FIRE – the thing that leads to early retirement - April 17, 2019

FIRE – the thing that leads to early retirement

Financial Independence, Retire Early – FIRE for short. That’s the name of a new movement that focuses on reaching independence by the age of 40. It’s becoming more popular among millennials who don’t trust social and pension systems and want to take care of themselves. Many of them succeed and give up work decades before reaching retiment age.

FIRE – that’s the name of a new movement that focuses on early retirement. It stands for Financial Independence, Retire Early and it’s most popular among the younger generations, especially millennials. FIRE’s followers plan to stop working decades before they reach retirement age. More and more of them succeed. But how do they do it?

They are financially savvy

There are different subgenres of FIRE: some live very frugal lives, others keep their quality of life up. One thing is common in all of them, though, their followers handle their finances with great care. They also have a simple goal in front of their eyes. They want to save up enough money until the age of 30-40 to be able to give up work.

To achieve this, they are willing to make sacrifices. Interestingly enough, money itself isn’t their goal. As the acronym suggests, these people want to reach financial independence. To do this, (through saving) they accumulate a decent nest egg, and afterwards they are using that money to stay independent. In a New York Times’ article an early retiree explains how his investments generate $40 thousand a year for him and his family.

They think in advance

Most followers plan all this in advance. They know how big a nest egg they need and how they can invest it. If they have enough, they let money do what it does best: earn returns. Interestingly, FIRE followers often come from industries like software development. A reason for that might be that they tend to be more open to analyzing planning in advance. They are often very disciplined as well.

There are a growing number of people who reached early retirement. Articles like the one on Business Insider or BBC show some of the examples. The number of followers grow constantly. More and more blogs help them, too, with tips and ideas. There are also forums where these people can share their tips on how to save even more. FIRE became a community and its members believe they can reach independence by the age of 30 or 40.

They are worried

The growing number of followers can be explained by common motivations. Many of these millennials are tired of their stressful jobs and want more freedom. (Again, their goal isn’t money, it’s independence.) When they see the chance, they seize it. But they are also worried about their future and its uncertainties. They don’t trust social and pension systems, so they take control of their lives.

It’s quite understandable: we already wrote about the problems of the pension systems around the globe (A pension crisis seem inevitable). In the future, age of retirement will go higher and higher, while the gap in pension systems may reach $400 trillion by 2050. That’s why self-care will become more important by the day for everyone and FIRE followers see this.

To make this path easier, we also gathered some of our tips about giving up work (Preparing for retirement made easier and What are the most important things in retirement) in our former posts. In short, savings and a professionally managed portfolio can help a lot in reaching these dreams.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.