Early Retirement: Is It Really Possible?

FIRE (Financial Independence, Retire Early) is a fast-growing financial movement across multiple age groups but especially among millennials. It encourages people to practice extreme saving and aggressive investing with the goal of achieving financial independence and early retirement.

What is FIRE?

The Investopedia describes FIRE as a movement dedicated to a program of extreme savings and investment that allows proponents to retire far earlier than traditional budgets and retirement plans would allow. They do this by saving up to 70% of their income, with the aim of retiring early while they are in their 30s or 40s at the latest.

The main aim of this movement is financial independence; which is achieved through saving a large enough nest-egg and living frugal lives. The money is then invested to earn compounding interest and ultimately grow the savings.

Information sources

The FIRE movement consists of an amalgamation of podcasts, blogs and discussion forums dedicated to sharing of information on how to manage finances to catapult one to early retirement.

One such popular blog is Mister Money Mustache, started by Canadian blogger, Peter Adeney. He was a software engineer who retired in his 30s. A few years later, he started the blog to share tips on financial management with the goal of early retirement through frugality. The blog is an influential voice that has helped to popularize the movement.

Reddit also hosts specialist forums that enable people in countries like the UK, India and Australia exchange tips and advice.

Subtypes

Within the FIRE movement are several styles, including:

• Fat FIRE – living a more traditional lifestyle while saving more than the average retirement investor.
• Lean FIRE – stringent adherence to minimalist living and extreme savings, necessitating a far more restricted lifestyle.
• Barista FIRE – quitting traditional jobs, but still employing some form of part-time work to cover current expenses that would otherwise erode savings.
• Coast FIRE – having a part-time job, but still having enough saved to fund retirement and current living expenses.

How it works

Members are said to be firing when they ruthlessly cut down on excessive spending and maximize their savings. They devise various life hacks to realize these goals, such as not purchasing unnecessary code, opting for cheaper services and not spending money on expensive items.

The goal is to get to a point where they can comfortably withdraw from their portfolios for expenses while ensuring they have enough to sustain them in the future.

However, the movement’s critics allege that the main proponents came from highly technical fields before retiring. This means that they had an easier time achieving the high saving rates required to start and maintain a FIRE.

Conclusion

While FIRE seems simple in principle, it poses a challenge to many, especially those on a low income. It is difficult to maintain the levels of frugality required or find the best ways to invest your money. Nevertheless, those who have achieved it enjoy the challenges as much as the results.