5 Financial Books for FIRE (Financial Independence, Retire Early) (2024)

FAQs

5 Financial Books for FIRE (Financial Independence, Retire Early)? ›

At the core of FIRE calculations is the rule of 25. It states that you should multiply your anticipated annual expenses in retirement by 25 to arrive at your target savings goal.

At the core of FIRE calculations is the rule of 25. It states that you should multiply your anticipated annual expenses in retirement by 25 to arrive at your target savings goal.

So, What Is the Financial Independence, Retire Early (FIRE) Movement? In a nutshell, the goal of the FIRE movement (sometimes written as fi/re) is to save and invest aggressively—somewhere between 50–75% of your income—so you can retire sometime in your 30s or 40s.

One frequently used rule of thumb for retirement spending is known as the 4% rule. It's relatively simple: You add up all of your investments, and withdraw 4% of that total during your first year of retirement. In subsequent years, you adjust the dollar amount you withdraw to account for inflation.

According to the FIRE (financial independence, retire early) movement, you need to have 25 times your annual expenses in investments.

The sustainable withdrawal rate is the estimated percentage of savings you're able to withdraw each year throughout retirement without running out of money. As an estimate, aim to withdraw no more than 4% to 5% of your savings in the first year of retirement, then adjust that amount every year for inflation.

If you want to be sure you're saving enough for retirement, the 25x rule can help. This rule of thumb says investors should have saved 25 times their planned annual expenses by the time they retire, according to brokerage Charles Schwab.

As a general guide, you can use the 6% Rule when evaluating the two options. It's a straightforward tool to help assess which choice makes more financial sense over time. Here's how the 6% Rule works: If your monthly pension offer is 6% or more of the lump sum, it might make sense to go with the guaranteed pension.

Fidelity's guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Factors that will impact your personal savings goal include the age you plan to retire and the lifestyle you hope to have in retirement.

Why do two early retirees say 4% rule? ›

The "4% rule" is popular among the "financial independence, retire early," or FIRE, community. It aims to help prospective early retirees figure out how much money they can spend in retirement without running out. The advice suggests that you can safely withdraw 4% annually from your nest egg.

In fact, a recent survey found that investors believe they'll need at least $3 million to retire comfortably. But retiring with $1 million is still possible, even as early as age 55, if you're smart about it. It will require some careful planning since you'll have to wait 10 years for Medicare, but it can be done.

If you retire early, or if you were laid off and need the distributions to cover living expenses, it could make sense. But if you get another job and cover your costs that way, it might not make sense to begin drawing down your 401(k).

One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.

FIRE focuses on living below one's means and aggressively saving money. FIRE followers often save 50% to 75% of their income. Many plan to retire in their 30s, 40s or 50s and then live off their savings and investments. FIRE strategies differ based on variables, like a person's current finances and retirement goals.

The short answer is yes, $500,000 is enough for many retirees. The question is how that will work out for you. With an income source like Social Security, modes spending, and a bit of good luck, this is feasible. And when two people in your household get Social Security or pension income, it's even easier.

To achieve early retirement, F.I.R.E. investors cut costs aggressively and save large percentages of their income. Their milestone for financial independence is a portfolio large enough to sustain their spending with inflation- adjusted withdrawals equal to 4% of the portfolio's initial value—the so-called 4% rule.

This early retirement fire calculator / visualizer is designed to project the number of years until you can retire, based upon a few key inputs such as annual income and spending, income growth rate, expected annual spending in retirement and asset allocation.

The 25X Rule states that you'll need 25X of your annual spending set aside at retirement to retire comfortably. To start, determine how much you spend in a year. The best way to do this is by looking at your expenses for a month, then multiplying that total number by 12.