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Retirement

The Big Cost to Your Retirement from Small Annual Fees

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

People like to think of retirement as the time when you get to enjoy a well-deserved rest, but let’s not forget that retirement is also a race between finances and life expectancy. In this high-stakes dash, small investment fees can snowball into budget-devouring amounts over the course of decades.

Take the seemingly insignificant fee charged by the companies that create and manage retirement funds, the so-called expense ratio. A new study from MagnifyMoney reveals how small differences in expense ratios can cost retirees tens of thousands of dollars over the lifetime of their investment, a warning millennials and anyone else who is starting their retirement journey should heed when choosing investments.

In a recent Fidelity survey, 74% of respondents underestimated how much they should save for retirement compared with what financial professionals suggest. This is just one more reason why paying attention to seemingly small fees is a big deal.

Tiny differences in fees have outsized impacts on your savings

To illustrate how much of your retirement savings can be consumed by seemingly small investment and brokerage fees, MagnifyMoney crunched the numbers on two different hypothetical fund investments. The amount invested and the rate of return on both funds was assumed to be the same — the only variable was the expense ratio, which reflects the different management fees for each fund.

In our exercise, one hypothetical fund charges a low annual fee of 0.02% of the total investment balance ($10,000 annual contribution over 25 years), while the other commands an annual fee of 0.99%. While the difference between the fees charged may appear insignificant, the gulf between earnings after 25 years was vast — the fund charging the 0.99% annual fee earned a total of $759,018, while the fund with the 0.02% fee earned $891,142. That’s a difference of $132,124, or approximately 17% of the total earnings on the high-fee fund.

How compounding expenses eat into your returns

Why the yawning disparity between the two earnings totals after 25 years? You might expect the difference in earnings to mirror the gap in the expense ratios, which is 97 basis points.

The answer lies with compounding expenses and opportunity cost. Let’s say you invest $10,000 into a mutual fund with an annual return of 9.0% and an annual expense ratio of 0.99%. After the first year, your investment would generate a return of $900 (0.09 x 10,000 = 900). You now have $10,900, but remember you have to pay the expense ratio. In this case, you have to subtract $107.91 from your $10,900 (.0099 x 10,900 = 107.91) which leaves you with $10,792.09 invested in the fund.

If you leave that money untouched for another year, it would generate a return of $971.29 (0.09 x 10,792.09 = 971.29) and give you a total of $11,763.38. Subtract your 0.99% expense ratio and that leaves you with $11,646.92.

Now imagine you had invested that $10,000 in a different fund that also has a 9.0% annual return but no expense ratio. You still have $10,900 at the end of the first year, but this time you don’t have to take out the 0.99% to pay the fund’s expenses. That means your second year, you are earning a 9.0% return on $10,900 (as opposed to $10,792.09), which gives you $11,881.

Note the difference in earnings between the two funds. It’s not huge after just two years, but the compounding effect over a 25-year period explains the difference in the two hypothetical situations outlined in the section above. Compounding expenses are the reverse of the compound interest effect, by which reinvesting the earnings from savings earns you more and more money reinvesting the earnings from savings earns you more and more money. A compounding fee takes a bigger and bigger bite out of your investment over time.

Real world examples: funds tracking the S&P 500

The impact that even a slight difference in a fund’s expense ratio can have on retirement savings isn’t limited to hypotheticals. MagnifyMoney’s study also looked at what would happen if a saver invested $10,000 every year for almost 25 years, from 1994 until 2018, in two of the most popular index-based funds, the Vanguard S&P 500 Index fund (VFINX) and the SPDR S&P 500 exchange traded fund (SPY). For simplicity’s sake, the chart below shows the final four years of our hypothetical investment.

Looking at the historical data, investors in the Vanguard index fund would have approximately $784,300 by the end of 2018, while investors in the SPDR ETF would have about $785,100. If you bought the S&P 500 index (a very challenging proposition for a retail investor, which is why funds like the VFINX and SPY exist in the first place), that same investor would net roughly $798,300, indicating the low expense ratio of the VFINX and SPY funds would only cost investors around $13,000 after 25 years.

