Being happy and satisfied with your work is one of the best ways to keep yourself motivated and productive. However, as you continue to gain experience and master your skills in the field, there will come a time when you’ll eventually need to think about retirement.
Nowadays, even millennials and Gen z workers are already considering the option and figuring out their retirement checklist. As a result, the FIRE movement is continuously growing more popular in hopes that these young workers can enjoy the opportunity of retiring early.
What Is the FIRE Movement All About?
FIRE stands for Financially Independent, Retire Early. It’s an extreme savings program dedicated to investing and growing your wealth to retire early. The concept requires more rigorous planning and dedication than traditional budgeting and retirement planning ideals.
For the FIRE method to work, you’ll need to find ways to budget and survive on 30% of your annual income while the rest goes into your retirement savings. You will also need to find ways to gain passive income, whether from a business, investment portfolios, or inheritance.
Other methods also dive into the following subcategories of the strategy to best suit their needs.
- Fat FIRE – For those with traditional lifestyles but aim to substantially save more than the average worker without changing their current way of living.
- Barista FIRE – For those who want to live in a balance between multiple part-time jobs and a less minimalist lifestyle.
- Lean FIRE – Making the switch to a minimalist lifestyle and restricting unnecessary expenditures until you reach the targeted goal.
5 Ways to Plan Your Early Retirement Scheme
With the inconsistencies of the economy, you need to dedicate yourself to planning to retire early, no matter how hard it gets. While everyone’s goals can differ depending on their needs, a few key strategies can help boost the chances of success. Here are some of the following tips to help you out.
1. Estimate your monthly expenses after retirement
Regular retirement plans generally estimate how much you need to set aside to live comfortably in the future. That number can drastically change depending on how early you want to quit your job. As a guide, you generally need around 80% of your pre-retirement income to maintain your current lifestyle.
2. Seek help from a financial adviser
The best way to understand your financial situation is to talk to a professional that can guide you. As you follow the FIRE movement, financial advisors can give you different strategies and tips. They can also help mitigate your risks of losing money from risky moves before you make them.
3. Keep healthcare and other concerns in mind
While saving for retirement will be a big priority, it’s not much use if you fall sick or get into an accident. Look into what healthcare benefits you can gain from your current job. If it doesn’t provide support even after you retire, consider getting a private health insurance policy as a safety net.
4. Look for ways to boost your savings or income
Your salary shouldn’t be the only thing growing your savings if you plan to retire early. As early as possible, think about creating side opportunities for you to invest in and grow your wealth. You can consider setting up a small business or investing in real estate to gain passive income.
5. Never diverge away from the plan
While treating yourself to special occasions can be okay in moderation, it’s important to discipline yourself throughout the journey. As such, it’s essential to understand your goals and why you’re doing them. Keeping this in mind will help you stay motivated and take the necessary courses of action to succeed.
The Pros and Cons of Retiring at an Early Age
Early retirement is a concept that many people wish to achieve regardless of what reasons they’re doing it for. However, much like any other major life decision, it has its fair share of advantages and disadvantages. Here are a few to give yourself a better idea of what it can be like.
Pros
- Enjoy more personal time
Early retirement gives you more time to focus on yourself and enjoy the pleasures of life. Many people use this as an opportunity to travel more. Others also take this as a chance to start a new career and pursue their passions.
- Improve health and well-being
Early retirement helps reduce your fatigue and lower stress levels. As a result, your mental health can improve along with other aspects of your overall well-being. Many other early retirees also find they have grown to have better relationships with family and friends.
Cons
- Social security benefits may dwindle
When you start to invest in retirement plans, you can risk getting lower payments. Some can experience up to 30% less social security benefits just by not retiring at what the government considers a full retirement age. Thus making other necessities like health insurance more costly too.
- Early retirement can be more costly
Early retirement often entails needing more money to ensure you can be financially stable throughout your non-working life. If you stick to a regular savings plan, you’ll need to find ways to readjust your budget to make your funds last longer.
Since significant economic changes can happen anytime, your retirement may not always cost the same after a few years, making it almost imperative.
Finalizing Long-Term Investment Plans Successfully
Early retirement can be a significant achievement for those looking to invest more time into themselves and their personal goals. However, like other major life decisions, it won’t be an easy obstacle. The best way to ensure that you prepare sufficiently for your eventual retirement is ample preparation.
Various methods allow you to set concrete and attainable goals that will help you live the life you want after retirement. Techniques like the FIRE movement can guide you through the process. Paired with a dedicated mindset and firm discipline, you can create new opportunities to help you reach your goals while safely securing your future.