Have Actuaries Abandoned FI?

It took me years to qualify as an actuary. That’s not as dramatic as it sounds, since it takes everyone years to qualify; the median is around seven years. But I decided that studying actuarial exams whilst starting as a fresh-faced actuarial analyst in a new career was not sufficiently challenging and also chose to combine it with a new family. Getting up early to study, broken nights, answering persistent questions from toddlers along with tough workdays made life busy. But I loved it.

I loved becoming an actuary because it was tough, I was learning a ton of new skills, and I was being pushed as hard as I have ever been. For the first time I learnt statistics, economics and even business writing skills. In hindsight, it was a bit like an MBA but with all the fluffy self-helpy crap replaced with a double dose of stochastic calculus. You know in the future when we create soldiers genetically engineered to be super-human fighting machines? It was like that. A rigorous exam regime with an eye-wateringly high failure rate was producing a super-human profession that could think their way around any problem involving financial uncertainty.

Want to put a value on a company in a M&A? Call an actuary. Need to know how much to set aside to decommission a nuclear reactor? An actuary can help. Want to value the cost/benefits of credit card rewards? Yep, an actuary can do that, along with valuing your pension plan and pricing up your car insurance premium. Newly minted on qualifying I was equipped with all the necessary tools to tackle these diverse problems and more.

The absent actuary

So given this skillset you might have thought that the actuarial profession would be actively leading the way with insightful thoughts on FI. Not so much. The issues raised by the FIRE community are perhaps the most significant financial issues facing workers of the developed world and look ripe for actuarial thought:

  • How much do I need to retire?
  • How long will I expect to live in retirement?
  • How should I invest my money?
  • What financial risks should I plan for?

But I couldn’t find any actuarial thinking directly in the FI community.

Here is a google trend chart showing the steady rise in interest in “financial independence” over recent years. This has taken FI from a kooky frugalist backwater to the mainstream media.financial independence

I did a Google search for “financial independence” and it resulted in 453,000 results, but an identical search on the Society of Actuaries webpage revealed only 15 results. I’ve been through all 15 results (you can thank me later) and they are not relevant. So what’s going on? Perhaps we are looking in the wrong place.

It seems that financial independence is probably captured by the anodyne umbrella term of “Financial Wellness”, and a search for the term “Financial Wellness” on the Society’s pages produced 303 results and on Google came up with 539,000 hits. Clearly, this is a much hotter topic for actuaries and might be closer to what we know as FI.

In future blog topics I’m going to be digging into the area of Financial Wellness and determining whether anything useful can be learned for FI pursuers.

But I’m mad

This has made me mad though. Despite actuaries being at the forefront of pension plan design and maintenance (who do you think designs target date funds in your employer’s 401k for example?) they don’t seem to be leading from the front. How many actuaries do you know providing thought leadership in the FI community? None. How many software engineers, physicians, lawyers, tax accountants can you name in the FI space? Lots.

And this is what frustrates me about my profession. Actuaries seem to have abdicated the space and I now have to take my retirement advice from software engineers! You wouldn’t ask me to solve your WordPress issues, don’t ask me about your gall bladder problems, or expect insight on tax planning, but surely one area I am qualified to add value are the key problems that a FI disciple faces. You know what is doubly frustrating? Many of the thoughts, ideas and philosophy from the FI community go against the established status quo, and I hate being on the back foot.

So I hope you will join me as I poke and prod my way around some of the FI thinking that has arisen and ask why it often goes against established actuarial thought and whether there are grounds for changing our thinking. In addition I will give some commentary on my own FI journey and punctuate everything with liberal profanity.

6 thoughts on “Have Actuaries Abandoned FI?”

  1. Welcome to the FI world! My spouse is an actuary, so I had to leap over here and see what you’re about when I saw your post on another blog. My spouse is only half on board with the concept of full FIRE, but I think FI makes intuitive sense to him, even though he reads none of the blogs and thinks its all way outside the main stream. Looking forward to reading your thoughts and perspectives!

    1. Thanks for dropping by Lucky Girl and welcome! I’m really fascinated by the differences between mainstream thinking and FI thinking and I want to dig into that further. I hope to hear more of your thoughts as we continue our journeys and I would be interested to hear about how your spouse’s thinking develops. I played my (non-actuary) spouse some podcasts and some of that material resonated with her to be sure.

  2. Do you think it’s a mindset like some doctors: I put in so many years of training / testing to get here, I’m not going to retire in 10 years. ?

    I look forward to reading more from you. 🙂

  3. It’s a group of people with a really low risk tolerance on average, and FIRE sounds risky to anyone introduced the idea for the first time. It causes them (us?) to normally think we need way more than actually necessary.

    I’ve had conversations with frugal co-workers that go something like this:
    CW: “I want to retire as soon as possible!”
    Me: “Oh yeah? How much do you think you need?”
    CW: “Oh, at least $10 million”
    Me: “…”

    1. Thanks for dropping by AA. I think it’s been institutionalized by actuaries in part. For example if you put in typical replacement ratios in modelers provided with your 401k then they will spit out huge sums like $10m. It’s not a very nuanced view of early retirement and how to achieve it.

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