Did you think you could only retire once you’re in your 60s, or maybe a bit earlier at 55?
These days, that’s not your only choice.
The FIRE movement wants to help you stop working when you’re much younger. Or you can aim for the financial freedom to only take on work you really want to do.
FIRE (Financial Independence Retire Early), or sometimes FIRE (Financially Independent Retire Early), shows you how to live well while using less of the world’s resources, saving much more of your income, so that you ultimately only work if you want to.
What is the Financial Independence Retire Early movement?
The FIRE movement began in the US with Vicki Robin and Joe Dominguez’s book, “Your Money or Your Life”, way back in 1992. But it didn’t really take off internationally until after 2010, when Jacob Lund Fisker’s “Early Retirement Extreme” came out.
Over the last decade or so, FIRE ideals and ideas have spread far and wide online. It’s become a lifestyle choice for many Millennials in the US, the UK and beyond. There are even FIRE dating sites, to help you meet that special someone who shares your early retirement dreams.
You just need to save a lot more of your income than most people do – up to 70% of it.
70%. Yes, that IS a lot of money to save.
You’ll need to cut your living costs by following a key FIRE principle: consume much less and live much more simply. That’s definitely a challenge. But FIRE followers have put a lot of advice and support online in blog posts, podcasts and on social media. We talk about how to have fun with your saving in our FIRE movement podcast episode of A Little Bit Richer, titled 'Finding financial freedom'.
For Financial Independence Retire Early UK-based advice, you can find an early retirement checklist in our How to retire early article. And you can also check out our own Midlife MOT. It could help you cut down your monthly spending and maybe get a raise, or find a new, better-paying job, leaving you on track for a comfortable income in retirement.
Understanding the FIRE movement
In essence, the FIRE movement is about deciding when you want to stop working (often earlier than traditional retirement ages), then saving up to live your ideal lifestyle when you get there. It recommends three main lifestyles you can aim for:
- Lean FIRE, where you live frugally, based on a lower income in retirement
- Fat FIRE, where you have a big savings pot, so can live more luxuriously
- Barista FIRE, where you still work part time or get support from an unretired partner
Once you know when and how you’d like to retire, you can work out how much you need to save. The Retirement Living Standards website will help you think about that for yourself.
And then you just start saving!
You’ll probably need to make some changes to your current lifestyle. Most FIRE followers live as simply as possible, so they can put away all the money they need to. They invest that money to achieve the best possible returns.
They also look to pay off their mortgages and any other debts, to cut their monthly spend. But that shouldn’t mean living insecurely. Whatever your savings plan, you should always have an easily available emergency fund that can cover three to six months of your expenses.
Who is the FIRE movement for?
FIRE’s very popular with younger people who don’t mind making sacrifices during their working lives. For some people, it’s a lifestyle thing. They want to retire as early as possible and live life on their own terms. For others, it’s about protecting the planet by leading simpler lives and consuming less.
Whatever your motivation, if you’d like to live more simply and have more control over your life, FIRE could be for you.
How does the Financial Independence Retire Early method work?
There’s global interest in joining the FIRE movement. UK FIRE followers might find some of these tips handy:
Grow your income
See if you can earn more money in your current role, or find a better-paying job. Look for side hustles – maybe you have a hobby that can bring in a little extra cash every month. And do you have any assets that could work harder for you? In episode one of our podcast Rewirement, Amy shares how she and her husband Dan made their way out of debt using innovative sources of income – like renting out their parking space and online mystery shopping.
Cut your spending
List your regular costs and see what you can cut down. Pay off any loans and haggle down or cancel any subscriptions. Stop buying takeaway food or drink, start seeing what you can make or recycle yourself. Look for cheaper or free ways of spending your time – volunteering can be a great option.
Save more efficiently
Pay into your pension, making full use of any employer support. If you don’t have a personal pension, set one up. And don’t let your money just sit in a savings account – find ways of investing it. Our Stocks & Shares ISA can be a great starting point if you’re new to investing.
Plan for the long term
Know what age you can retire. Set clear, long-term goals for yourself. Investing earlier and letting your money grow for longer should give you bigger returns later on. If you want to retire before you can access your pension, plan to fund your lifestyle with at most 4% of your savings each year.
FIRE isn’t for everyone. But it’s an interesting and increasingly popular approach to retirement. Even if you don’t end up retiring at 55, it might help you rethink how you save and what you’re saving for. Series three of our podcast, Rewirement, is all about understanding more about your financial challenges, and getting to grips with your money. With episodes on early retirement, savings, investments and more, listen on your favourite podcast player.