Financial Independence, Retire Early (FIRE)
We all put our time in at work to reap the rewards when it comes time to retire. For most people, retirement means no longer needing to work while having the money to afford our living costs and expenses, pursuing the lifestyle we wanted but couldn’t have during our working years.
What is Financial Independence, Retire Early (FIRE)?
FIRE stands for Financial Independence, Retire Early. It’s a lifestyle movement that became popular among Millennials in the 2010s to gain financial independence and retire early. FIRE was developed as a model for how young people could achieve their financial freedom and enjoy a retirement lifestyle at a much younger age without having to put in the time and effort of a lifelong career.
Financial independence and the freedom that comes with it are frequently associated with retirement. Though the retirement age has traditionally come after decades of work, more and more people want the financial independence typically enjoyed at retirement earlier in life. Or, put more simply, they want to retire early.
The opportunity to achieve financial freedom and retire earlier than the average worker is well within your reach, and it doesn’t have to mean sacrificing your happiness in the present. The expert financial advisers at MyFuture have worked with many individuals to develop achievable plans that they can implement to reach their retirement dreams without having to wait for their pension to mature.
Who is the FIRE movement designed for in New Zealand?
The FIRE movement provides a meticulous financial plan for how young people can live, reduce their spending, save money, increase income, and invest in order to reach a state of financial independence and freedom before the traditional retirement age.
The model of achieving this entails the strict discipline of saving and investing the necessary funds to enjoy an early retirement. These aggressive investments and savings are intended to provide a passive income sufficient for an individual’s retirement lifestyle.
While the FIRE movement may be suitable for some, MyFuture’s philosophy is a little different. We believe that it’s all very well to create wealth, but you need to be able to enjoy your life along the way. We strive to develop financial plans that allow clients to achieve an early retirement without having to make drastic changes to their lifestyles today.
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Our Qualified Financial Advisers can help you achieve your goals with a tailored financial plan and proven financial expertise.
How much do I really need for financial independence?
FIRE advocates aim to save 25 times their expected annual expenses and withdraw no more than 4% of their savings each year. Much of this retirement funding comes from aggressive savings, occasionally reaching 75% of an individual’s annual salary. While this may seem like too much money to save, it can be doable without significant lifestyle sacrifices. But for most people, this level of savings is unattainable, and if they do pursue a FIRE strategy, their savings rate is between 25-50%. Keeping three to six months’ emergency savings is also vital for your FIRE retirement.
While the FIRE movement is one option for people to achieve financial independence, it is not the only game in town. Other models have been popularised over the years that aim to help people reach their financial goals at an earlier age. Still, the best option for the majority of people is to reach out to a qualified financial adviser who has the knowledge and expertise to navigate the complex world of finance.
The team at MyFuture can evaluate your financial situation, work with you to identify your personal goals, and develop a plan that you can implement to help you reach them. Our experienced financial planners understand that your priorities may change over time but aren’t just a fad. That’s why we take the time to listen and make sure you’re happy with the plan to achieve your financial freedom. Then, we work with you to help you achieve those goals over the long term.
How can I reach early retirement in NZ, even if pursuing FIRE isn’t realistic?
The key to being able to retire early is to have enough money in savings and passive income to support your lifestyle goals once you stop working. This will differ for everyone depending on the kind of retirement you want and the expected cost on an ongoing basis of your needs, wants, and any unexpected expenses.
Many people have tried different savings and investment models and lifestyle adjustments with varying levels of success. If you want a concrete plan for reaching financial independence and the freedom to retire early, MyFuture is ready and waiting to field your questions and help you get there.
What is our 6-Step Financial Advice Process?
The 6-step financial advice process is the international benchmark for financial planning. This holistic approach is proven to increase the likelihood of you achieving your financial goals.
Discovery Session
This is our opportunity to get to know you better, understand your financial goals (short, medium and long-term), and what resources you have to achieve those goals.
Research & Recommendations
During these steps, we do the research, run the numbers, document and present our recommendations to you. This can be a comprehensive financial plan focused on long-term wealth creation and/or a statement of advice focused on your more immediate financial needs. We will need to verify the information you provided during the Discovery Session by requesting supporting documents such as loan and savings account balances, payslips, etc. This ensures we are using highly accurate information when developing our recommendations.
Implementation
This step is all about implementing the recommendations. We don’t just provide the recommendation; we take responsibility for helping you implement it. This could involve helping you to complete application forms, working with a broker to restructure your lending, or finding you suitable investments. We understand you’re busy, so our goal is to make your financial world as easy as possible by doing as much as we can in-house for you. However, ultimately, we never have access to your money and cannot sign anything on your behalf, so you need to be an active, willing, and ideally enthusiastic participant in this process.
Ongoing Service & Reviews
This is where the real fun begins—managing and tracking your long-term financial success. We have periodic reviews to ensure your strategy is still appropriate if your goals or circumstances have changed. We adjust when necessary and provide annual snapshots so you can see your progress over time. Most importantly, you have your very own trusted Personal Financial Adviser available anytime to help with the little or big stuff. Worried about making next month’s mortgage repayments? Call us. Your parents gave you an early inheritance? Call us. Broke up with your partner and split all your assets? Call us! We’re here for you every step of the way to ensure that whatever life throws at you, you stay on track with your long-term financial goals.
Frequently Asked Questions
While you might not be interested in retiring yet, FIRE grants financial independence that helps you live a more stress-free life where your funds are secured and you have more time to do what you enjoy.
The best time to start saving is right now! The earlier you start, the sooner you can retire. Also consider such factors as your annual income, existing savings and investments, your risk tolerance, when you want to retire, how much of your income you can save, how much you need to live in retirement, credit card debt, home ownership status, potential inheritance, and pension income. Remember, you can’t withdraw money from KiwiSaver until you’re 65 years old. So, if you’re planning on retiring early, don’t count on using your KiwiSaver savings to help.
How much you need to retire at 40 depends on your individual lifestyle goals – whether you want to live lavishly or are happy to have a modest life. You can use the 4% rule to estimate how much you’ll need to retire for 30 years or plan with a certified financial planner such as MyFuture.
While it will require major adjustments and planning, it is possible to achieve FIRE with a big family. It could even be more cost-effective per person since you can buy supplies in bulk. However, overall costs will be higher.
Being dedicated to the FIRE movement could put you at odds with friends and family who like to live large. Following your values and being honest about your goals and intentions is important. If it’s hard to find support in your local sphere, you could join online communities to find many FIRE followers who’ll help you stick to your goals and stay motivated.
Get in touch and learn how to retire early in NZ with MyFuture today
Talk to us today and take advantage of a FREE no-obligation Discovery Session where we’ll work with you to protect the present, secure your future, and be prepared for anything life throws at you.