FIRE - Financial Independence Retire Early

[Alberto]

Is it just me getting annoyed by the hype of this movement?

They say things like the following:

*) in order to retire you need a pension pot 25 times your annual living expenses. I was almost tempted to agree with this. But with no mention of housing (paid off? or renting? or living on a friends sofa?) isn't it an empty statement...?

*) If you live frugally for the first 7-8yr of your career, you can save/invest enough such that you can retire even if you have "normal" earnings. Absolute nonsense. Maybe if you score a double on a Champions League final, but if so you probably don't have "normal" earnings. If you disagree, example with hard numbers, please.

*) A couple claim they live on 20k/yr (each? or combined?) and managed in a year 3 leisure trips on different continents. Do you believe this? I don't. Btw, housing paid off or what? Again, without details is a very empty statement.

Sounds arrogant to me.
What do you think?

https://www.bbc.com/reel/video/p09qwdp6 ... n-your-30s

[Fraufruit]

There are many examples of how to do this. It just depends on which article you read or which financial advisor you listen to.

It is nothing new at all. Just working hard, saving and investing a lot so that one can retire early. My dad retired at 55. So did my brother.

The FIRE movement talks about retiring much younger. I have read a lot of stories. Many tried and failed and had to go back to work. Many just got bored and went back to work. Then there are those who were able to retire and follow their life passions to make money doing what they love to do.

[alma.freya]

I think the hype died down years ago.

*) in order to retire you need a pension pot 25 times your annual living expenses. I was almost tempted to agree with this. But with no mention of housing (paid off? or renting? or living on a friends sofa?) isn't it an empty statement...?

Housing is a living expense.

25 times is based on the 4% rule:

https://www.investopedia.com/terms/f/fo ... t-rule.asp

*) If you live frugally for the first 7-8yr of your career, you can save/invest enough such that you can retire even if you have "normal" earnings. Absolute nonsense. Maybe if you score a double on a Champions League final, but if so you probably don't have "normal" earnings. If you disagree, example with hard numbers, please.

Here are some numbers: https://www.mrmoneymustache.com/2012/01 ... etirement/

*) A couple claim they live on 20k/yr (each? or combined?) and managed in a year 3 leisure trips on different continents. Do you believe this? I don't. Btw, housing paid off or what? Again, without details is a very empty statement.

Housing paid off doesn't matter, all that matters is your expenses. Housing is an expense.

Sounds arrogant to me.
What do you think?
https://www.bbc.com/reel/video/p09qwdp6 ... n-your-30s

Lot's of people have achieved FIRE. The speed at which you can FIRE is based on your savings rate, so it's much easier to do when you are a high earner (or you inherit money). If you are earning an average wage, focus on frugality, and invest in a broad index ETF, you can certainly retire early, but probably not in your 30s. Again it all depends on your savings rate.

This is one of my favourite resources on the topic: https://jlcollinsnh.com/stock-series/

And here is a great German resource: https://frugalisten.de/

And if you use Reddit there are lots of stories or success, failure etc.:
https://www.reddit.com/r/Fire/
https://www.reddit.com/r/financialindependence/
https://www.reddit.com/r/EuropeFIRE/

There are also various versions of FIRE. LeanFire, FatFire, BaristaFire, CoastFire.

I also plan to FIRE before I am 50.

[Alberto]

@FrauFruit

thanks for replying.

What I really really would like to see are realistic(!!!) numbers backing up FIRE. Everything I read about it either a) didn't provide hard numbers at all, or b) provided very unrealistic numbers.

Yes of course, retiring at 55 at that time your dad must have done it, sounds very realistic.

Anyone else?

[Alberto]

@alma.freia

thanks very much for replying. I'll read your links in details some other time and I will post what I think of it.

[alma.freya]

@FrauFruit

thanks for replying.

What I really really would like to see are realistic(!!!) numbers backing up FIRE. Everything I read about it either a) didn't provide hard numbers at all, or b) provided very unrealistic numbers.

Yes of course, retiring at 55 at that time your dad must have done it, sounds very realistic.

Anyone else?

Here are some FIRE calculators, there are many many more:

https://ficalc.app/
https://engaging-data.com/fire-calculator

And on the Reddit links I posted you will find many real life examples of people who are pursuing or have achieved FIRE.

It's also worth remembering some media could have an anti-FIRE agenda, so they are presenting it in such a way that makes you highly sceptical.

It also gained mainstream popularity in the US mainly among tech workers: high salaries, low taxes, no social contributions, 401k allowing to invest pre-tax salary in stock market, post 2008 stock market bull run.

[Alberto]

OK here we go, I did a little math myself based on the assumption you need a pension pot 25x your yearly living cost (this assumption I find reasonable)
So if you average 50k/yr earning (after tax, that is), so orange line, but you live on only 30k/yr (good luck with that, including housing and kids of course), you only need to work 37yr.
And if you earn average 70k/yr (green line), spend 30k/yr, you only need to work 30yr
If you start work at 25....

