RRA Educational Resources/Blog/Understanding Financial Independence, Retire Early (FIRE)

Understanding Financial Independence, Retire Early (FIRE)

Brought to light from the 1992 book Your Money or Your Life by Vicki Robin and Joe Dominquez, the Financial Independence, Retire Early (FIRE) community was born as a movement that analyzes spending in terms of working hours as the ‘payment.’ For example, if your hourly pay is $12, a tube of toothpaste at $4 is 20 minutes of work. Being founded on the extreme frugality of spending, the movement is heavy on saving and investing, too.

With their dedication to saving and investing, FIRE followers aim to retire decades before 65. Those within the community typically work to save, invest that money, and when their assets are about their 25-30 times their projected annual expenses, will retire fully in their 30s or 40s. Some may work part-time. To maintain their desired lifestyle, FIRE folks will withdraw 3-4%. There have been various FIRE perspectives come to life since its rise in 1992 depending on lifestyle needs. The core three are as following:

- Fat FIRE – This style takes aggressive savings and investment strategies and is more suitable for those with larger incomes than the average worker. Oftentimes this is the FIRE lifestyle for someone who does not want to reduce their standard of living.
- Lean FIRE – With extreme saving and investing methods and a minimalistic lifestyle, the restricted living often has these folks living on $30,000 or less a year.
- Barista FIRE – As the mid-grounds for Fat and Lean, folks here typically quit their traditional full-time jobs and use a combo of minimalistic living with freelance or part-time work. This is typically to maintain health benefits, support themselves, and not touch their retirement funds.

More to FIRE than Meets the Eye:
FIRE does not mean entirely quitting work nor does just apply to retiring early. There are many accessible elements that could be applied to your retirement planning and financial health. Planning for your future is the core of the FIRE community. It is about getting better with your money—be it better saving, methodical investing, or intentional spending:

1. Planning – In 2021, a study showed 25% of Americans did not have a retirement savings at all. Of those, almost 40% felt they would never get on track to have the retirement they want. FIRE emphasizes the importance of planning and saving.
2. Discipline – To achieve what your plan entails there is a great amount of discipline involved. FIRE is about maximizing your income and minimizing your overall expenses. Setting a budget, strictly sticking to it, creating income streams now and saving.
3. Invest wisely – Ideally, taking a certain percentage of your monthly income to invest is the idea of FIRE. The money adds up over time and grows. Strategies under FIRE are a little more extreme, encouraging to sometimes invest large amounts than the typical working person.

​For further information on FIRE and much more, listen to our podcast episode “F.I.R.E., Side Hustles, and Retirement with the Financial Panther” of The Retirement Risk Show.

See other posts like this one:

Thursday, March 28, 2024

In 2024: What Medicare Could Cost You

Friday, March 01, 2024

Building Cash Flow in Retirement: Income Diversity Strategies

Wednesday, February 21, 2024

Why Legacy Planning is Part of Smart Retirement Planning

Thursday, February 15, 2024

How a Living Will Can Help Your Retirement

Friday, February 09, 2024

Retire Right: Ditch the Traditional Plan, Embrace Your Risk-Based Freedom

Thursday, February 01, 2024

From Pensions to 401(k)s: Shifting Risks in Retirement

Wednesday, January 24, 2024

Why Today’s Retirement Isn’t Like Your Parents’

Friday, January 19, 2024

Roth vs. Traditional Accounts for Pre-Retirees

Thursday, January 11, 2024

Pioneers of Risk-Based Retirement Planning

Thursday, November 30, 2023

Understanding Linked-Benefit Long-Term Care

Wednesday, November 22, 2023

Which is Best: Annuity or LIRP? Or Both?

Thursday, November 09, 2023

You Can Unlock Your Home Equity for Retirement

Wednesday, November 01, 2023

What Is a Second-To-Death Life Insurance Policy?

Friday, October 27, 2023

Beneficiary IRAs: Preserving Your Legacy for Future Generations

Thursday, October 19, 2023

Steady Stream of Retirement Income

logo.png

Investment advisory services offered through Brookstone Wealth Advisors, LLC (BWA), a registered investment advisor and an affiliate of Brookstone Capital Management, LLC. BWA and Retirement Risk Advisors are independent of each other. Insurance products and services are not offered through BWA but are offered and sold through individually licensed and appointed agents.

© COPYRIGHT RETIREMENT RISK ADVISORS. ALL RIGHTS RESERVED.

RETIREMENT PLANNING

Step 1 – Team Approach
Step 2 – Get to Know You
Step 3 – Design Your Plan
Step 4 – Provide Education
​Step 5 – Help You Take Action

CONTACT US

1309 Coffeen Avenue, Suite 3851, Sheridan, WY 82801

Support Staff support@retirementriskadvisor.com

Toll free: 1 (855) 491-0400
​Text us at: 1 (307) 264-2902