By Oscar Casas, CFP®, CRPC®, MPAS®, ABFP℠
When only roughly one-third of American workers find their work engaging, it’s easy to find people who want to retire early—maybe even you. As it turns out, there is a full-on drive afoot. If you’ve spent time reading about personal finance, you might be asking this question: What is the FIRE movement?
FIRE (which stands for “financial independence, retire early”) has caught on with younger adults who plan to take early retirement to another level. While many people dream of retiring in their 50s—eight to seventeen years before the traditional retirement age of 67—acolytes of FIRE are leaving work behind in their 40s and 30s.
You might wonder how that’s possible and whether it’s time to talk to a financial advisor at Tranquility Path Investment Advisors. But first, let’s dig a little deeper into the answer to “What is the FIRE movement, and is it right for me?”
What Is the FIRE Movement?
The FIRE movement has two elements: financial independence and retiring early. It’s a lifestyle movement where people undertake intense—even extreme—measures in order to attain enough financial freedom to choose what they do with their time.
The term originated in a bestselling book by Joe Dominguez and Vicki Robin, Your Money or Your Life. The authors wrote about changing your relationship with money, working toward financial independence, and aligning your lifestyle with your goals and values.
The goal of FIRE is to work hard as a young adult while budgeting, saving, and investing enough to retire early and live off the money you’ve socked away. To do FIRE, you target saving and investing 50% to 70% of your income with a plan of withdrawing about 4% each year in retirement.
Practical Lessons From FIRE
FIRE requires you to reduce your expenses to the bare bones, find ways to increase your income, and invest the money you save in tax-advantaged accounts. You might also put money in a regular brokerage account so you can access your savings before age 59½—the age at which you can withdraw money from a 401(k) or traditional IRA without penalty.
The deep cuts in living expenses might be too much for most American workers. FIRE calls for saving and investing over half of your income; however, 46% of renters spend 30% of their income on housing alone.
Still, the FIRE movement delivers some practical lessons for anyone dreaming of retiring:
- Save aggressively.
- Live below your means.
- Invest wisely.
- Maximize your income.
- Manage your debt.
- Leverage tax-advantaged accounts.
While FIRE might not work for everyone, the principles that drive the movement are useful for anyone who wants to retire in comfort. Consulting with a financial advisor at Tranquility Path Investment Advisors can help you plan with confidence for your future.
Is FIRE for You?
Now you know the answer to “What is the FIRE movement?” You might wonder whether FIRE is for you. While the movement might seem like it’s only for high-earners who are happy to make sacrifices in their quality of life for years, its core principles apply to just about anyone setting goals for their financial future.
The answers to questions like “What is the FIRE movement?” and “Am I on the right path to retire early?” are likely to continue to gain traction. Developing healthy spending habits, saving money, looking for ways to increase your income, and investing in assets that generate passive income are all realistic financial goals.
You don’t have to deprive yourself by living a minimalist life now for the retirement you want later. You can take lessons from FIRE and create realistic goals that allow you to balance enjoying your life now with saving for the future.
Talk to a Financial Professional
If you’re thinking about retiring, Tranquility Path Investment Advisors can guide you through developing a retirement plan with an income you can depend on.
Get in touch with us today. Schedule a no-obligation conversation or reach us at (732) 856-4324.
About Oscar
Oscar Casas is the chief executive officer at Tranquility Path Investment Advisors, an independent Registered Investment Advisor firm dedicated to putting their clients first, always. Oscar has over a decade of experience helping clients plan for a confident retirement. He is known for being an empathetic and compassionate listener and for prioritizing his clients’ needs and goals above all else. He acts as a coach, advising his pre-retiree and retiree clients through all the ups and downs on their financial journey. He loves that he has the opportunity to make a difference in people’s lives and take some of the stress off their shoulders.
Oscar has a bachelor’s degree in finance, a master’s degree in personal financial planning, and is a CERTIFIED FINANCIAL PLANNER™, Chartered Retirement Planning Counselor℠, Master Planner Advanced StudiesSM and Accredited Behavioral Finance Professional℠ professional. When he’s not working, you can find him enjoying the outdoors with his three children. He is an avid tennis player who also loves golf, the beach, snowboarding, traveling, and volunteering with the Scouts.