retirement

The Benefits of Being FIRE-ish

You can adapt the Financial Independence, Retire Early movement to fit your lifestyle.

It’s easy to dismiss the super savers who embrace the FIRE movement as starry-eyed dreamers or cultish extremists. Financial Independence, Retire Early followers—many of whom are millennials who consider working 9 to 5 to be drudgery—often save 50% to 70% of their annual income with the goal of retiring in 10 to 15 years. The aggressive “Lean FIRE” savers share tips online on how they manage on less than $40,000 a year—for example, by Dumpster diving, living in a van, not having children or living on a diet of rice and beans.

But FIRE is much more than that. FIRE followers track their money, invest in low-cost funds, avoid high-interest debt and focus their spending on what’s important to them, rather than buying things because they can afford them. Adapting some of these FIRE principles to fit your less-austere lifestyle can go a long way toward helping you achieve your retirement goals.

If you’re not ready to go full-blown FIRE, here’s how to be FIRE-ish.

Supercharge your savings. Boosting savings gives you more money to invest. But more important, “every time you increase your savings rate, you are decreasing your lifestyle,” says Whitney Morrison, principal financial planner with LegalZoom. That means you won’t need to accumulate as much to maintain your lifestyle in retirement.

FIRE folks typically watch every penny. You don’t have to be that precise, but you should have an idea of your cash flow so you can find extra dollars to put toward savings. Some expenses, such as a car loan or kids’ extracurricular activities, disappear over time, freeing up money that you can redirect into investments, says Melissa Sotudeh, a certified financial planner in Rockville, Md. “If you’re at the point that you’ve got the kids launched, that’s a big pay raise there,” she says.

Or boost savings by cutting expenses. “There is a lot of low-hanging fruit that won’t force you into depriving yourself,” says Brad Barrett, cofounder of the ChooseFI website. You don’t have to give up your lattes. Look to housing and transportation, the largest expenses for consumers. If the kids are grown and you no longer need a four-bedroom house, consider downsizing.

Many FIRE folks also move to areas with a lower cost of living. Barrett moved from a one-bedroom co-op in East Northport, N.Y., to a four-bedroom home in Richmond, Va., and slashed his housing expenses in half.

Some FIRE advocates also ditch cars in favor of bikes, or they move closer to work so they can walk to their jobs. Barrett says he and his wife each have a car for convenience, but they drive older vehicles (his is a 2003 model; hers is a 2013).

Also look for ways to increase income. FIRE practitioners often find creative ways to generate income, such as blogging about their path to financial independence. Sotudeh says a pair of her clients pull in $30,000 a year by leasing their basement through Airbnb. Consider consulting on the side or finding ways to turn hobbies into cash, such as selling your crafts. “It can potentially help you retire earlier, but it can also help you create more income in retirement,” says Katrina Soelter, a CFP in Los Angeles.

Review the investment fees you pay, which can significantly erode your returns over time. FIRE acolytes favor low-cost index funds, such as those offered by Vanguard, Schwab and Fidelity.

Myth 4:  It’s too soon or too late for me to plan.

K11R-RETHINKING RETIREMENT.indd

Getty Images

Most Popular

Where's My Refund? How to Track Your Tax Refund Status
tax refunds

Where's My Refund? How to Track Your Tax Refund Status

If you're waiting for your tax refund, the IRS has an online tool that lets you track the status of your payment.
March 2, 2021
Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer
Coronavirus and Your Money

Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer

The IRS has an online tool that lets you track the status of your stimulus checks.
February 19, 2021
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021

Recommended

The Cost of Retirement Has Tripled! But a New Way of Planning Can Help
retirement planning

The Cost of Retirement Has Tripled! But a New Way of Planning Can Help

With today’s low interest rates and paltry dividends, the old way of saving for your retirement and living off your dividends and income to preserve y…
March 5, 2021
The Basics of Required Minimum Distributions: 12 Things You Must Know About RMDs
Financial Planning

The Basics of Required Minimum Distributions: 12 Things You Must Know About RMDs

Retirement savers who are 72 must start withdrawing funds from tax-advantaged retirement accounts. Here’s what you need to know about required minimum…
March 4, 2021
A COVID Storm Hits Senior Living
Coronavirus and Your Money

A COVID Storm Hits Senior Living

The pandemic has created significant challenges for all types of senior living communities. Because of that, it's more important than ever to review a…
March 3, 2021
8 Insurance Products You May Not Need
Financial Planning

8 Insurance Products You May Not Need

You may be paying for insurance, such as long-term disability or product warranties, that is potentially unnecessary.
February 26, 2021