Is $1 million enough to retire these days? You shouldn’t retire based on age, but instead should focus on improving your net worth to reach your retirement goal, allowing you to retire as early as your 50’s, 40’s, or even 30’s if you have a good income and start early enough. F.I.R.E. stands for “Financially Independence, Retire Early”, but it’s not for everyone. Here are 3 steps you need to take to reach the goals of the F.I.R.E. movement.
1. Plan for Retirement
Less than half of American’s have a plan for retirement and many don’t think about it until they reach their 40’s. You need to decide how much you will spend each month as a retiree including hedge, and set a retirement goal based on that. Find different ways to invest by signing up through my referral link for a 401k or Roth IRA through Betterment, or consider other companies like Wealthfront. If you are a generally healthy person, consider getting a high deductible health insurance plan, qualifying you to open an HSA (Health Savings Account), a triple-tax advantaged account that grows your money and allows you to pay for medical expenses tax free. If you are young and plan to go back to school or have kids, open a 529 education investment account, another triple-tax advantaged account. Invest in crypto currencies through Coinbase or invest in stock through apps like Robinhood and Webull where you can earn free stock just for signing up.
2. Improve your Cashflow
Find ways to lower your expenses and keep them low, then find ways to improve your income. Recycle grocery bags by using them as trash bags, get a learning programmable thermostat to keep your utilities down, find a home or apartment with zero to minimal expenses and pay it off fast, replace your SUV with a cheap to run reliable and efficient car, cut the cord or consolidate your subscription streaming services, and consider using your network provider’s data plan as your main source of internet to save on monthly internet bills as I did for a year.
Find ways to make passive income. Take on a second job or third job with work-on-your-own-time companies like DoorDash and Uber. Invest in yourself so that you can move up the corporate ladder or find a better opportunity with another employer.
3. Make investing a Priority
Saving and putting your money to work is the fastest way to have it grow. Instead of leaving it in a savings account, invest it in stocks, real estate, crypto, or your own business. Remember to invest 50 to 80% of your income for retirement. Eventually you will potentially have passive income from stock dividends, investment growth, sales or rent.
Why F.I.R.E. is not for everyone
Retiring early does not mean you can spend your money on traveling or a beach house. The F.I.R.E. movement will allow you to live an easier life with minimal expenses working part time jobs as needed. It requires that you aggressively invest AT LEAST half of your income while finding ways to minimize expenses and increase your income. F.I.R.E. is for those who are okay with living a minimalistic lifestyle, even in retirement.
To really retire in your 30’s or 40’s, you will need a large income. A $75,000 per year salary is not enough. You need to find ways to increase your income so that you can earn 6-digits each year. It takes most millionaires 25-30 years of saving and investing to reach their first million. Due to inflation and increased costs of living, $1 million is not enough for retirement anymore, even if you live frugally.
In Conclusion
I don’t want to discourage you from trying to retire early. Your expectations should be to continue to live frugally if you retire early, even with $3 million saved. Otherwise you will quickly lose your retirement and end up having to go back to work in your 60’s. The earlier you start the better. Pay off all of your debt first, including your mortgage, then make sure you have your kid’s education savings taken care of so you can finally save and invest for retirement.
Affiliate Link Notice: This post contains affiliate links, which means I may earn a small commission, at no additional cost to you, if you decide to purchase or sign up for a product through my referral links. While you can sign up through any other means, it would help support the blog if you sign up through my links. Thanks.
