F.I.R.E. stands for “Financial Independence, Retire Early.” The goal is to save and invest very aggressively so you can retire sometime in your 30s or 40s. Devotees of the movement are now likely rethinking their plans in the wake of the coronavirus pandemic.
Coronavirus has hit the economy hard, with mandated closures of “nonessential” businesses and record numbers of Americans filing for unemployment. According to several followers of the FIRE. (Financial Independence, Retire Early) Movement, financial independence might just take more time than expected.
FIRE Movement Fundamentals
Arising out of the 2008 financial crisis, the FIRE movement has caught the attention of many, from Gen Xers to millennials.
The premise of FIRE is that by slashing expenses and saving and investing a very high percentage of their income, these individuals can achieve financial independence and be able to retire at a much younger age. This might be as much as 70% of more of their annual income that goes toward saving for retirement. While the standard age in which most people start thinking about retiring is in their mid-sixties, people who strive for FIRE retire much earlier than this, usually in their 40s, 30s, and sometimes even in their 20s.
The Effect on FIRE from COVID-19
The coronavirus pandemic has certainly put in a speed bump for more than a few members of the FIRE movement.
The best way to address the risk of retiring early is to over-prepare and create a conservative plan based on reliable numbers. If during the pandemic you crunch the numbers and realize you’re in financial trouble, you need to take action.
There are some options that might help to get you back on track; Reevaluating your current portfolio and retirement income strategy with a retirement income expert, and even making the decision to delay your retirement are good places to start.
Until the financial markets recover – and they will – it may be necessary to develop alternative cash flows to supplement lower investment income. Your financial advisor will help make sure your plan is airtight and that you’re OK retiring with the amount of money that you have. But it’s also vital to remember that that the markets go up and down, and be willing to be flexible when it comes a retirement budget.
This new arrangement doesn’t have to be forever either. You can work through the crisis phase, then go back to early retirement when things calm down.
Getting the Help You Need
As history has proven many times over, good times are followed by bad times, which are followed by good times, and still more bad times. If you’re a member of the FIRE community, you’ll need strategies to deal with both.
After all, no one ever said life was easy – even when you achieve financial independence or early retirement.
Part of the job of a trusted financial advisor is focusing on helping clients achieve financial independence and to accumulate a sufficient amount of resources to fund the retirement lifestyle they desire. If you’re plans to retire early have been affected by COVID-19, reach out to the retirement income experts at CKS Summit Group. We design custom portfolios to protect during uncertainty and perform during prosperity – and we’ll advise you on your best course of action to get you back on track.
Despite these challenges, this recession won’t end the FIRE movement, but it will force it to change. Having a long-term plan will ultimately put you in a better financial position to weather rough economic times.