by Ashley
Image credit: Pixabay/Alexas_Fotos
One of my long-term goals is to retire early. Early in my debt-reduction days, I learned about the FIRE movement and it really appealed to me. FIRE stands for Financial Independence, Retire Early. The philosophy is to stay out of debt and have a high rate of savings, living below one’s means so that it’s possible to retire early.
I’ve personally had a goal to save approximately 50% of our household income. We aren’t quite there, but we’re not too far off (when you include all types of savings, including HSA and IRA contributions, etc. etc.). When saving 50% of your income, and assuming approximately the same rate of spending in retirement, 1 year of working = 1 year of saved living expenses!
With my husband’s job, he’s going to be eligible for retirement (with a pension!) at age 50. At 43 now, that finish line feels more in-sight than ever before. We’ve run the numbers and he’ll actually make MORE in retirement than he does now, so there’s literally no reason to work longer than that. He’s talked about potentially getting a side hustle or part-time job to keep busy, but it’d be more of a “for fun” job rather than a job intended to pay the bills.
At my work, I don’t get any type of pension so my only retirement money is from my own retirement account that I contribute to personally (and employer matches up to 7%). I can retire at any age, but obviously we’ll be better situated financially if I continue to work longer. That said…. I know myself. I already know that when hubs retires in 7 years…. it’s going to be tough for me to keep working full-time.
This brings me back to the FIRE concept. I was only familiar with the traditional FIRE. But, I recently learned that in addition to the standard FIRE philosophy, there’s also CoastFIRE and FatFIRE.
All the FIREs!
Standard FIRE is when you save enough that your investments can cover your living expenses indefinitely, allowing an early retirement. People typically use the 4% rule (deducting 4% from savings/investments per year for living). Assuming this, you would calculate your planned annual spending and multiply by 25 to determine the amount needed for retirement. For example, if your annual spending is $100k/year, then you’d need $2.5 million to retire.
CoastFIRE is when you save super aggressively early in life until you hit an amount that, left untouched, will continue to grow to fully fund retirement by the time you plan to retire. Let’s say the goal is to have 3 million by age 55. If you’re able to save 1 million by age 40, you no longer have to make any contributions whatsoever. That 1 million will continue to grow and can reach 3 million by the time you’re set to retire at 55. In that way, you save aggressively early, and then you just “coast” while the interest compounds.
FatFIRE is when you want to have a higher spending standard than the traditional FIRE or CoastFIRE philosophies, which both emphasize living quite frugally in order to prioritize savings. Maybe you like to travel, have expensive hobbies, want a nicer lifestyle, or live in a higher cost-of-living area. For this philosophy, you multiply your annual spending by 30-40. Let’s say you spend $150,00/year, then you’d need $4.5 – 6 million to retire comfortably.
Retirement Planning
This whole concept is really intriguing to me and it’s brought up topics and questions that have been great conversation starters for hubs and I to discuss. For instance, he’s assumed that once the kids are grown, we would downsize our home to something smaller and cheaper. I assume the opposite – that we would maybe get a house with less square footage, but that we’d go a step up in terms of builder and finishes, which would likely mean it’s more expensive. (Caveat: honestly, we got our house at a great deal on a short sale, so even looking at “downsized” homes – most cost more than what we paid for our current house).
Then it becomes a question of how much do I value “lifestyle” (home and travel are my two big things) versus wanting to retire early. If I want a nicer home and want to continue traveling, then there’s realistically no way I’ll be retiring when hubs retires at 50. If I’m okay with continuing to penny-pinch and keep expenses super low, then it might be a possibility.
Right now I’m leaning toward continuing to work so we can afford the lifestyle I’d like to have in retirement. But it’s really a fun thought experiment and has led to really great financial conversations about our goals, where we want to be, etc.
What do you think? Does the FIRE movement appeal to you? If so, which one?
Hi, I’m Ashley! Arizonan on paper, Texan at heart. Lover of running, blogging, and all things cheeeeese. Early 40s, married mother of two, working in academia. Trying to finally (finally!) pay off that ridiculous 6-digit student loan debt!
What would you do for health care?
Great question! I think I’ll actually write a blog post about this because it’s a great topic and something to think about with early retirements. The short answer is that we’ll still be eligible for insurance through husband’s employer, even in retirement.
A challenge for me has been the imbalance of savings in my 401k versus in my Roth and brokerage accounts. In order to make the math work, I need to aggressively save cash in my brokerage account to cover spending until I can tap my 401k, which is well funded.
My goal is to be in a position to leave the workforce in about four years when my oldest enters high school and my husband to be able to exit when our youngest graduates high school a number of years after that.
Some big question marks are health insurance, private high school (with our religious affiliation), college choices, and our pace of travel.
The goal of the staggered retirement is to get some certainty around what our realistic post-retirement spending is. Will we travel more aggressively? Spend money on new hobbies? Or will we utilize the extra time in ways that reduce our outsourced spending?
I’d love to hear more about your planning and chime in with my own, Ashley!
Walnut – I’ve always enjoyed your “friendship” over the years! You always raise such good points and thought-provoking comments! I’m adding this to my list of blog post topics to be addressed sometime soon(-ish). I have some thoughts but would love to hear yours and ideas/opinions from others too!
My own experience has been great with this. I was(and a guess still am) a follower of Mr. Money Mustache who I believe came up with the concept, or at least advanced it. My wife still works but I’m sort of early retired. I think you will probably be more like us. That is, once you ‘retire’ you really won’t sit around and do nothing, and neither will your husband. I have two or three ‘side hustles’ that really constitute more or less a job. But really, honestly? It’s fantastic to be off the corporate BS cubicle system early! Start looking at things you can do to make ‘some’ money and with your husband’s pension you may be able to do this quicker than you think.
I used to read Mr. Money Mustache years ago! And I think you’re right. I’m already kind of looking at side-things to make money. My current thing is writing. I just completed a book proposal and am shopping it around, trying to find a literary agent! It’s been a really fun side-project.