When inflation started rearing its ugly head two years ago, Bryce Leung’s financial situation started improving, rather than getting worse.
Mr. Leung and his wife Kristy Shen, who are retired in their early 40s, had switched their investment income strategy to focus on dividend stocks, whose total returns were outpacing inflation. So while their food bills increased by 10 per cent annually in recent years, their investment portfolio’s value grew quicker and allowed them to increase their income from $40,000 a year to between $60,000 and $70,000.
If Mr. Leung and Ms. Shen’s situation sounds unusual, that’s because it is. The couple are part of a movement called Financial Independence, Retire Early (FIRE), where people squirrel away as much of their income as possible into retirement savings in their 20s and 30s while aiming to spend as little as they can. While many Canadians are grappling with how inflation will affect their retirement plans, FIRE couples say they can easily make their lives inflation proof because of the flexibility that the lifestyle allows.
Mr. Leung and Ms. Shen left the work force in 2012 at the age of 32 with an investment fund of $1-million, and are living off the proceeds of those investments. Their wealth has grown to roughly $2.2-million today.
The key to being able to retire so early, Mr. Leung says, is that the couple’s wealth is in liquid investments. That means they can adapt to market conditions, rather than being tied up in home ownership where rising property prices provide no immediate benefit and higher interest rates can drive up the cost of mortgage payments.
“This is the pattern that happens over and over again – the world changes and people’s assumptions don’t apply any more,” said Mr. Leung, who contends that homeowners are the ones that stand to lose the most because they can’t adapt to those changes.
While many Canadians are grappling with how inflation will affect their retirement plans, FIRE proponents say they can easily make their lives more resistant to inflation because of the flexibility that the lifestyle allows. They’re able to adapt their investment strategies, can move to cheaper locales because they’re not tied to work, and their commitment to reining in spending little means they’re less affected by inflation. In the worst case, some couples say returning to work part-time wouldn’t be the end of the world either.
Many FIRE couples like Ms. Shen and Mr. Leung reject home ownership for renting because it allows them greater freedom in their choice of accommodation. Mr. Leung says this has been a boon for them because they were able to take advantage of rock-bottom rental rates during the pandemic.
Now that they have a child and need to upsize their living arrangements, Mr. Leung and Ms. Shen are considering moving temporarily to Thailand, where they can save money on a two-bedroom rental and the cost of living is immensely cheaper.
A previous move to Thailand saved them plenty of money – giving them a larger budget for all costs when they return to Toronto.
“The income from our portfolio was higher than what we were spending, so we were actually making money every single day that we were sitting on a beach,” Mr. Leung said. “It increased this cycle of wealth building and made our position stronger and stronger.”
Meanwhile, couples like Celestian Rince, 35, and Stephanie Williams, 37, said they’re relatively unaffected by high inflation because they spend only on necessities.
The two of them have just under $900,000 saved – which they say is enough for them to retire – but they continue working because they’re enjoying their current jobs. Even though they haven’t retired yet, the couple is still part of the FIRE movement: They did the work to reduce spending and save, and are able to retire whenever they decide.
In 2023, the two of them made $80,000 in total, and they spent roughly $33,000. The rest went to savings. They say that budget has enough slack in it that they could easily cut another $10,000 out if they needed to, and they’re able to take on the costs of inflation as a result.
There are multiple ways the couple says they’re able to spend so little. They live in a housing co-op where rent is set equitably by a board of renters in the downtown Vancouver building, which means they pay only $900 a month. If they were to be evicted, they’re open to shared apartments or “microsuites” to keep costs low.
They’re vegan and they try to do most work around the house themselves, so they’ve avoided the rising costs of labour and certain more-expensive food products.
Unlike Ms. Shen and Mr. Leung, they don’t tinker with their investments. They simply leave them alone knowing that inflation and market gains tend to level out over time.
This is a point that Evan Parubets, head of the advisory services team at the investment firm Steadyhand, agrees with. He doesn’t recommend that clients change their portfolios through market shifts, unless they’re extremely aggressive with their strategies.
“Portfolios for the most part actually have built-in inflation adjustments,” Mr. Parubets said.
However, people who live the FIRE lifestyle are different from most Canadians, and some financial advisers say they see many Canadians with less aggressive retirement plans worry about whether they can retire early.
Thuy Lam, a certified financial planner with Objective Financial Partners in Markham, Ont., says some of her thirtysomething clients who are trying to retire in their 40s or 50s say that the last two years of inflation has made it challenging to save money.
Some of them have had to consider delaying or cancelling certain life goals – such as upsizing their home or moving into their own home if they share with others – if they want to keep gunning for early retirement, she says.
Inflation can be rough for people who are just a few years from retirement also. When running projections with clients in their 50s, Ms. Thuy said she’s had to advise some to continue working in a part-time role, or working in a lower-paying job that aligns with something they enjoy, to supplement their retirement income for a couple years.
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