If You Can’t Retire Early, Retire Rich Instead

With all the hype surrounding the FIRE (Financial Independence/Retire Early) movement these days, it can be hard to decipher just what is real and what is Internet real. I mean, let’s face it, all those Instagrammers showing off their early retired/nomadic lifestyles in idyllic photos sometimes neglect to post the bad stuff that goes along with such an alternative lifestyle. Nevertheless, the FIRE movement and its early retirement adherents have definitely carved out a fascinating name for themselves in the real world and the virtual one.

Sure, FIRE sounds like a wonderful idea, but what if you’re getting a late start or simply can’t save enough money to retire early? Well, retire rich instead. 

The Principles of FIRE

The principles of FIRE are fairly straightforward. Basically, the goal is to save at least 50% of your annual income to achieve a nest egg of at least 25x your annual living expenses to fund an early retirement from traditional work. Typically, a savings rate of 50% or more is achieved via high incomes coupled with extreme frugality measures.

After retiring, most early retirees draw down on their savings to the tune of 3% – 4%, annually. Some supplement their early retirement with side hustles and second jobs while others stop working for money altogether.

Depending on the starting balance of their nest eggs and amount of money required to fund their annual lifestyles, followers of the movement typically have to closely monitor their investments and withdrawal rates to account for market downturns and unexpected expenses. Not doing so could mean depleting their money too quickly or pursuing a job, either part-time or full-time work.

The Varieties of FIRE

• Fat FIRE = 2.5M saved to fund a 100k annual lifestyle
• FIRE = 1M saved to fund a 40k annual lifestyle
• Lean/Barista FIRE = <1M saved to fund a <40k annual lifestyle (often supplemented with side hustles/second jobs for income)
• FIOR (Financial Independence/Optional Retirement) = Adherents employ the principles of pursuing FIRE but do not necessarily retire early. They achieve a nest egg that is equal to or greater than 25x their annual expenses and have THE OPTION to retire early.

  

“Early Retirement” and “Rich” Are Relative Terms

I’m sure there isn’t anyone out there that would disagree when I say early retirement and rich are relative terms.

Rich to me is certainly not rich to Bill Gates or Mark Zuckerberg. And, rich to me might not be rich to you and vice versa. Likewise, retiring early to me might mean retiring at 65 and retiring early to you might mean retiring before you hit 40. The point I’m trying to make is that accumulating enough wealth to retire early is a sliding scale and different for everyone.

Some people feel good pulling that retirement trigger in their 30s with less than a million in the bank. Oftentimes these folks have a flexible mindset and a profitable side hustle in their back pockets to combat life’s unexpected events. Whether or not they’re retired in the traditional sense of the term is open for interpretation.

Others, myself included, would rather work a more traditional job with traditional pay and benefits and retire in their 60s or 70s with several million stashed for whatever life throws their way.

No way is right or wrong, it’s a personal choice.

Related posts:

• Why We Stopped Chasing Early Retirement For A Happier Life
• F.I.O.R. – Financial Independence Optional Retirement
• 5 Reasons You Need To Track Your Net Worth To Build Wealth
• Shifting To A Frugal Mindset Has Given Us Options. Tons Of Options.
• Operating With An Attitude Of Gratitude On The Path To Financial Independence

Related Podcasts:

• Episode 13: Second Generation FIRE, Parental Role Models, And Rat Poison
• Episode 3: Why We Stopped Chasing FIRE For A Happier Life
• Episode 12: Side Hustles: The Good, The Bad, & The Ugly

Reasons You Can’t Retire Early

Now I know you’re sitting there thinking that early retirement is a joke and pipe dream for most. And you’re not wrong. For a good chunk of the population, monthly incomes are eaten up by ordinary obligations like mortgages, childcare, utilities, transportation costs, college savings accounts, etc. Throw in an aging parent or an unexpected illness and there is no way most families can save that much money toward the future.

All that to say that having a 50%+ savings rate is simply not easily achievable for the majority of the population. In essence, the only way most families can achieve that kind of savings rate is to somehow significantly increase their income and/or significantly slash their expenses.

So, it might not be so much that you can’t retire early, it might be that you won’t retire early because you’re not interested in radically changing your current lifestyle to make it happen…and I can’t say that I blame you. Sometimes the current sacrifice isn’t worth the longterm reward, especially when it comes in the form of having to watch every penny and deny yourself simple pleasures like cable TV or new clothes. We found this out during our FIRE rise and fall. Read all about it here.

Retire Rich Instead

Listen, retiring early is a fantastic goal and I don’t disparage anyone ambitious enough to take it on. However, the fact also remains that it can be much more difficult to attain if you’re getting a late start, caring for aging parents, putting kids through college, or a combination thereof.

The solution: Employ as many FIRE principles (see list below) as you feel comfortable with without compromising your current quality of life. Then, retire rich at traditional retirement age and enjoy not having a single financial care in the world during those golden years.

FIRE principles include:

• Live well below your means
• Build an emergency fund
• Eliminate high-interest debt like credit cards, car loans, and student loans
• Cut or slash your Cable/TV subscriptions
• Cut or slash your cell phone bill
• Meal plan
• DIY repairs and housework whenever possible
• Increase retirement contributions with each raise/promotion
• Earn more money at your current job, or switch jobs
• Take on a side hustle or second job
• Buy used and save the difference
• Live in a small house
• Travel hack
• House hack
• Increase your knowledge
• Avoid significant lifestyle inflation

The Good News About Traditional Retirement

The good news is that retiring rich at a normal retirement age means you don’t need as much of a nest egg when you are in a position to combine it with 401(k)/403(b) withdrawals, pensions, and (hopefully) social security income. Being able to compile multiple income streams during a traditional retirement has the potential to equal HUGE monthly incomes, whether you were able to stash away millions or not.

Remember, slow and steady wins the race and rich is relative and based on your comfort level and lifestyle. Saving 10 – 20%+ over the course of decades will likely net you the same or more wealth than someone who was able to save 50 – 70% for a shorter period of time to retire early. In the end, you should have plenty of money to do whatever the heck you please in retirement and extra along the way to enjoy your life in the moment.

Want to spend two months in Europe or drive an RV across the US? Do it. Prefer to stay close to home and enjoy your children and grandchildren? Do it. Want to pay for your daughter’s wedding or your grandchild’s college education? Do it.

Yes, you’ll be in your 60s and the current argument is that you won’t be young enough to truly enjoy your free time or travel like you would have had you retired in your 30s. True, traveling in your 60s isn’t as easy as traveling in your 30s, but, since you’re opting to retire at a normal age, you’re not going to have to live an extreme frugality lifestyle and will have the opportunity and income to travel all throughout your life, before hitting your 60s. No hostels required.

In my opinion, retiring rich at a traditional age is a wonderful and realistic alternative for anyone enamored with the FIRE movement but without the income, ability, or desire to truly hop on board.

Do you think the FIRE movement and early retirement is realistic for most families?