8 retirement planning tips everyone can learn from the FIRE movement

More than 39% of Americans Want to retire before 63According to a recent GOBankingRates survey of 997 adults. Early retirement isn’t a modern fad – it’s the main goal behind the FIRE (Financial Independence, Early Retirement) movement.

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Many FIRE followers seek to save about 30 times their annual expenses so they can retire in their 40s or 50s. Then in retirement, they can withdraw small portions of their savings to cover normal living expenses.

But what if you’re not planning to retire early, how can the FIRE movement help you? Here are several FIRE principles you can still follow, according to financial experts. Woman putting money in a savings bank

Save as much of your income as possible

The more you save and invest now, the more financial comfort you will feel in retirement. Henry Gibson Garcia, Financial Adviser with Planning and workingHe said he’s seen some people in the FIRE movement invest up to 75% of their income so they can retire early — although he typically recommends saving only up to 50%.

“Having a limit reduces the likelihood of burnout and increases the likelihood of success,” he said.

If saving 50% of your income isn’t possible, start with a lower number and work higher, said Teresa Arrigo, financial advisor at GenWealth Financial Advisors.

Even saving 10%-15% of your income for retirement can go a long way if you do it consistently, especially if you’re not planning to retire early. Putting that savings into a retirement plan — such as a traditional Roth IRA or an employer-sponsored 401(k) plan — will also allow your money to grow over time.

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Get out of debt as quickly as possible

For those planning early retirement, Arrigo said, eliminating debt is a top priority. After all, the faster you pay off your debt, the less you’ll pay in long-term interest.

Saving an extra percentage of your income to pay off student loans, mortgages, car loans, and credit card debt early can free you from saving — or simply enjoying — even more of your income in the future. A shot of a young man checking his finances at home.

Live without your means

Arrigo said the only way to save and pay off debt is to live below your means, which requires discipline and diligence.

To cut costs, many FIRE followers choose to eat at home rather than eat out regularly. You can also shop in bulk, take advantage of discounts and coupons, and buy clothes and shoes from second-hand stores. 401k savings piggy bank

Maximizing an Employer’s 401(k) Matching Plan

If you have an employer plan, be sure to maximize your available match.

“Every time you get a raise, increase your contribution by 1-2% to increase those savings over time,” Arrigo said. A person uses a tablet computer to invest in stocks.

Invest in low cost mutual funds

Gibson Garcia said that trying to allocate time to the market is often a waste of time and money — especially when you factor in trading costs.

“Low-cost, efficient mutual funds require much less work – just set them up and let them go!” He said. A man reviews wallet assets on a tablet

Diversify your investments

Gibson-Garcia also recommends getting the right mix of stocks and bonds for maximum return. To find this balance, determine your level of risk tolerance and your needs in retirement. Also consider hiring a financial advisor who can help you find investments that work for you.

Budget planning concept, the accountant is to calculate the company's annual tax.

Take advantage of tax benefits

Gibson Garcia regularly encourages his clients to improve their taxes.

“Tax incompetent people leave money on the table every year,” he said.

One way to lower your tax bill is to increase your tax-deductible contributions to a health care plan like an FSA or HSA, a college fund like a 529 plan or a retirement plan like a traditional IRA or 401(k).

You can also hire a CPA to guide you through tax deductions that you can safely take. Rich retired golf

You have a vision for your retirement

Part of what motivates FIRE followers to spend less and save more is their dream of retiring early. Having a clear picture of what you want your retirement to look like can help you carry on when you’re feeling down.

Do you like to travel, take nice vacations, visit family frequently, volunteer, or live in a nice neighborhood? Let your vision of retirement motivate you to continue managing your money wisely.

“You can’t decide how much to save until you know how much or what income you will need,” Arrigo said. “So knowing what you want to do in retirement can help your counselor develop your plan.”

More from GOBankingRates

Methodology: GOBankingRates surveyed 997 Americans aged 18 and over from across the country between August 9 and August 11, 2022, asking sixteen different questions: (1) How much money do you currently save for retirement?; (2) How much money do you think you will need for retirement?; (3) Realistically, at what age do you want to retire? (4) At what age did you start saving for retirement? (5) What worries you financially about retirement? (select all that apply); (6) Are you planning to work in retirement? (7) What assets do you have in your retirement portfolio? (select all that apply); (8) How has the current inflation affected your retirement plans?; (9) How much of your retirement do you plan to fund through Social Security? (10) How do you feel about the future of Social Security in retirement? (11) What percentage of your salary are you currently investing for retirement? (12) Are you planning to move after retirement? (13) Where is your ideal place to retire? (14) What government programs do you plan to use in retirement? (select all that apply); (15) Do you have a pension? and (16) How much do you think the average American citizen has saved at the time of his retirement? GOBankingRates used the PureSpectrum survey platform to conduct the survey.

This article originally appeared GOBankingRates.com: 8 retirement planning tips everyone can learn from the FIRE movement

The opinions and opinions expressed here are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.

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