Do you dream of retiring in your 50s, 40s or even 30s? Followers of the "financial independence, retire early" (FIRE) movement strive for that goal by aggressively saving between 50% and 75% of their paychecks. The FIRE movement has faithful adherents, but some may find the lifestyle far too restrictive. Here are seven alternatives to FIRE that can help you accomplish similar goals without going to financial extremes.
1. Lean FIRE
Traditional FIRE (sometimes known as Fat FIRE) focuses on amassing enough money to sustain your current lifestyle after retirement. To achieve Fat FIRE, your "FIRE number" (the amount of your nest egg) should be 25 times your estimated annual expenses in retirement. For an estimated annual retirement budget of $100,000, you'd need to save 25 X $100,000, or $2.5 million. Depending on your age, income and desired retirement age, Fat FIRE isn't always realistic.
To say "so long" to the rat race faster, try Lean FIRE. By opting for a frugal retirement lifestyle, Lean FIRE lets you save less before retiring. For instance, on an annual retirement budget of $40,000, you could retire with $1 million.
2. Barista FIRE
Health care is a major expense in retirement, but retiring early costs you access to your employer's health insurance. Barista FIRE can fill the gap until you turn 65 and qualify for Medicare.
With Barista FIRE, you build a nest egg that generates enough to cover part of your retirement living expenses. Then you get a part-time job that covers the rest of your expenses. If you need health insurance, look for a job that offers it; if you don't, use Barista FIRE to dial back your hours at work or start a side gig you enjoy.
3. Coast FIRE
Coast FIRE takes advantage of the power of compound interest. Here's how it works: You maximize retirement savings and investments in the early years of your career. Then you stop and "coast" as the money in your retirement and investment accounts grows exponentially.
Coast FIRE followers generally don't retire until their 60s; however, depending on your desired retirement lifestyle and your investment results, you might be able to retire earlier. The benefit of Coast FIRE: You can spend your entire income in the later years of your career while still developing a substantial nest egg. Saving 50% to 75% of your income for retirement is often easier when you're young and single, without expenses like children and mortgages.
4. Flamingo FIRE
Flamingo FIRE followers ease into retirement in three phases. In phase one, you work full-time and put aside 50% to 75% of your income for retirement. Once you reach half of your FIRE number, begin phase two: Stop investing or contributing to your retirement plan, and work only as necessary to pay your living expenses.
Meanwhile, wait for your investments to double in value. You can calculate how long that will take using the Rule of 72: Divide 72 by the expected rate of return on your investment (leaving off the percentage). For example, a retirement account earning 8.7% annually (the average return on investment for accounts balanced between stocks and bonds) should double in value in a little over eight years (72 divided by 8.7). Once your nest egg's value doubles, enter phase three: retirement.
5. Baby FIRE
Prospective parents can use Baby FIRE to take extended maternity or paternity leaves or stay home while the children are young. To use Baby FIRE, determine what your ideal life after children looks like. Will one parent stay home for the first few years of the child's life? Will both parents shift to part-time work to enjoy more time as a family? Do you want the option to be a stay-at-home parent until the kids are grown?
The amount necessary to achieve these goals, and the best savings or investment vehicles for your money, depend on your timeline and income. Is parenthood a decade off? You've got time to invest. Want to have kids in a year or two? Consider a certificate of deposit (CD), high-yield savings account or other interest-bearing savings vehicle.
6. Geo FIRE
The concept behind Geo FIRE is simple: The lower the cost of living in your geographic location, the further your money stretches. Moving to a cheaper city, state or country after retirement means you could enjoy a Fat FIRE retirement on a Lean FIRE budget.
There are two ways to use Geo FIRE:
- If remote work is an option for you, accelerate retirement savings by moving to a cheaper location while you're still working. Aim to earn the salary you'd make in, say, San Francisco or New York City while living in a more affordable city. For example, a studio apartment that rents for nearly $2,500 a month in San Francisco can be had for under $300 in Thailand. Work from Thailand, put the $2,200 savings on rent toward retirement, and you'll sock away an extra $26,400 a year. The younger you are, the longer that money will have to grow.
- If you can't or don't want to move, find a more affordable location for after retirement. You don't have to go to Thailand; even moving from Los Angeles or New York City to Texas or Mississippi could significantly slash your expenses and make your money stretch.
Before moving, investigate the cost of living and the tax ramifications, health insurance options, and other potential expenses of each location.
7. Slow FIRE
Slow FIRE followers take the middle way: saving for tomorrow while enjoying today. Rather than scrimping or working 100-hour weeks to fuel your FIRE, you create a budget that allows for what you care about—and for retirement savings. Slow FIRE might mean avoiding debt, building a hefty emergency fund, maxing out your retirement accounts and investing.
Slow FIRE looks a lot like traditional retirement saving, but slow and steady wins the race. A recent study of 10,000 millionaires found that 80% had participated in an employer's 401(k) plan, while 75% credited their financial success to investing consistently over the long haul. By funding their retirement plans early, they accumulated $1 million or more—even though the majority earned less than $100,000 per year on average throughout their careers.
The Bottom Line
Withdrawing money early from a 401(k) or IRA can incur taxes and penalties. Work with a financial consultant and tax advisor to determine the best way to save for FIRE. Whether you use FIRE or not, good financial habits such as paying yourself first, budgeting and automating savings can help make the most of your retirement.
Maintaining a good credit score is another way to maximize opportunities in your golden years. Check your credit report and credit score regularly and sign up for Experian's free credit monitoring service to keep tabs on your credit.