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Money Matters Blog

Tuesday, June 25, 2019

Is FIRE a Realistic Goal for You?

FIRE (Financially Independent, Retire Early) is having a moment, and it’s not hard to understand the appeal. Retiring early, who wouldn’t sign up for that? When you think of retirement age, you probably think of someone in their late 50's or 60's, and there’s a reason for that: it’s the norm. While this is the standard age most people retire, people who strive for FIRE retire much earlier than this, usually in their 30's or 40's.

FIRE isn’t always a realistic goal. There are challenges associated with early retirement that you won’t read about in the accounts of bloggers who have achieved this goal. Also, as you correctly assume, early retirement is not for everyone. Here’s why:

1.) Boredom breeds discontent
Some people loathe typical work settings. They have other interests they’d pursue if the majority of their waking hours weren’t spent at the office. For them, a responsible early retirement may be a path towards true happiness.

However, many people feel fulfilled by their work. For these employees, leaving the structure of the workplace while they are still in their productive prime can lead to depression and a physical decline well before old age sets in.

2.) You’ll miss years of peak earning potential
Business and investing website Visual Capitalist found that the biggest jump in salary generally happens between ages 30 and 40, with those pulling in higher salaries seeing the greatest increase closer to age 40. If you leave the workforce in your early 30s, you stand to miss reaching your peak earning potential. And, if you retire at age 40 or 50, each year you are out of the workplace means more loss, since you likely would have reached your highest income level during that time.

3.) You likely don’t have enough money to retire early
According to the Bureau of Labor Statistics, the average person spends nearly $46,000 a year post-retirement. A survey by GOBankingRates found that 42 percent of Americans have less than $10,000 saved for retirement. Many folks have nothing saved. Even if you have a handsome retirement fund, it may not be enough to keep you going for half a century or more. Keep these factors in mind when you crunch the numbers:
  • You won’t be eligible for Medicare until age 65. Leaving your job can mean losing health coverage. If you get hit with a big medical expense before you find adequate coverage, you may need to drain your retirement savings to cover it.
  • You may be required to pay an early withdrawal fee on your retirement funds. If you withdraw funds from your 401K or IRA before age 59 1/2, you’ll be hit with a 10% penalty. 
4.) You won’t be contributing to society
Once you bow out of the workforce and spend your days chasing thrills or pursuing the ultimate in relaxation, you’re less likely to be impacting the world in a positive way. Like boredom, living selfishly can ultimately lead to dissatisfaction and unhappiness. 

Your Turn: Do you believe that early retirement is a good idea? Share your thoughts with us in the comments.

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