[Alberto]

Unlikely but possible my script has mistakes. If so, apologies....
Will check more later.

in case any nerd, here my Python script:

Code: Select all

import numpy as np
import matplotlib.pyplot as plt

earn = np.array([2,3,4,5,6,7,8,9,10])*10000
earn = np.array([40000,50000,70000,100000])
plt.close('all')
plt.figure()
for j in range(len(earn)):
    minimum = 30000
    spend = np.linspace(minimum,earn[-1],int((earn[-1]-minimum)/10000))
    print(spend)
    N = np.zeros(len(spend))
    for k in range(len(N)):
        ssave = earn[j]-spend[k]
        if ssave<0:
            print('******************')
        if ssave>0:    
            N[k] = 25*spend[k]/ssave
    plt.plot(spend[N>0]/1000,N[N>0],'.-',label='Yearly earning '+format(int(earn[j]/1000))+'k')
plt.legend()        
plt.ylabel('Num. of years you must work')
plt.xlabel('Yearly living expenses / 1000')
plt.show()

[Fietsrad]

Realistic figures? Mostly speculation, nobody knows. Depends a lot on which jurisdiction you live in, health costs are very troublesome in the USA, maybe elsewhere.

I did not think much about retirement, struggled along, at 60 I realised I could afford to retire. I had hardly prepared or planned, but I was ready. Not regretted it yet.

[Krieg]

There is as well a big difference if you retire in the same (first world country) place you've been living or you retire in a village in Cambodia, Indonesia, Bolivia, Namibia, etc

[alma.freya]

OK here we go, I did a little math myself based on the assumption you need a pension pot 25x your yearly living cost (this assumption I find reasonable)
So if you average 50k/yr earning (after tax, that is), so orange line, but you live on only 30k/yr (good luck with that, including housing and kids of course), you only need to work 37yr.
And if you earn average 70k/yr (green line), spend 30k/yr, you only need to work 30yr
If you start work at 25....

Income 50k Expenses 30k = savings rate of 40%

https://networthify.com/calculator/earl ... awalRate=4

FIRE after 21.6 years, assuming annual returns of 5%.

I think you forgot to invest your money in a low fee global ETF.

[alma.freya]

There is as well a big difference if you retire in the same (first world country) place you've been living or you retire in a village in Cambodia, Indonesia, Bolivia, Namibia, etc

https://smartasset.com/financial-adviso ... -arbitrage

This is called geographic arbitrage and may be appealing to some people.

[alma.freya]

Realistic figures? Mostly speculation, nobody knows. Depends a lot on which jurisdiction you live in, health costs are very troublesome in the USA, maybe elsewhere.

I did not think much about retirement, struggled along, at 60 I realised I could afford to retired. I had hardly prepared or planned, but I was ready. Not regretted it yet.

Providing you include healthcare costs in your expected expenses after you retire, it shouldn't make a difference to the calculations.

[Fraufruit]

I think you forgot to invest your money in a low fee global ETF.

I don't think investing everything in one ETF is very smart. A few of them along with a few funds, stocks, etc. makes more sense.

Eggs......basket.......

[alma.freya]

I think you forgot to invest your money in a low fee global ETF.

I don't think investing everything in one ETF is very smart. A few of them along with a few funds, stocks, etc. makes more sense.

Eggs......basket.......

VWCE has 3600 companies from around the world.
https://www.justetf.com/en/etf-profile. ... 0#holdings

Which ETFs, funds or stocks would include for.extra diversit without any duplication?

[Alberto]

Income 50k Expenses 30k = savings rate of 40%

https://networthify.com/calculator/earl ... awalRate=4

FIRE after 21.6 years, assuming annual returns of 5%.

First comment, perhaps more later:
How feasible is living on 30k/yr?
In a location where you make 50k/yr netto?
With housing costs (so either mortgage or rent), children, childcare, dentist, and all other normal things we know...?
Maybe a loner living at his parents, but with normal life and family...???
Not saying impossible, but...

[alma.freya]

Income 50k Expenses 30k = savings rate of 40%

https://networthify.com/calculator/earl ... awalRate=4

FIRE after 21.6 years, assuming annual returns of 5%.

First comment, perhaps more later:
How feasible is living on 30k/yr?
In a location where you make 50k/yr netto?
With housing costs (so either mortgage or rent), children, childcare, dentist, and all other normal things we know...?
Maybe a loner living at his parents, but with normal life and family...???
Not saying impossible, but...

You are right. For most FIRE is not possible without a very frugal lifestyle. The figures were from your example. You could use 100k and 60k as the figures and the years until FIRE would be the same. 60k allows you a more comfortable lifestyle, however that's only possible for very high earners. For your average household the frugality to achieve a high savings rate would probably lead to a depressing lifestyle.

The maths regarding savings rates is sound providing you invest those savings and the market continues to grow.