Some young people are looking to retire far before they turn 65.
The Financial Independence, Retire Early (FIRE) movement prioritizes extreme savings and early investment to reach retirement earlier than any traditional wealth management plan would allow. The movement blew up with millennials, and interest remains high, with Reddit’s FIRE forum boasting 516,000 members, in the top 1% of the site’s subreddits based on size.
While FIRE-ing may not be an attainable goal for all workers, the movement provides vital lessons for those looking to retire before Social Security kicks in. The average American retirement age is currently 62, and that number has been slowly increasing. For workers looking to beat this trend, steadfast FIRE advocates could offer some guidance.
What is Financial Independence, Retire Early?
While the origins of the FIRE acronym are largely unknown, the ideas behind the movement stem from Vicki Robin and Joe Dominguez’s 1992 book, Your Money or Your Life. The book touts simple living: All expenses should be evaluated based on the number of work hours it took to pay for it.
FIRE followers save some 50-70% of their income, meaning most advocates recommend spending only on essential items. This also means that FIRE may be inaccessible for certain populations: individuals with lower net incomes, those who live in cities with higher rent, or those who face sudden spending emergencies, like taking care of a loved one.
While the goal of the FIRE movement is broad—reaching financial independence earlier in life—there are some common rules followers tend to observe. “The Rule of 25” says that workers should consistently be saving 25 times their annual expenses. “The 4% Rule” demands that early retirees only withdraw 4% of their savings the first year post-work, adjusting that steady rate each year only for inflation. Some FIRE followers also maintain careful rules for rates of investment per account, based on their taxation rate.
The FIRE movement’s lessons for all workers
Of course, most workers won’t retire in their 30s, like FIRE practitioners hope to. Still, there are some key takeaways for the average saver. Maybe saving 25 times any annual expenses is unreasonable, but what about five or 10 times? Being cautious about every dollar spent is not only a core tenet of the FIRE movement, it’s a great strategy for all-around financial stability.
While an early retirement may sound appealing, the FIRE movement may also offer a surprising lesson: Don’t rush toward the end of work. According to a 2019 UK survey, the average retiree is bored within one year of retiring. Researchers Bala Vissa and Winnie Jiang have been studying the after-effects of FIREing. In piece in Fortune, which Jiang coauthored, she says that many early retirees are left feeling unfulfilled and aimless. So the rush to save and invest as quickly as possible could have a downside, too.
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