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Would you like to retire early? It might sound like a lofty dream, but it’s one of the foundational components of the FIRE movement (Financial Independence Retire Early).

Perhaps you favor a Jaime Lannister approach and would rather work than sit on an Iron Throne. Or maybe your style is a bit more Cersei Lannister and you dream of creating chaos from afar. A FIRE lifestyle is a bit like a choose-your-own-adventure approach to life.

In any case, the FIRE movement has gained traction in recent years, especially among younger generations. Older generations might have been happy working until the prime age of 65 or beyond, but more people are starting to say, “No, thank you,” Olenna Tyrell style.

By following a few simple principles, it is possible for you to build a large enough nest egg to retire early and live a comfortable lifestyle, though it does take effort. The Lannisters didn’t build their fortune overnight either.

In this article, I’ll tell you the benefits of retiring early, how you can use the FIRE formula to plan an early retirement and ways you can be more successful with your FIRE goals.

The Benefits of Retiring Early

There are many benefits to retiring early. 

• More time to travel and explore the world.
• More time to spend with family and friends.
• More time to pursue hobbies and interests.
• Less stress and more freedom.

Retiring early can provide you the opportunity to spend more of your time doing the things you love, which may or may not include working on a passion project, or spending more time with family and friends. You might also favor traveling, much like Arya.

Retiring early can also save you money, though it mind sound counterintuitive. After all, you wouldn’t need to pay for work clothes, commuting, or even retirement savings.

The Basics of the FIRE Movement

The FIRE movement is based on the idea that you can retire early if you save a large percentage of your income and invest it wisely. The goal is to reach a point where your investments are generating enough income to cover your living expenses so that you no longer need to work.

The Lannisters amassed a large enough fortune to cover their expenses for generations, but unless you’re fortunate enough to gain a considerable inheritance, you’ll need to take a different approach.

The FIRE Formula to Retire Early

The FIRE movement is based on the following formula:

Savings Rate x Number of Years = Retirement Age

For example, if you save 50% of your income and you want to retire in 20 years, you will need to have a savings balance of 25 times your annual expenses.

How to Calculate How Much Money You’ll Need to Retire Early

There are a few different ways to calculate how much money you’ll need to save in order to retire early. 

The FIRE formula above is based on the common rule of thumb that you should multiply your annual expenses by 25. This will give you the total amount of money you need to have saved in order to retire comfortably. For example, if your annual expenses are $50,000, you would need to save $1.25 million in order to retire early.

Another approach is to follow the 4% rule. This rule states that you can withdraw 4% of your savings each year in retirement without running out of money. This rule is based on the assumption that your investments will grow at an average rate of 7% per year.

No matter which strategy you choose, it’s important to remember that building a savings to retire early takes time and discipline. It’s not something that you can achieve overnight. 

How to Save for Early Retirement

There are a few things you can do to increase your savings rate and reach your goal of retiring early.

1. Increase your income.

One of the best ways to save more money is to increase your income. This could mean getting a raise at your current job, starting a side hustle, or investing in real estate.

The Hound invested his time into developing valuable skills and won the Hands tourney to amass a considerable fortune. While you likely won’t have access to a similar tournament, there are plenty of good side hustles that make money.

2. Reduce your expenses.

Another way to save money is to reduce your expenses. This could mean cutting back on unnecessary spending, such as eating out or buying new clothes, or finding ways to save money on your housing, transportation, and other necessities.

While on the run, Arya forego most of the comforts she was used to from home. Granted, she was running for her life, but she could have used the same strategy to save along the way!

3. Invest wisely.

Once you have saved up some money, you need to invest it wisely. This means choosing investments that will grow over time and provide you with a steady stream of income in retirement.

The Lannisters helped fund the Crown, which in turn supported their many desires.

One approach to investing that you may want to consider using is a target date fund. A target date fund is a type of mutual fund that is designed to help you reach your retirement goals. These funds automatically adjust their asset allocation as you get closer to retirement so that you are less likely to run out of money when you need it.

It’s a good idea to speak with a financial advisor before you commit to making any investments.

Psst if you’re interested in getting started with stock market investing, I recommend reading The Bogleheads’ Guide to Investing.

How to Save More of Your Income to Retire Early

Saving a significant portion of your income may seem like a daunting task, but it’s important if you want to save for FIRE. 

Dani’s advisors cautioned her against pursuing the Iron Throne. They knew it was a nearly impossible task, yet she never gave up.

Here are a few additional tips to help you save for FIRE:

Live below your means to retire early.

Potentially the single most important thing to help you achieve a FIRE lifestyle is to live below your means. If you can spend less than you earn, you will be able to save more money each month.

You’ll want to track your spending and make sure that you’re not spending more money than you earn.

Similarly, Dani was mindful that she would need an army to pursue the Iron Throne. She knew it would have been foolhardy to come unprepared.

Get out of debt to retire early.

Debt can be a major drain on your finances. If you have debt, focus on paying it off as quickly as possible. This will free up more money for you to save.

Dani was cautious, diligent and thoughtful in her approach as she built an army and prepared to take on the Iron Throne. You’ll need to do the same to pay off debt.

The Challenges of Retiring Early

There are some unique challenges associated with retiring early, such as:

• A smaller retirement nest egg.
• Higher healthcare costs.
• A need to downsize your lifestyle.

It may be difficult to cut back and make lifestyle changes, but depending on your goals and your lifestyle, it may be a necessity. 

For example, you may need to move to a less expensive area or find ways to cut back on your spending. You may also need to find ways to stay active and engaged in your community.

Another challenge is that you may not have as much money saved up as you would if you retired at a more traditional age. This means that you may need to be more careful with your spending in retirement.

Along the way, Dani had to make considerable sacrifices to achieve her goals. She took the sacrifices in stride, and over time managed to overcome remarkable odds.

Is the FIRE Movement Right for You?

The FIRE movement is not for everyone. It requires a lot of discipline and sacrifice, and it may not be possible for you to save such a significant portion of your income. 

However, if you’re willing to make the necessary changes, the FIRE movement can give you the freedom to retire early and live a comfortable lifestyle.

Here are some additional tips for retiring early:

• Start saving early. The earlier you start saving, the more time your money has to grow.
• Invest carefully. Choose investments that are appropriate for your risk tolerance and financial goals. The Bogleheads’ Guide to Investing is a great resource to help you learn more about investing.
• Spend cautiously. The less you spend, the more you can save.
• Be disciplined. Stick to your savings and investment plan, even when it’s difficult.
• Don’t give up. Retiring early is a long-term goal, but it is possible if you are willing to put in the work.

Conclusion

The FIRE movement is a great way to achieve your financial goals and retire early. By following a few simple principles, you can save enough money to live a comfortable lifestyle.

With a little planning and hard work, you can achieve your goal of retiring early and living a happy and fulfilling life.

Think retiring early will FIRE your life? Check out the posts page for more ways you can FIRE Your Career and achieve financial freedom.

FIRE Your Career: Achieve Financial Freedom Through Your Career & Spend MORE Time Doing What You Love.

Products I recommend in this article:

The Bogleheads’ Guide to Investing (book on how to get started with stock market investing)

Disclaimer: I am not a financial advisor and none of the above should be construed as financial advice. For financial advice, please seek advice from an accredited financial advisor.