Keep in mind, expense ratios have been falling over time. The Investment Company Institute (ICI), an association of investment professionals, recently released a report showing the average expense ratio has declined from 0.99% in 1997 to 0.55% today. That doesn’t mean you can’t find yourself in trouble if you don’t pay attention to a fund’s expense ratio, but it does indicate these costs are shrinking as time marches on.

Should you always avoid funds with high expense ratios?

Your investment strategy needs to reflect your individual goals and willingness to accept risk, but is there any reason to place your hard-earned money in a fund with a high expense ratio?

“In general, you should pick the lower-fee product if you are comparing two investment products that will give you similar asset exposure,” said Josh Rowe, LendingTree’s manager of investments (MagnifyMoney is owned by LendingTree). “The higher the expense ratio, the more ground a mutual fund manager will need to make up to obtain the same return versus a fund with lower expenses, which means that the mutual fund manager will also have to take on additional risk.”

If you’re working with a personal financial advisor, it’s simply a matter of making clear to them that finding funds with low expense ratios are a priority. However, if you are investing on your own, Rowe has some advice on how to find funds with lower expense ratios.

Take a look at the ETFs robo-advisors use by finding that list on the company’s website. “Many robo-advisors actually provide a detailed list of the ETFs that they invest in, often in the ‘White Paper’ section of their website explaining how the robo-advisor works,” said Rowe.

Examine the expense ratios of those funds and, if they’re low enough to your liking, you can buy the ETFs yourself through a self-directed broker and avoid the robo-advisor fee, which is often around 0.25% of your invested balance annually — and robo-advisors charge this fee in addition to an expense ratio. You can also do the same with larger brokers, many of which have lists and screening tools that allow you to only look at low expense ratio funds.

While the importance of a fund’s expense ratio shouldn’t be underestimated, you also need to keep in mind it doesn’t represent the totality of fees you pay for that fund. For example, if you are investing in a fund through a 401(k) or a similar type of employer-sponsored retirement plan, there’s a separate fee negotiated between the employer and the plan providers (the company that actually manages the investments constituting the retirement plan).

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Retirement

The Best Cities for a FIRE Early Retirement

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Any discussion of retirement comes with more baggage than a Kardashian on vacation. For some, it means relaxing days on the beach; for others, it’s all about the grandchildren. But whatever your plans, deciding where to retire is a huge decision with major ramifications for how much you need to save and how much you’ll have to spend.

The question of where to retire is even more central for people pursuing FIRE, an acronym standing for “financially independent, retire early.” The FIRE approach to retirement has become popular among many younger, millennial savers in recent years. In a nutshell, practitioners of FIRE aim to retire as early as they can, but only once they have achieved a level of financial independence that would free them from conventional employment. The core strategy for building a nest egg that would allow one to retire early is to adopt extremely frugal saving and spending habits.

Successful FIRE retirees anticipate supporting themselves with savings and investments for 30 or 40 years — or even longer, depending on how early they drop out of the workforce. With FIRE, it’s vitally important to choose a place to live that’s affordable enough to sustain financial independence for several decades. However, just because a community is affordable doesn’t mean it’s necessarily a place you would want to spend several decades.

To find the best communities in the United States for affordable living and a great quality of life, MagnifyMoney has assembled data on 171 cities and towns, and ranked them based on how appealing they may be for FIRE early retirees.

