Monday, April 1, 2019

Freedom with ‘Fire’: Living simply, saving heavily to retire young

By Richard Hartung

30 March, 2019

Having the option of retiring in your 30s or 40s sounds really attractive for many people.

“Fire”, short for “financial independence, retire early” is a growing movement that started in the United States. Its followers tend to be millennials who choose that goal in a bid to free themselves from what they see as a prolonged and unsustainable work life that takes its toll on them.

It’s not easy, though, so it may not be as enticing as it seems.

People who embrace the Fire philosophy aim to achieve financial independence at an early age so that they can quit their job whenever they want.

The reasons people flout conventional career norms and accumulate savings at high rates range from dissatisfaction with unfulfilling work to the decline of traditional social safety nets to a desire for more economic security, The Wall Street Journal reported.

While Fire adherents are often millennials and younger Gen-Xers who have college degrees as well as above-average incomes, anyone with the discipline to adopt a strict do-it-yourself approach to retirement can strive for financial independence.

A hallmark of the Fire movement is to live frugally, insurer AIA Singapore said, so as to save more when you are young and lead a low-maintenance lifestyle when you retire.

Fire adherents usually live below their means, make very personal spending decisions and invest their savings to grow their funds so that they can retire when they want.

The exact age to achieve Fire varies, however, because it is highly dependent on your financial background, the amount you earn, how much you save and the amount required to sustain your desired lifestyle.

Success stories about people in the Fire community having been able to retire in their 30s or 40s abound.

[Example in this video:

She didn't really start out to FIRE, but she had the habits of FIRE.]


Before starting towards Fire, it’s important to understand your goals for financial independence and whether you’re willing to make the lifestyle changes to achieve them.

Financial independence may mean not having to work at all, for example, or it may mean continuing to work with the option of opting out whenever you want.

Indeed, some people who achieved Fire are still working. However, they have the flexibility to consider other types of jobs and the freedom to pursue their passions.


If you decide Fire is what you want, the first step is to calculate how much you’ll need to reach financial independence. That amount can vary widely depending on your lifestyle and life expectancy.

As a simple example, the Aviva Singapore retirement calculator shows that a 28-year-old who wants to retire by the age of 40 and live a simple lifestyle — such as taking the bus and eating in food courts while shopping in mid-range stores and travelling occasionally — would need about S$3,042 a month.

To retire at 40, the calculator shows, you would need about S$736,000 in savings that earn 4 per cent a year to continue to have that monthly amount until you’re 80.

A simpler lifestyle, a higher return on your savings or other factors could change the amount you need.

[Here's an illustration:

However, a lot of advisers seem to assume rather generous rate of returns. The article assumes a 4% return, and the video calculations are based on 7.5%. I'm not familiar with investment, but I think 7.5% is rather optimistic. But hey, I may be wrong. You may know how to get an average of 7.5% returns in the long term.]


Next, you’ll probably need to change your lifestyle so you can accumulate enough money. That shift will likely require sacrifices, frugality and avoiding consumerism, which are at the heart of Fire.

Mr Bob Dockendorff, vice-president of financial advisory firm Claro Advisors, told US News: “Extreme saving and cutting costs go hand-in-hand to achieve Fire.

“The Fire community strives to save 40 to 60 per cent of their income. With saving apps, shared housing platforms, frugality websites and more, there’s no excuse for living extravagantly.”

There are a variety of resources with insights about how to make that change, including blogs and books.

One of the bibles of the Fire movement, published in 1992, is Your Money or Your Life, which explains how to reduce spending and value time over material gain.

Another is Playing with Fire by Scott Rieckens, which describes how to achieve the goal. One example is to write down 10 things that make you happy, then adjust your spending by cutting out things that don’t bring joy so that you can maximise your happiness rather than feeling deprived.


Finally, you’ll need to invest your savings wisely.

Your savings rate and investment returns will determine when you can retire.

People who want to retire early will need the compound long-term growth that investments provide, so they often invest aggressively and economically.

Stocks have performed better than many other investments, so investing in stocks or low-cost exchange-traded funds (ETFs) and index funds can lead to higher returns, albeit with higher risks.

Some people may also invest in real estate, by buying a property or purchasing shares in a real estate investment trust (Reit).

Once you reach your goal, you’ll have the option of retiring.


While the number of Fire adherents and the blogs or communities around Fire may be smaller in Singapore than in some other countries, there are individuals here who are working towards financial independence and you can find like-minded people.

If you’re thinking about joining them, it’s important to reflect on your goals as well as to learn by reading through the wealth of blogs and books available here and overseas.

If you still want the option of retiring early, consider taking the plunge and shifting towards a frugal lifestyle that will start you on your way.

[To FIRE in Singapore, you may have the added "advantage" (or burden) of CPF.

If you have built-up adequate CPF savings, your "retirement" may only need to cover the years up to 65, after which CPF Life payouts kick in and you can live off that or just supplement that.

Alternatively, you can ignore CPF Life, and plan solely on your savings. If you intend to retire early, you may not hit the CPF Life retirement sum anyway as your contributions would be truncated.]

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