to fund a future perceived nirvana state becomes all consuming, perhaps obsessive. In the US, they talk about the rise of financial dysmorphia - a distorted view of our finances.

The double danger of ‘financial dysmorphia’

This dysmorphia can swing either way. For some, it’s obsessive saving. For others, it is saving too little and ignoring the consequences. And yes, there are probably more of the latter than the former, particularly in the UK. But it is hard to tell. Research by Fidelity found only 51% of British workers believed they have saved enough for a comfortable retirement, putting us near the bottom of the saving confidence tables. In contrast, 68% of Americans believe they are on target, and 74% of Danes.

Source: The Fidelity Global Sentiment Survey 2023

The views in such surveys are obviously a perception. Knowing how much you need is difficult to calculate because there are so many unknowns: how much you’ll spend in the future, how long you’ll live and so on. In the age of final salary pensions, these headaches were solved by actuaries employed by your employer. Today, it’s your headache.

This makes us anxious. Have we saved too little? Better do more. And more. A common response is goal setting - clear the mortgage at 40, get a pension pot of £500,000, ‘better to be on the safe side’.

Such precise targeting might work for some, but it comes with the risk of damaging side effects. If it descends into compulsion and obsessiveness then living for now is entirely replaced by living for the future. And perhaps that becomes a permanent state, and the future never arrives.

The stakes have never been higher, given demographic trends. I wrote previously that there’s a good chance I’ll live to 93 (a one in four chance), or even 97 (a one-in-10 probability). The 100-year life is a growing reality and one that demands we reshape our approach to retirement. And it can be positive.

If we can work for longer, then funding our old age becomes infinitely easier. Many people don’t like their job, or the hours, or the commute. A solution for younger generations is to plan their lives with optionality - route some of your investments into flexible pots, such as ISAs. You then give yourself the option to retrain to a new career in your 40s or 50s, and perhaps more than once - to find something you love. Or you just want to take a break - a three-year mini retirement to travel, so you have the stamina to continue working longer. It’s worth reading this thoughtful post from a 25-year-old on how she is thinking about this.

Why it’s helpful to ‘CHILL’

Work can maintain engagement, keep us all sharp, as well as maintain social connections and even a sense of purpose. The ideal employment and employer would keep alive these beneficial attributes while giving you more time to pursue the things you love.

This is the antidote to the FIRE movement. I’m calling it CHILL: Career Happiness Inspires Longer Lives.

Don’t get me wrong. I understand 100% that we have a saving crisis. Too few people invest and too many people invest too little. We need the under-saved to embrace long-term investing, and the potential it has to unlock a better future for them. But it is best done gently and not held too tightly.

Alongside a savings crisis, we also have a mental health crisis, in part driven by financial dysmorphia. The solution is more education such as our retirement calculators, and those offered across the industry offer solid help. Those willing to pay the extra may consider financial advice if it’s the only way they’ll sleep at night.

Either way you’ll never work out exactly how much to save. Save what you can, what is sensible. And think about ways to extend your working life. Join the big CHILL.

This article was originally published in This is Money

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in an ISA or SIPP and tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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Ed Monk

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Ed Monk

Ed Monk

Fidelity International