Is the FIRE Movement Right for You?

Steve Lear |

By Kyle Berg, CFP®, BFA™

There is a rumbling amongst the younger segment of the population. Most notably, the Millennials, who are in the process of trying to turn the traditional idea of retirement on its head.

If you’re like most people, when it comes to retirement you think of working hard until your 60s, spending years accumulating a nest egg, qualifying for Social Security, and THEN retiring. Well…there may be another way. There is a strategy that inner circles call FIRE, or “financial independence / retire early.”  All it takes is a simple Google search to find hundreds of FIRE strategies posted on the popular social media discussion website Reddit. In a lot of the cases, people are retiring in their mid-40s, or even in their 30s.

Hard to believe? Yes.

Is it even possible? Surprisingly, yes. Explaining all the different variations and strategies of the FIRE movement would likely result in a book, rather than a blog post. But, I hope to shed some light on the topic and provide a better understanding of how this movement has grown from an improbable dream to a well-known trend.

On the surface, the goal of the FIRE strategy is becoming financially independent (FI), in other words, not having to work for a paycheck any longer. Then, you are free to quit working at an early age, or retire early (RE). What it really consists of is maximizing available savings and minimizing spending, even if you have a high income. Ultimately, it consists of being a minimalist. Savings rates in a lot of discussions I have read are close to 50 or even 80%, which is an enormous amount of saving and very difficult to attain — for anyone. Many of the more prevalent FIRE stories come from people working in Silicon Valley making high incomes. But examples can be found in the lower end of the pay scale as well.

As with many things in personal finance, a FIRE strategy starts with creating a strict budget and sticking to it. A FIRE-friendly budget includes cutting out all unnecessary spending, automating your savings, and giving each dollar a job. That coffee you get every morning? Might want to rethink that luxury if you are giving serious thought to your own FIRE strategy.

A common misconception is that anyone wanting to achieve their FIRE goal would have to give up experiences in order to save the necessary amount. The counter argument  by FIRE advocates is that they are saving in order to have the flexibility and freedom to do whatever they want during their early retirement, including having those ever-revered experiences. And, by sticking to their FIRE strategy they will be able to do so while time and health are still on their side.

Now, even if you are able to retire from your career at an early age, it does not necessarily mean you stop working. Many people choose to volunteer at their favorite religious organization or charity. And as we discuss with newly-minted retirees of all ages, one of the largest retirement expenses is healthcare. A lot of people go out and find part-time work simply for the benefits. But having financial independence means that you can be more selective with your second career. Maybe it’s teaching yoga or working at a home repair store. Regardless of the choice, you are not looking to do it for money.  

Clearly, the FIRE movement isn’t for everyone. But Financial Independence is a goal we work hard to help all of our clients achieve at some point in their lives. And with any retirement plan, it is helpful to have someone there with you along the way.

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