Early Retirement Strategy
Financial Independence Retire Early (FIRE) movement targets retirement well before traditional age by saving aggressively and living on 4% of portfolio. With $40,000 annual expenses, you need $1 million (25x rule). Starting with $100,000, saving $30,000 annually at 7% returns, you reach FI in 17 years - 43% savings rate enables early retirement.
Savings rate matters more than income - 50% savings rate enables retirement in 17 years regardless of salary. 70% rate achieves it in 9 years. Calculate savings rate as annual savings divided by total income. Increase rate by earning more, spending less, or both. Track net worth monthly and celebrate milestones.
FIRE requires discipline, frugality, and aggressive saving but provides freedom to pursue passions, travel, start businesses, or work only on meaningful projects. Not everyone wants extreme frugality, but concepts apply to any retirement timeline. Even modest increases in savings rate dramatically accelerate financial independence.
Quick Tips
- Always compare APR, not just interest rates
- Use the Rule of 72 to estimate doubling time
- Extra payments dramatically reduce total interest
Frequently Asked Questions
Save 25 times your annual expenses to retire safely. $40,000 expenses requires $1 million portfolio. Based on 4% withdrawal rate - withdraw $40,000 annually from $1 million. Historically sustains portfolio indefinitely.
Yes with high savings rate and disciplined spending. 50%+ savings rate common in FIRE community. Requires living significantly below income, avoiding lifestyle inflation, investing consistently. Not for everyone, but achievable with commitment.
Any increase in savings rate helps. Moving from 10% to 20% cuts years to retirement by ~10 years. Start where you are, gradually increase savings with raises, focus on big expenses (housing, transportation, food). Progress over perfection.