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Financial Independence Retire Early (FIRE)

Dan Westfall

Dan Westfall

Financial Independence Retire Early-FIRE
Financial Freedom has got to be up there with goals for many people that aspire for more when it comes to their quality of life. FIRE or Financial Independence Retire Early is the latest acronym to be tied to financial freedom.

Many people want to have the option to retire early. However, COVID has really changed the perspective of how a lot of people value what’s most important. Specifically, retirement and retiring early is on more minds.

What is the FIRE Strategy?

What’s the FIRE strategy? Simply put, Financial Independence Retire Early strategies are savers that aggressively live well below their income in hopes of acquiring financial flexibility and retiring years before “normal retirement age.”

What is the FIRE Strategy

A person aiming to retire by 50 might need to accumulate about 70% of their current annual income for every year they expect to be retired. If a worker has current income of $100,000/year, and is planning on a 35 year retirement, they would need more than $2.5 million invested by age 50.

Investing to Retire Early

A 30-year-old is going to need to invest close to $50k each year and have that investment making around 9% rate of return. A 35-year-old is going to need to invest around $85k/year at that rate. And a 40 year old, if they’re starting from zero, is going to need to invest about $165k/year to hit that $2.5M by age 50.

Financial Independence Retire Early

The most important part of any successful Financial Independence Retire Early (FIRE) strategy is to live well below current income. This is naturally difficult because everyone is programed to like instant gratification vs delayed gratification.

When a person can become financially independent and retires, a separate set of challenges appears. The first is accepting that you’re now going to withdrawal money from your investments. This can be hard for any retiree. But it’s especially difficult for someone that is hyper focused on saving a high amount of their current income.

How To Use The FIRE Method To Retire Early

Just like any other addiction, acceptance is the first step. Saving and investing can be addicting for those people that are wired to be savers. Accepting that’s it’s now okay to withdrawal money is a major first step. However, this is an important step to being able to enjoy retirement and the money that’s been saved.

Financial Independence Retire EarlyEarly Retirement with the FIRE Strategy

Another important challenge for all retirees, especially a younger retiree, is still having purpose. If you retire at age 50, finding a new purpose is important because the traditional things that take up time in retirement might not be the same for a 50-year-old as a 65-year-old.

Spending time with grandkids, traveling, volunteering, spending time with friends/family or working a “fun” job might be different for a 50-year-old. Keeping the mind active is crucial. Additionally, waking up with a purpose is a vital part of any retirement plan. But this is especially true for FIRE plan.

FIRE Investment Strategies

Financial Independence Retire Early is a great goal to have! It also will force a person to save dramatically more than most. Even if a person decides to continue to work, having more money than they need is a quality problem to have. This is positive problem I’d be happy to help them reach!

Contact me today to talk about your FIRE strategy to reach financial independence and retire early.

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