Resignation. Early retirement. Semi-retirement. Is this all just pie in the sky dreams?
I don’t talk very much about the FIRE (financial independence / early termination) movement. But it definitely influenced my life and I believe that everyone should at least strive for financial independence.
I think most of the bad press associated with FIRE comes from the premise that it’s “early to retire.” Whether people find it lazy to retire at 40 and sit on the beach, or envy those earning six figures and flaunting their ability to retire early due to astronomical savings rates, the concept of early retirement is generally frowned upon. … …
Personally, I don’t think I will ever “retire” in the official sense of the word. I think I’ll always be working on my next entrepreneurial idea (next: starting an accounting business!) Or spending time helping the community through my church or other local organizations.
But there is another way that allows more people to access the benefits of freeing up time for family fun, hobbies, or other interests: semi-retirement.
I asked my friend Mr S.R. from Semi-Retire Plan tell us about the difference between FIRE and semi-retirement, and why it might be the best option for you. Take it away, Mr. SR!
Elegant technology and design. Muscle cars and motorcycles. Rock and roll and electric guitars.
There are certain topics and industries in which the phrase “sex appeal” can be used to describe things that are not inherently sexual. I don’t think that amateurs necessarily mean that the thing is sexy, it just delivers some kind of excitement. There is a “wow!” factor.
The FIRE (financial independence, early retirement) movement offers the same excitement in the personal finance community.
Why FIRE is “sexy”?
Finance topics have historically had a reputation for being boring and opaque – insurance, annuities, estate planning … yawn.
But the FIRE movement has a different feel. The concept of the FIRE movement is that it is unpleasant to work full-time until the age of 60 or 70. If you can actively save for retirement, you can fully retire at a much younger age. You can even strategically access your retirement savings ahead of time!
The FIRE movement is freedom when you tell your employer that you don’t need them and set off for the sunset. There is a feeling that you are going against the trend and rejecting the status quo. FIRE shares a sense of rebellion with the “sexual” themes mentioned above.
The personal finance community owes a lot to the FIRE movement. It attracts a new audience in contrast to traditional personal finance. The FIRE movement is growing. And in my opinion, this is mostly great news!
The flip side of the FIRE
Any polarizing movement will meet resistance. I do not consider myself an opponent of FIRE, but I think there are some drawbacks.
However, let me first say that if you can save a significant chunk of your income without impacting much on your quality of life and mental health, then the FIRE movement might be a good thing for you. I don’t mind creating wealth and having the freedom to spend my time in a way that is fulfilling and valuable to you and your family. These are worthy aspirations!
I also understand that FIRE and semi-retirement do not have to be black and white. Many early retirees plan a FIRE and then take part-time jobs just because they enjoy it. It is not a clear distinction between “one or the other.”
FIRE movement can scare people away
For people with low or middle income, the FIRE movement may seem out of reach. Ardent FIRE devotees save up to 60% of their income, which is surprising, but such bets may seem impossible for people without a six-figure income. If you can save 15% or more of your income, you are doing significantly better than most Americans, but you are disappointing by FIRE standards.
Then the question arises of what your life should be like when you can stop working. How will you spend your time if you’re 40 and don’t have to work?
Many early retirees actually find themselves bored or lacking a clear understanding of purpose. Most or all of their peers continue to work full-time. Many early retirees end up choosing to return to work, or at least find ways to make money from home and spend their time. This is actually what inspired me to start writing about semi-retirement as an alternative.
Semi-retirement: the FIRE alternative
The job itself may not be a problem. You may just want to work less and do something else that really excites you. If so, you could save less intensively and still create the life you want. This shifts the financial equation and timing in your favor.
Savings rate (and income)
There are exceptions, but on the FIRE forums and forums I usually see people with high income.
Consider if you want to save 50% of your income. It is much easier to save $ 100,000 when you make $ 200,000 than $ 25,000 when you make $ 50,000. In the first scenario, you still have $ 100,000 to live on, compared to living on just $ 25,000.
Thus, it is logical that low- or middle-income individuals generally cannot achieve such a high savings rate. For most people in the US it is simply not profitable to live on only $ 25,000 a year (before taxes and deductions).
When planning a FIRE, the goal is to fully reimburse your income or reimburse enough of your income so that you can live your planned retirement lifestyle.
Alternatively, doing a job you enjoy for a few hours a week during your half retirement period will generate income. This means that you will not need to repay the same return on your investment during this period, which in turn means that you do not need to save as much while you are working full time. Hence, you don’t need to have such a high savings rate.
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I do not want to hush up this moment – This is a big deal… If you can report on future work that you are interested in doing during your semi-retirement age, you can spend more on meaningful experiences and relationships in your life.
timeline
Within certain limits, you will be able to leave your job full time earlier with a lower savings rate if you plan to partially retire, compared to the full firefighting pension.
Intensity versus flexibility
FIRE and semi-retirement start out the same – deliberately saving by working full time. But there can be a big difference in the level of intensity.
Would you and your family live a super-concentrated life for several years for more financial freedom later in life? Or would you rather live a more moderate life now and later?
Another final benefit of semi-retirement that I highly appreciate is the flexibility to replenish your expenses as your interests and investments fluctuate. Retire completely because you are completely uninterested in jobs that significantly limit your future.
If the stock market is dropping and you don’t want to withdraw the same amount from your investments while the market is dropping, the semi-retiree can schedule a few more hours of their work that they like to add more income to their budget.
If you decide you want to travel more than originally planned for a few months, just do a few more semi-retirement projects to fund it.
Ask yourself …
If you are trying to decide which path to retirement or FIRE is best for your life, consider the following questions:
1) How do I see my life for the next few years?
2) What is the long-term vision of my life?
3) How much am I willing to save money during my full-time professional career? Is discretionary spending on travel or other luxury items a priority during this start-up period?
4) If I had free time and did not need money, would my pastime bring income?
5) Would I be better off retiring early and working part-time in the job I like, or will I retire in a few years and not work at all?
I do not want to prescribe semi-retirement as an appropriate tool for everyone. However, just as FIRE made personal finance interesting for a new audience, I hope that semi-retirement age will make early retirement affordable for a new group of people – people who work hard and earn at a moderate level.
