What is F.I.R.E? Can F.I.R.E really help you retire early? 4 reasons it may not work for you
Here is everything you need to know about F.I.R.E and if it really works.
F.I.R.E stands for Financial Independence, Retire Early. This principle is all about achieving true financial freedom well before the usual retirement age.
People who follow the F.I.R.E rule aim to save and invest their income aggressively, which would allow them to have a financial cushion good enough to sustain their lifestyle without a paycheck.
F.I.R.E rule followers believe in reducing lifestyle costs, investing strategically in stocks, mutual funds, and FDs among others, setting a retirement target and adjusting their previous strategies as and when required.
The F.I.R.E movement has started gaining more popularity in the US and Indians are adapting to it too. According to Motley Fool data gathered between 2016 and 2022, only a small percentage of Americans have been able to achieve F.I.R.E. As per the data, only 1% of Americans aged 40-44 retired through F.I.R.E, 2% in the 45-49 age group and 6% in the 50-54 age group.
In India, achieving F.I.R.E depends on a lot of external factors. People following this principle must save a huge chunk of their paycheck and living costs in cities creates an obstacle in doing so. Inflation also plays a role in saving money, and higher inflation may ruin your plans in retiring early.
F.I.R.E is only suitable for those with relatively low expenses, high earning potential, or a combination of both. Therefore, while this principle is viable for some people, it is not meant for all. If you follow F.I.R.E, the first thing you have to do is significantly change your lifestyle for a frugal one. If you cannot compromise on your lifestyle, F.I.R.E may not work for you. F.I.R.E is heavily impacted by market fluctuations. A market downturn can negatively impact your investments and may require you to further cut down on your expenses. Medical emergencies and other unforeseen circumstances can impact your F.I.R.E plans and may require you to change your investment strategies and lifestyle. If you have to make a significant expense regularly, F.I.R.E may not be for you. If you are a social butterfly and love to interact with your colleagues, retiring early through F.I.R.E may negatively impact your social life.
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