Financial Independence, Retire Early. Sounds pretty nice right?
This movement is dedicated to a program of extreme savings and investment that allows individuals to retire far earlier than traditional budgets and retirement plans would allow. I recognize that the audience reading this may already be retired, or be pretty close to it, but I wanted to write about this anyway for a couple reasons.
- To get your take on it
- You may have people in your life who this may apply to, a good conversation starter! (If you're into this stuff like me)
So, people who partake in this, dedicate up to 70% of their income to savings causing them to potentially quit their jobs and live off of the withdrawals from their portfolios much earlier than the conventional retirement age. The origin of this movement came from the book Your Money or Your Life by Vicki Robin & Joe Dominguez. In the book, they essentially put one's expenses and time spent at work side by side with hours of your life. Every expense is compared to the time spent at work in order to earn the purchase.
Example: Someone makes $20/hr at their job and they are looking at a $40 item. Instead of thinking "it's $40," members of this movement say, "it costs 2 hours of work."
Supporters of this lifestyle almost always begin by remaining in the traditional workforce for several years to save up to 70% of their yearly income. Once their savings reach about 30 times their yearly expenses, usually roughly $1 million. they might quit their day jobs or completely retire. Once/if they retire at a younger age, proponents make small withdrawals from their savings, typically around 3-4% yearly. This, of course, is pretty individual specific. How much one would withdraw depends on their desired lifestyle and the size of the savings, which is similar to a traditional retirement! As you can imagine, this requires extreme diligence to monitor expenses and continued maintenance.
So, what's our take?
These upcoming generations are taking a different approach on a lot of things. One that's especially important to them is flexibility and freedom in their life. Working from 16-65 is not appealing, and frankly, they are willing to hustle and sacrifice some of their younger years to have the majority of their life to themselves. As I mentioned above, withdrawals depend on the individuals desired lifestyle, but this does seem to set up for a life of scarcity. The cost of living is only going up, along with prices for everything else, so living on $30,000/year minimally is not sustainable and nearly impossible as an adult living on their own (based off the example used above).
What I do like, is the price justification system they use. Thinking of the cost of something as x hours of work puts it into perspective.. is it worth that amount of work for this one thing?
I won't leave out the fact that there are different variations of The Fire Movement. Some who save more than the average retirement investor, some who live a minimalist lifestyle therefore have extreme savings techniques, and some who still have a part time job that would cover their expenses so their retirement fund doesn't go completely dry, or a part time job just to pass the time!
We'd love your input on what you think, do you wish you could've retired early? Would you have implemented this if you could go back?
Contact us below and let us know!