So you want to retire early? Is the Financial Independence, Retire Early (FIRE) model for you?


Anyone would want to stop working and enjoy an early retirement but not everyone has the luxury of saving up money every month. But if you have the discipline to do so, this could be a reality.

All about keeping to the plan

You might have been wondering why some people could retire at an early age and not worry about finances. They could come from a rich family, made their millions early or could have been using the Financial Independence, Retire Early (FIRE) plan. Basically, this is a movement that promotes savings and investments that will let you achieve that. However, it can be quite extreme.

So, how does it work?

The underlying principle of FIRE is to be frugal and save as much as you can. In fact, it promotes the idea of saving up to 70% of your income yearly. The FIRE movement comes from the ‘Your Money or Your Life’ book which was published in 1992. Once you retire, you use the money from your accumulated funds through small withdrawals.

When you put 70% of your income into savings, you are planning way ahead. While this is not a guaranteed plan, it has got a good success rate. This is because it depends also on the living standards (that will rise in the years to come). Although the concept came out in the 90s, it started to gain a lot of traction in recent years as more Millennials have started taking on this movement.

You basically try to save up to 30 times your annual expenses and you know that is when you could quite and retire. That said, it amounts to about $1 million. And then, you should withdraw about 3-4% of your savings each year depending on your lifestyle. Do take note that there are other types of FIRE like Barista, Coast, Fat and Lean FIRE.

So, Is FIRE really for you?

Ultimately, you want to retire before 65 with enough to last you all the way. The objective is to reach an amount in your savings 30 times your expenses annually. So, does that work for you? In Malaysia, the FIRE model could work well for you mainly because our standards of living are not as high as neighbors like Singapore. If you can live within the means of 30% of your income including all expenses for the family, then it might work well for you taking into consideration the small amounts you can withdraw after you retire.

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