F.I.R.E. – This is Hot Stuff
There has been a lot of talk and about F.I.R.E. (Financial Independence, Retire Early). Brought to light in a 1992 best-selling book “Your Money or Your Life” by Vicki Robin and Joe Dominguez, this is a systematic program of extreme savings and investment that allows individuals and couples to retire up to thirty years earlier than traditional budgets and retirement plans would allow, saving up to 70% of income. If successful, followers of the FIRE movement may eventually be able to quit their jobs and live solely off small withdrawals from their portfolios. Similar to what we would normally do at later ages of 62 and up. Of course, FIRE isn’t a sure-fire plan, and extremely high rates of saving at the expense of current quality of life and lifestyle should be considered.
The goal or theory here is to stay in a traditional workforce to accumulate at least 25 – 30 times their annual expenses or roughly “$1 million dollars”. Then you could possibly quit your job or retire. To support this new life style you would only withdraw 3 – 4% of your accumulated savings leaving the principle to still grow at a nominal percentage rate, say maybe 6 – 10%.
JUST THE NUMBERS
To bring this down to my level, the question I ask is what are the numbers? From what I read the more you commit to savings the faster you’ll reach your goal. That’s obvious. First thing to do is figure how little you can live on. Let’s say $10,000 is your annual spending. You will need 30 times that or $300,000. This amount can be realized in 50+ years if you put aside only 10% of your income. How about 15%? This will get you there eight years earlier. Now put away 50% of your income and you hit a 25 times target in 17 years and 75% in less than seven years. If you spend $40,000 a year you will need a cool $1.2 million dollars saved before you can retire. You do the math. This plan sounds pretty solid if you willing to sacrifice your comfortable lifestyle today to reap the rewards years before normal retirement age.
WHO IS THIS FOR
Damien Fahy, director of the personal finance website MoneyToTheMasses.com, said Fire is catching on, particularly with millennials. He suggests it’s almost like a cult movement. He calls it “It is an extreme version of traditional financial planning.” However, he questioned whether the 4% rule was sustainable if you were retiring in your 40s or even 50s, as your money would have to last for four or five decades, and a lengthy stock market slump or financial emergency could throw your plans off course. “If your money starts running out, you might struggle and need to return to the workplace. Difficult if you’ve been out of it for a long time or ill,” he said.
Stephen Lowe, communications director at retirement advisers Just Group, said the vast majority of people were not saving enough to retire at 65, let alone 45. So if your 20 – 25/30, you probably could go for it. however, “For most, Fire is little more than an abstract idea but if it captures people’s imagination, that’s got to be a good thing,” he said.
I have to agree with Stephen Lowe that it encourages the younger crowd to begin to save for their future. With the advent of the interwebs it’s catching on like wild F.I.R.E. (See what I did there.) This wasn’t the advantage I had back in the day even though I knew in the back of my mind I should be saving more for our retirement. It just wasn’t hammered home enough I guess. Or shown the proper way to invest.
WHO IS THIS NOT FOR
Lynn James, who writes the Mrs Moneypenny blog, asserts that Fire is only realistic “if you have a big salary, low mortgage and no children.” And not everybody wants to spend their 20s being frugal. “At that age she wanted to travel the world, eat amazing food, go to concerts and experience life.” Were we any different?
To make matters worse today’s 20 somethings have another major hurdle to get over and that’s their college debt. Most student debt is around $25,000 and $50,000 but more than 600,000 borrowers are over $200,000. That’s puts the total student loan debt @ $1.52 trillion and the number of student loan borrowers @ 44.7 million. My son who graduated three years ago is in debt to a little over $100,000. Right in the middle. He’s not married, yet. Doesn’t own a home, yet. Rents and He’s got a good job, but will it be enough? What are his chances to retire early if at all? Slim to none is my guess. He better have a plan.
HOW ABOUT US OLDER GENS.
After what I have discussed above, is there room for us? The baby boomers today are typically under saving, with only 1 in 3 have estimated savings under $25,000 saved for retirement according to this study. Can FIRE work for us? With all that said FIRE is changing the retirement conversation. It’s making us aware that your retirement is not a fantasy, it’s coming. The issue is when are you going to start planning? It may not be the FIRE plan. This idea has been around for a long time. This is just a new way of talking about an old concept. I’m so happy there is a conversation going on. FIRE will spark new thinking in some people about what we need to be happy. For so long there was nothing out there that helped, now it’s just a click away.
WHAT DO WE DO NOW
Although there are many variations of this movement. According to investopia.com there are 4 variations.
“Fat FIRE” refers to an individual with a more traditional lifestyle who saves more than the average retirement investor.
“Lean FIRE” refers to stringent adherence to minimalist living and extreme savings, necessitating a far more restricted lifestyle.
“Barista FIRE” refers to followers who have quit their traditional 9-to-5 job, but still employ some form of part-time work to cover current expenses that would otherwise erode their retirement fund.
“Coast FIRE” also applies to followers with a part-time job, but these proponents do have enough saved to fund their retirement and current living expenses.
If you’re in your 50’s and up, I don’t believe the first two are a viable direction to take. First one, Fat Fire, is saving more than the average investor and the second, Lean Fire, is keen on minimalist living. The last two “Barista” and “Coast” describes extreme savings coupled with some form of income stream. So these scenarios kinda put us out of the loop because it assumes were out of the workforce and maintaining another form of income or have enough saved to retire. So that means if your savings are anemic and you’re just not quite where you want to be in your retirement planning, you and I don’t qualify to embrace this lifestyle. It’s just too late.
BUT WE STILL HAVE CHOICES
You could stay at your job until there is enough saved up. Probably till death do you part. Take on a second or part time job. Again, till death do you part. They won’t pay enough to get you there. The point is, how long do you want to work? We need find a way to accelerate the earnings we need in the little time we have so we can survive the golden years.
If you’re like me, I want to stop working as soon as possible without sacrificing any of my goals. I want to give back to others and show how it is possible to have the things you want in your mature years and leave a legacy for my family.
What I am doing now is subsidizing the income I have now. I also started developing a passive income that will give me the freedom to do what I want to do, when I want to do it, and wherever I want to go.
That my friends is the plan and that will be the reality.
A while back I discovered that online Affiliate Marketing was a niche that was a growing segment on the internet and well within anybody’s abilities. Through a referral from a friend, I met Dean Holland. He is the Founder and CEO of Internet Profits. The mission of Internet Profits is to provide the training, tools, and support to allow everyday men and women to achieve their vision of success in life with an internet based business. He designed his company specifically for those who think affiliate marketing is too complicated or technical. I’ve been going through much of the training and completed the Partners Certification Program quite quickly. That’s because the courses are broken down into easy simple lessons anyone can do. He has a support system that’s second to none.
This all started with a book he has written, “The Affiliate Marketers Playbook”, in it he reveals the best kept secret behind why most Affiliate Marketers are failing online today. Now he wants everyone to have it for FREE. All he asks is you cover the $5.96 shipping. Fair enough. And, if you don’t like it you can ask for your money back and keep the book. That’s a NO RISK offer.
The key to making your retirement a great time in your life is to do something. It may not be exactly what I’m doing, but any plan is better than NO plan. I admit I’m partial to Dean Holland’s Internet Profits and its working. Not because of him but because I’m using his system. I’m putting in the time and effort now to achieve my retirement reality.
I Wish You All A Great Day.
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No matter what you say, it helps us all to learn more.