Many young people are now looking to retire well before the traditional age of 65, driven by the Financial Independence, Retire Early (FIRE) movement. This movement emphasizes extreme savings and early investment to achieve retirement much sooner than conventional plans allow. It has gained significant traction among millennials, with Reddit’s FIRE forum amassing 516,000 members, placing it in the top 1% of subreddits by size. While not everyone can achieve FIRE, it offers valuable insights for those aiming to retire before Social Security becomes available.
The FIRE movement’s principles can be traced back to Vicki Robin and Joe Dominguez’s 1992 book, “Your Money or Your Life,” which advocates for simple living and assessing expenses based on the work hours needed to cover them. FIRE adherents typically save 50-70% of their income, focusing on essential spending only. This approach, however, may not be feasible for individuals with lower incomes, high living costs, or unexpected financial burdens. Common FIRE strategies include “The Rule of 25,” which advises saving 25 times one’s annual expenses, and “The 4% Rule,” which limits annual withdrawals to 4% of savings, adjusted for inflation.
While most people won’t retire in their 30s like some FIRE enthusiasts, the movement still offers valuable lessons for average savers. Striving to save five or ten times one’s annual expenses, rather than 25, can enhance financial stability. Additionally, the importance of mindful spending is a universal principle. However, a key lesson from FIRE is to not rush retirement; a 2019 UK survey found many retirees become bored within a year. Researchers Bala Vissa and Winnie Jiang noted that some early retirees feel unfulfilled, suggesting that the relentless pursuit of early retirement might have its drawbacks.
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