Key Findings

  • Southern hospitality is real: Maybe it’s the rivers of sweet tea or the prolific use of “y’all,” but 17 out of the 20 best cities for a FIRE early retirement can be found south of the Mason-Dixon line, including the whole of the top 10. In our analysis, the cities of Naples, Fla., Charleston, S.C., and Port St. Lucie, Fla. rank as the top three best cities for FIRE retirees. An affordable cost of living and generally pleasant weather were major factors in determining a place’s quality of life, and both are pretty common in the South.
  • The Northeast isn’t a great option: Our analysis shows that the Northeast is home to the least-hospitable communities for FIRE retirees. New York City, for example, may be a mecca for finance and the arts, but the prohibitive cost of living makes the Big Apple poison for FIRE retirees.
  • Bigger isn’t better: Small town America has a lot to offer, especially to financially independent early retirees looking for a place to settle down for the long haul. The top 20 communities in our study almost all have populations of less than 1 million — even the city of Seattle has less than 750,000 people — thanks to a more affordable cost of living and a better quality of life in smaller cities.
  • Settle for Seattle: If your want to enjoy a FIRE early retirement without passing up big-city life, make your way to the Emerald City. As mentioned, it’s the only large city on our top 20 list, and the only location with more than one professional sports team.

Which are the best cities in America for FIRE early retirement?

As you can see from the map below, the communities we looked at in our study range from sea to shining sea. Click the bar at the bottom of the map to filter the communities by ranking and you’ll find the top-ranked communities to mostly be in the South.

Because the best city in the Midwest doesn’t even crack the overall top 20, it’s helpful to refer to the tables below listing the 20 highest-ranking (and the 20 lowest-ranking cities) that were included in our study of best communities for financially independent people seeking early retirement, which break down the cost of living and quality of life score by city. True FIRE devotees may decide a locale’s low cost of living outweighs a weak quality of life score.

The lowest cost of living: Sebring, Fla.

This small central Florida town provides financially independent early retirees giant savings, thanks to its impressively low cost of living. They can enjoy the Florida sunshine and numerous nearby golf courses while benefiting from a cost of living that’s about 17% to 18% below the national average — meaning $40,000 is worth roughly $50,000. Combine that with the town’s median home value of $134,600 and the Sunshine State’s lack of an income tax, and you can see why your money could go further in Sebring.

The best quality of life: Santa Rosa, Calif.

If money isn’t a limiting factor in your decision of where to retire, than you can’t do much better than this northern California town. The approximately 175,000 residents of this town report the fourth-highest satisfaction with their physical fitness, according to Gallup polling, and the pleasant summers and mild winters of this community make it a slice of paradise. But paradise comes with a price, in this case a high cost of living (21% over the national average) and a median home value of $578,700.

Regional champions

While the numbers don’t lie, we understand there could be reasons someone might prefer another region than the South. To accommodate geographic preferences, we’ve reviewed the best and worst community in each of the country’s four major census regions for people who want to be financially independent and retire early.

The Northeast

Best: Barnstable, Mass.

Barnstable, Mass. was the only town from the Northeast to break the top 20 overall. Notably, the cost of real estate isn’t exactly cheap — Barnstable’s median home value stands at $383,400. Still, health care is less expensive than the national average, with the cheapest Affordable Care Act Silver plan monthly premium (our standard for measuring a state’s healthcare costs) at $323, compared to the average of $452.

Where Barnstable really shines is with how satisfied its residents are. In the Gallup poll’s State of American Well-Being report, Barnstable ranked first in the nation in terms of community and residents’ sense of enjoyment, safety and pride.

Sounds like the kind of place you might want to spend your early retirement.

Worst: New York City, NY

President Gerald Ford may not have literally told the Big Apple to drop dead, but FIRE retirees probably should. As you might expect, New York ranks dead last in not only the Northeast, but in the entire nation for high cost of living. Perhaps more surprisingly for folks whose ideas of life in NYC may have been molded by binge-watching Friends, the city ranks rather low in our quality of life metric, as well.

The Midwest

Best: Grand Rapids, Mich

This Midwestern gem ranks as the region’s most desirable place for FIRE early retirement, thanks largely to its affordable cost of living and pretty good quality of life. Healthcare is fairly inexpensive in Michigan, with the average monthly premium of the cheapest ACA Silver plan at $367 versus the national average of $452.

The purchasing power of a Grand Rapids resident is also greater than the national average: An income of $40,000 actually has the purchasing power of $42,780, a difference that adds up over the years. The median value of a home in Grand Rapids is $159,700, well below the national average of $226,300.

