Millennials are fueling a growing movement of investors who aspire to work for shorter periods of their lives, supercharging their savings and investing during their early years, so that they can retire at a younger age than the generations before them. This strategy known as Financial Independence, Retire Early (FIRE) sounds like a good plan, but it can be incredibly difficult to obtain easy to go awry on implementation.
FIRE expands on the basic tenants of long-term retirement planning: be smart with spending and saving, and create an investment plan so that the money you save today will grow to sustain for the rest of your life and replace the income you will lose when you stop working. However, with FIRE these concepts are much more extreme.
First and foremost, achieving FIRE demands discipline. Be prepared to maintain a strict budget, living below your means and saving as much as 80 percent of your discretionary income during your working years. It also requires you to regularly and closely monitor your plan to respond to unexpected market declines or life events, such as the loss of a job, health issues or the birth of a child, which may put a dent in your plan and necessitate a swift change in strategy and/or your timeline to retirement.
Additional risks to consider before starting FIRE, include the following:
FIRE is not an all-or-nothing concept. You may merely want financial independence and the freedom to reduce you working hours so that you can spend more time doing the things you enjoy, including launching an entrepreneurial business.
For more information about FIRE, listen to the Relatable Finance podcast at https://www.provwealth.com.
About the Author: Shane Phillips, CFA, CAIA, CFP ®, is a portfolio manager with Provenance Wealth Advisors (PWA), an Independent Registered Investment advisor affiliated with Berkowitz Pollack Brant Advisors and Accountants and a registered representative with Raymond James Financial Services. He can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or via email at firstname.lastname@example.org.
Provenance Wealth Advisors (PWA), 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.
Shane Phillips, CFA, CAIA, CFP ®, is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC.
Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors and Accountants. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory and Financial Planning Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the advisors of PWA and not necessarily those of Raymond James. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation. The information contained in this report has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Holding investments for the long term does not ensure a profitable outcome. Though they can help mitigate risk in a portfolio, diversification and asset allocation do not ensure a profit or protect against loss. Investing involves risk, and you may incur a profit or loss regardless of the strategy you select.
* Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.