According to the 2021 results of its annual study, Hearts & Wallets, a research and benchmarking company that analyzes consumer behaviors around saving, investing , and seeking investment advice , found that 39% of consumers plan on retiring before the age of 65. That’s the most significant share since 2010.
The study also reported that 18% of people plan to retire before age 59. It also found that: Over 38% of respondents under age 54 will retire full-time by age 55.
Only 32% of older workers, or pre-retirees, expect to stop working full-time in the next five years.
44% of respondents in the pre-retirement age group have already retired.
This shouldn’t be all that shocking. According to government data, approximately 2.7 million Americans age 55 and older contemplate retirement years earlier than expected because of the COVID-19 pandemic. In addition, interviews with wealth managers and federal surveys found that more significant numbers are White, a group with typically higher assets. They also stated that they were tired of COVID-19 and their retirement funds as reasons for early retirement.
However, even people in their 30’s and 40’s have already retired. And, they claim that this was possible through the F.I.R.E. movement. What is the F.I.R.E movement?
FIRE is an acronym that stands for Financial Independence Retire Early. The concept is basically a combination of extreme saving, frugality, and investing. “The idea is to achieve financial independence, be free from financial commitments and retire early so you don’t ever have to work again if you don’t want to,” says Elizabeth Buko, (quoted on Stylist) a financial mentor and founder of Wealth from Little. “And anyone can do it, no matter how much money they earn.” In reality, this movement has been embraced by ambitious and middle-income earners who use the following formula; High savings rates (50-70% of income), frugal living (minimalism), and low-cost stock index fund investing (such as Warren Buffett’s standard investment advice).
It usually takes around ten years to achieve this goal. But, it’s no surprise that FIRE is sometimes referred to as the “ultimate life hack.”
While this might seem like a relatively modern concept, its origins can be traced back to 1992 in the best-selling book Your Money or Your Life by Vicki Robin and Joe Dominguez. Rather than working 9-5 to earn a living, they emphasized achieving financial independence . Many are scared of retirement.
In recent years, millennials, in particular, have joined this movement. And, you can’t exactly blame us. Millennials experienced the ripple effects of both the financial crisis of 2007-2008 and the COVID-19 pandemic. They (millennials) also, lost their jobs during the Great Recession (2008). We know that ( 8.7 million covering all generations suffered these losses too.
Many have struggled to find a job after graduating from college. As a consequence, this generation is still behind financially from other generations at the same point in age time.
In addition, millennials continue to face staggering student loan debt and ballooning housing, healthcare, and childcare costs. Due to this, many put off buying a home , getting medical and dental care , and having children .
No wonder we’re scared of the word “retirement .” Understanding FIRE and its different types.
FIRE’s ultimate goal traditionally is to take early retirement. To support yourself, you would use your savings and income from investments.
Sometimes you’ll hear about people who live extremely frugal lifestyles to save money.
They then invest that money to retire when they’re in their 30’s or 40’s. Thus, FIRE advocates might be able to save up to 50% of their income, or even more, to retire early. However, that’s not the only factor to consider.
Through the years, FIRE’s definition has expanded in scope and developed its application. For example, rather than retiring early, many people nowadays focus more on achieving financial independence.
Essentially, FIRE requires you to shift your perspective regarding money and work.
As a result, this encourages you to consider what’s most important to you, and how you might reach financial independence without being ruled by money demands.As Vicki Robin explains, the real purpose of her book isn’t to present a step-by-step guide to early retirement. Instead, it’s showing people how to live well while consuming less. In turn, you’ll have a more fulfilled and rewarding life. Or, as Robin put it, “If you live for having it all, what you have is never enough.FIRE’s principles, such as saving and being conscious of your spending, are universal. But how individuals choose to apply them in their […]
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