All-in-all, it adds up to a good deal for FIRE retirees looking to stretch their savings as much as possible.

Worst: Chicago, Ill

The Windy City will quickly extinguish the savings of FIRE retirees. Illinois collects $1,237 per capita in state and local income taxes — the 13th highest amount in the nation — and out of 183 locations, Chicago itself ranks 110 in the social realm and 146 in terms of community, according to Gallup’s State of American Well Being report. Also, have you ever been there in winter? Brrr.

The South

Best: Naples, Fla.

According to our research, the top-ranked community in both the South and the entire nation is Naples, Fla. While healthcare costs a little more in Florida than the rest of the nation — the benchmark ACA Silver plan monthly premium costs $461 versus $452 national average — the lack of an income tax is a big boon to FIRE retirees who may still be earning supplemental revenue.

Living in Naples may cost a little more than the national average, but the happiness of its residents is through the roof. The community ranks either number one or two in all five categories of community well-being as measured by the Gallup poll’s State of American Well-Being, and has topped the report’s overall list for the third year in a row.

Worst: Washington, D.C.

No matter where you fall on the political spectrum, you probably think there’s plenty wrong with our nation’s capital — and you’re right, at least as far as a FIRE early retirement goes. The median value of a home in D.C. is $579,200 and the cost of living in general is 19% more than the national average, which would eat away at retirement savings.

The West

Best: Visalia, Calif.

Let’s be upfront about the cost of living in California — you’re going to be paying lots of taxes for your residency in the Golden State. California collects $1,991 per capita in state and local taxes — the fifth-highest rate in the nation — and levies a sales tax of 8.55%. However, healthcare is cheaper than the national average ($407 vs. $452 when comparing our benchmark plans) and the cost of living in Visalia is 5.4% cheaper than the average cost of living in the country.

People living in Visalia seem satisfied with their hometown — the Gallup poll ranks the community as the third-happiest in the nation when it comes to having supportive people and meaningful relationships in their lives. That’s a heartening statistic when you consider they could be your neighbors for several decades.

Worst: Denver, Colo.

Rocky Mountain highs may appeal to many, but not if you’re thinking of settling down for an affordable FIRE early retirement. Denver boasts a cost of living higher than some of its residents — an income of $40,000 only goes as far as about $37,700, while the median house value of $427,300.

Savings tips for a FIRE early retirement

Before you call the movers and retire early, you’ll have to achieve financial independence under the FIRE approach to saving. Here are some tips on how to meet your savings goal and get on with enjoying life after work while you’re still in your prime.

  • Know where the finish line is: In order to make intelligent financial decisions about retirement, you need to decide how much to save in total. While many people planning for traditional or even early retirement set a goal of saving 25 times their projected annual retirement expenses, FIRE savers usually aim for much more. With a FIRE early retirement, you’re aiming to support yourself for potentially decades longer than someone who retires in their mid to late 60s. If your nest egg runs out too soon, you could have difficulty finding a job in your later years.
  • Less is more: Depending on your earnings, amassing the savings required for a FIRE early retirement demands radically cutting costs and embracing a lifestyle that’s downright monastic. It’s not uncommon to read FIRE bloggers advocating saving rates of 20% to 50% of annual income in order to reach their goals. Pinching that many pennies means saying goodbye to luxuries like dining out, cable television, gym memberships and more.
  • Invest in success: Money saved through frugality alone won’t let you retire early if you park it in a typical savings account. Instead, achieving FIRE means carefully investing in the stock market, where your funds yield the returns necessary to fund decades of retirement. Because brokerage fees can wreak havoc on your returns, FIRE investors prefer low-fee index funds. In addition, any opportunity to build more streams of passive income — buying real estate and renting it out to tenants — warrants serious consideration.

Methodology

MagnifyMoney evaluated 171 communities in the United States to find the places most hospitable to financially independent early retirees who are utilizing different FIRE strategies. The two major criteria to determine which places were best were cost of living and quality of life.

