Want to Retire Younger? Try the New FatFIRE Method

Followers of the Financial Independence, Retire Early (FIRE) movement are people who wish to retire before the usual retirement age. Rather than retiring in their mid-60s and beginning to collect Social Security, they seek ways to save enough money to retire early and then live off the proceeds of their assets.

The FatFIRE movement is a variant of the FIRE movement and involves higher retirement savings and income levels than FIRE. To comprehend how FatFIRE operates, it may be useful to know the following:

  • How Much Money Do You Need to Achieve FatFIRE?
  • Advantages of FatFIRE.
  • Negatives of FatFIRE
  • Considerations before beginning FatFIRE.

What exactly is FatFIRE?

While the FIRE idea traditionally emphasizes frugality, FatFIRE encourages excess. “FatFIRE,” explains Levon Galstyan, a certified public accountant with Oak View Law Group in Glendale, California, is an early retirement program for people who earn a lot of money but do not completely give up creature comforts. The objective is to have sufficient finances to enjoy independence and flexibility upon early retirement.

How Much Money Do You Need to Achieve FatFIRE?

Depending on your income and choices, the precise amount you save for retirement and utilize to fund your lifestyle will be determined by the amount you accumulate in a nest egg. Samantha Hawrylack, co-owner of the site How to FIRE in Glenmoore, Pennsylvania, explains, Once you know your number, you can construct a schedule for making FatFIRE a reality. As a general guideline, if you want to reach FatFIRE, you should attempt to save at least 50 percent of your income.

Many individuals establish a savings goal of $2.5 million for FatFIRE and then take 3% or 4% per year from their investments. If you have $2.5 million in savings and withdraw 4% annually, your yearly income will be $100,000. Some FatFIRE followers decide they want to live on a higher salary and save more money. David Hampshere, the proprietor of Purple Egg Real Estate in Niceville, Florida, advises you should save at least $5 million to live comfortably off the interest. Hampshere is a member of the FatFIRE social community.

Advantages of FatFIRE

Perhaps the greatest benefit of FatFIRE is financial independence from the need to work. Galstyan states your living level may be higher than it is now. This is especially true if you are attempting to save as much money as possible while living on less. You may be able to dine out more frequently or explore new interests after retirement. You will also have the luxury of leisure to organize your days as you see appropriate. You may choose to spend more time with family and friends, or you could volunteer at a local charity.

Additional benefits attract workers to the FatFIRE movement. Some individuals may seek a method to fund a vacation lifestyle or assist with child-rearing costs. Others may be interested in acquiring luxury items, retiring with a large property or many properties, or residing in a place with a high cost of living. If there are family members to support, such as an elderly relative who resides with the family, the FatFIRE idea may also be attractive.

Negatives of FatFIRE

Although future benefits can accumulate, it may be difficult to save the necessary amount. In addition to laying aside millions of dollars, time must also be considered. FatFIRE might take twenty years or more, Galstyan warns. If unforeseen circumstances arise, you may be forced to alter your plans and utilize your resources to pay for short-term needs.

After retirement, you may discover that maintaining your lifestyle costs more than anticipated. You may be in difficult circumstances, especially if family members or acquaintances need financial assistance. Some individuals miss the social relationships that come with employment, and it can be challenging to find a new career and engage in meaningful activities.

Considerations Before Beginning FatFIRE

Considering your long-term objectives and retirement plans will help you decide if FatFIRE is ideal for you. If you prefer being with coworkers and having a schedule, you may find it challenging to face days with no obligations following early retirement. It may be difficult to connect with friends who are still working or organize activities with constantly employed coworkers.

If you determine that financial independence is essential, you may be motivated to examine your present wages and savings. You must ensure that you are maximizing your revenue potential, adds Hawrylack. This entails developing your talents and earning potential and making prudent financial decisions that enable you to save the most money feasible. Then, you can create a plan to follow and assess your FatFIRE approach annually to ensure it continues to accomplish your objectives.