If you’re looking for more free time and a higher quality of life, consider retiring early. Taking this leap requires setting aside enough funds to cover your expenses for decades. You’ll need to know how much you plan to spend and what you will do with your free time.
To achieve this, you might join the FIRE movement, which stands for financial independence, retire early. The trend involves saving significant portions of your income and stepping away from work well before retirement age. There are a variety of approaches to accumulating the funds needed to sustain yourself in the future. Those who have retired by FIRE credit these simple steps with helping them reduce stress and enjoy retirement.
As you think about early retirement through FIRE, consider these lessons from those who have successfully pulled it off:
1. Start planning early.
2. Know how you’ll spend your free time.
3. Don’t overlook health care costs.
4. Set retirement goals within your budget.
5. Pick the right FIRE version for you.
6. Be flexible.
7. Focus on the positive.
1. Start Planning Early
The FIRE movement advocates for saving as much of your income as you can. This might include putting away 50% or more of your salary for years, depending on how much you need to retire comfortably. While Mary Gregory of Elmore, Ohio, was getting ready to retire by FIRE, she and her husband both worked. “We lived off one salary, saving every penny of mine,” she said in an email.
Understand that a low-spend budget could impact your daily life, and you may have to give up short-term splurges while waiting for your investments to grow. That can prove difficult when watching co-workers and neighbors spend freely on cars, vacations and gifts.
[READ: Why I Don’t Regret Retiring by FIRE]
2. Know How You’ll Spend Your Free Time
Greg Gaudet of Makawao, Hawaii, retired in his 30s from a full-time job to oversee 19 rental properties that produce passive cash flow. “I am absolutely thrilled that my plan to FIRE was successful and that I achieved what I thought would take a lifetime,” Gaudet said in an email. “But if I’m being honest, I can’t believe how much I miss going to work. Being home all day every day gets boring eventually.”
If you have ideas of how you’ll spend your free time in early retirement, try testing them out. Perhaps you want to hike every day, go to the gym or train for a marathon. Practice getting out on the weekends while you are still working so you can make sure you enjoy those activities. Think about volunteering, joining a neighborhood class or starting a weekly gathering with friends.
3. Don’t Overlook Health Care Costs
You’ll be eligible for Medicare once you reach 65. If you retire before then, you might have to find your own health insurance. In some cases, you may be eligible for coverage through your spouse’s insurance plan if they are still employed. “My husband will retire in a year and a half, so we have to self-fund our health insurance for a handful of years,” Gregory said. “This is where many early retirements break down. Costly health situations could derail everything.”
4. Set Retirement Goals Within Your Budget
While you may have a long bucket list, you’ll need to make sure it aligns with your budget. That may mean living off less money than your original salary to avoid draining your resources. Setting goals can help you budget and still fill your days with pastimes you like and find fulfilling. “I enjoy meeting up with friends and family, refinishing furniture, working in the yard, building things, and attending classes,” Gregory said.
5. Pick the Right FIRE Version for You
There are variations of the FIRE movement. For example, Fat FIRE focuses on higher levels of savings and income than FIRE. Proponents of Fat FIRE often set a goal of spending at least $100,000 a year in retirement. Lean FIRE takes a more frugal approach, which involves living off $40,000 or less in early retirement. The Barista FIRE strategy is to save enough to retire early and then continue part-time work for health insurance or other benefits. Coast FIRE involves front-loading retirement contributions into a 10- or 20-year span.
Choosing which version works for you can lower stress levels. “Many of my Gen Z friends have reached FIRE status but don’t want to retire completely,” said Frederik Bussler, founder of Bussler & Co., a global marketing agency in New York, in an email. Bussler’s acquaintances have all pursued different versions of FIRE. “Personally, I reached Coast FIRE, meaning that I have enough money invested that it will grow sufficiently without needing additional contributions,” said Bussler, who is also a member of Gen Z.
[How I Save Money by Living Simply in Retirement]
6. Be Flexible
It’s easy to think that reaching your FIRE goals will bring a sense of financial stability. However, there are bound to be additional expenses that spring up. For instance, you could spend more than you planned on a home renovation. Maybe you’ll miss the office social circle or have to rejoin the workforce if your funds don’t last as planned. To earn extra income, you may even consider starting a business or trying out a new side hustle in an area that intrigues you.
7. Focus on the Positive
If you feel down after retirement, you might find it helpful to create a list of the things you enjoy doing and accomplishments you hope to achieve. “I think having purpose and achieving accomplishments is critical,” Gaudet said. Now that he’s reached FIRE, Gaudet has turned his focus on pursuing new challenges. “I’m planning to achieve another lifelong dream of becoming a pilot,” he said. “It’s fascinating that I miss going to work,” Gaudet added. “But it’s like they say — the grass is always greener.”
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7 Lessons From Those Who Retired by FIRE originally appeared on usnews.com
Update 02/16/24: This story was previously published at an earlier date and has been updated with new information.
