Is FIRE the Right Retirement Strategy for You?

Whether you love your job or hate it, there's a good chance you bably hope to retire one day so you can spend more time with your family or pursuing your interests

But traditional retirement ages -- usually in your early to mid-60s -- can feel unbearably far away

However, you may not have to wait that long if you're willing to make significant sacrifices in the present

Some Financial Independence, Retire Early (FIRE) adherents manage to leave the workforce in their 40s, or even their 30s

But plenty more burn out on the demanding savings strategy

Here's how to know if it's right for you

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What is the FIRE movement

The FIRE movement centers around saving aggressively and leaving the workforce far earlier than is typical

Adherents usually set a savings target -- a FIRE number -- and retire as soon as they reach it

The high savings rate is common across all types of FIRE, but FIRE numbers can vary wildly based on a person's location, how long they expect their retirement to last, and what kind of lifestyle they hope to have

Barista FIRE: Barista FIRE assumes you'll work a flexible, part-time job during your retirement, such as being a barista

Coast FIRE: Coast FIRE involves saving aggressively until you've reached a certain target, at which point you continue to work but stop setting aside new money for retirement

This strategy typically involves a more traditional retirement age

Figuring out which type of FIRE strategy most appeals to you is the first step in calculating your FIRE number

Once you have an apximation of how much you'll need to cover your annual expenses in retirement, you can choose a FIRE number

Some people go with 25 times their estimated annual expenses

But if you plan to retire before 62, you may be better off using a higher number 33 times your annual expenses

Then, you'd as much as possible -- ideally half your annual income -- until you've reached your goal

After that, you can sit back and enjoy retirement

FIRE isn't for the faint of heart The FIRE movement sounds appealing, but only a select few pull it off

A big part of that has to do with the sacrifices the strategy requires in the present

It's not easy to half your paychecks

Many people wind up saying no to fun activities in the present and then burn out because they can't sustain that kind of lifestyle year after year

FIRE also involves taking some bigger risks

No one knows exactly how long their retirement will last or how much they'll need to cover their expenses after leaving the workforce

A longer retirement introduces even more uncertainty

A serious illness or a natural disaster could completely derail your budget

If this happens, you might have to return to work, which could be challenging if you've already been retired for decades

This isn't to say it can't work out, but it's important to be prepared for the challenges that come with this aggressive retirement strategy

You may also want to have a backup plan for what you'll do if FIRE isn't sustainable for you

If you don't think it's a good fit for you, that's OK

You don't need to half your paychecks to retire early

You may not be able to retire in your 40s, but if you stick with it and invest your savings, you can still position yourself to leave the workforce earlier than usual

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