In my first post, I talked about the movement FIRE, meaning Financially Independent, Retire Early. But what is this movement clearly and what does it mean to follow it. First of all, there is a lot of blogs and websites that talk about FIRE. I mean a LOT! And like I often said, having too much information sometimes, is like not having enough. So this is why I wanted to do a quick overview and make sure it is short and clear.
Age of retirement
In the USA, the age of retirement without having any social security penalty is between 62-67 years old. (Depending on your year of birth) and in Canada, the age of retirement without penalty is 65 years old. This means that before this age, you need to live with your own investment. (you could request money earlier but will suffer some penalties) To be honest, who knows what could happen in the future and how much money will still be available at that time. My dad always told me that I should plan myself for my retirement and that I should not count on the government for it. Don't forget that the age of retirement has already been updated from 65 to 67 in the USA. Who knows if in 30 years the age of retirement will not change from 67 to 70. Also don't forget that 30 years ago, the average age expectancy was around 73 years old (https://ourworldindata.org/life-expectancy). In 2018, the average age expectancy is around 79 years old. That mean 6 more years in 30 years of evolution. Experts don't expect this to keep changing at the same pace but it needs to be part of your calculation. I normally use the age of 85 in my calculation.
FIRE
Enough of statistic, let's talk about FIRE. It's hard to know who really started the movement but the more you read about it, the more you will see the name of Vicki Robin and Joe Dominguez. They wrote a book in 1992: Your money or your life, that a lot of people use as a reference in the movement. You will also see a lot of story about people that retired at the age of 30-35 years old. (https://earlyretirementdude.com or https://www.mrmoneymustache.com/) While I appreciate many of the advice that this community gives, I don't embrace all of them. The movement promotes a frugal lifestyle and gives a lot of advice on how to reduce your expense. I do believe that we need to be more careful about what we buy and to have a better control of our expense but keep in mind that one of my principles is: STOP TRYING TO REDUCE YOUR EXPENSES AND START INCREASING YOUR INCOMES.
Here is a small list of actions that the FIRE movement promotes and that I follow.
Use tools to track your expense. I use Personal Capital but there is others platform like Mint, Betterment or Wealthfront. It will help you to understand where your money is going and also help to catch any unusual expense.
Evaluate every big expense you do. Take the time before doing a big expense. Sometime we want something right now but if you take 24h to evaluate the idea, you may cancel the idea of buying it. You also need to review the expense that you already have, rent, insurance, car payment, etc. I take time to reevaluate all these every 6 months.
Have a plan. To retire early, you need to know when you can do it and how you gonna make it. I will explain my plan in the next chapter.
Invest your saving. No explanation needed here I guess.
The 4% rule. For many FIRE advocate, this number is really important. The idea is to be able to have enough money to withdraw 4% of your total investment every year when you retire. If you think you need 30 000$ per year to live and that you will retire at 45, you will need around 1.4 million by the age of 45 to live until 85 years old. (https://financialmentor.com/calculator/retirement-withdrawal-calculator)
My FIRE plan
I would love to follow the 4% rule and I would like to have around 60 000$ per years when retired. (Knowing that I have already paid my house) I would love to be financially independent by the age of 40 and would love to retire at the age of 50. Taking into consideration the inflation, my investment return and some potential others income, (real estate mainly) I will need to get around 2 to 2.5 million to live from 50 to 85 years old. Since for me, retiring doesn't mean "stop working" but more doing what I like and doing the amount of hour I want, I will probably need a little bit less.