Cost of living component measures:

  • Cost of living according to the Bureau of Economic Analysis, which takes into account regional price disparities for goods, services and real estate to measure the relative purchasing power in different communities.
  • The cost of healthcare premiums in the state where each city is located, as measured by the cheapest Silver plan available, according to the Kaiser Family Foundation.
  • State and local taxes, as measured by per capita tax burden and state and local sales taxes, according to The Tax Foundation.

Quality of Life component measures:

  • Community well-being, as residents reported via telephone interviews to the Gallup Organization in 2017. These results were compiled by Gallup in its State of American Well-Being report.
  • Pleasant weather, as measured by lack of temperature extremes. We looked at the average number of days per year temperatures do not exceed 90 or fall below 32 degrees Fahrenheit. Besides being pleasant, this helps minimize heating and cooling expenditures.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Retirement

Financial Independence, Retire Early: Should You Consider FIRE Retirement?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Nobody wants to spend their golden years working under McDonald’s golden arches. However, some savers aren’t content to wait for their golden years to put their feet up and stop working.

In recent years, a cohort of millennials and younger savers have adopted an approach to retirement savings called FIRE, an acronym that stands for financial independence, retire early. The FIRE retirement movement challenges its followers to view every financial decision they make through the lens of the question “does this bring me closer to or further from retirement?”

“One of the things that motivated me to become financially independent was watching one of my coworkers collapse and almost die at his desk,” said Kristy Shen, a FIRE blogger at the website Millenium Revolution. “I now realize that your health is not worth trading for money.”

By advocating a laser focus on retirement goals and building a nest egg early, FIRE asserts that workers can reclaim decades otherwise lost to status meetings and sad desk lunches by retiring for sooner than their 60s.

What is FIRE retirement and how does it let you retire in your 30s?

The goal of FIRE retirement is to make you financially independent — no paycheck, no boss — with sufficient assets saved to retire decades earlier than most Americans. While many of the FIRE movement’s practitioners talk about their lifestyle with the zeal of converts, there’s no official list of rules or tips you have to follow.

Read through the FIRE Reddit page or one of the many blogs detailing methods people have adopted to achieve FIRE and you’ll see that it’s easy to get lost in the minutiae of advice and warnings. But at the end of the day, FIRE retirement boils down to having the initiative to plan out how much money you need to retire at a target age of your choosing, and the discipline to build a nest egg by cutting costs and boosting income.

How much money do you need to retire early with FIRE?

Calculating how much money you need to save before you can leave the office forever can be difficult with a traditional retirement. It’s even tougher to plan for a FIRE retirement, given that retiring in your 30s would mean anticipating around 50 or more years of expenses. Add to that the fact that you can’t start collecting Social Security until 62, or withdraw money from an IRA account without a penalty before age 59 ½, and you begin to understand the daunting challenge facing anyone hoping to retire before middle age.

However, the basic questions you need to ask yourself for FIRE retirement and traditional retirement remain the same. Determine how much annual income you require to maintain your anticipated lifestyle in retirement by figuring out how much you’ll spend on everything from groceries to medical costs.

If you were aiming for a traditional retirement in your 60s, you would add up your estimated annual expenses and multiply this figure by 25, which would give you a good goal for the amount you need saved in a portfolio of stocks and bonds.

Why 25? In 1999, three economics professors from Trinity University in San Antonio conducted a study of the stock market and determined retirees should have a portfolio that large to allow them to withdrawal 4% the first year of retirement, and increase this amount each year to match inflation. Based on the historical returns offered by markets, retirees could live comfortably for at least 30 years with this strategy.

But if you retire at age 30, you won’t want to start looking for a job as a 60-year-old because your portfolio ran out of funds. FIRE practitioners set a goal of amassing far more than the 25 times their annual retirement expenses to help increase the odds they’ll remain financially independent for the long haul. “The 4% rule is still a valid foundation, but that doesn’t mean we’re just going to blindly follow it regardless of what happens,” said Steve Adcock, a FIRE blogger who runs the website ThinkSaveRetire.

Ultimately, the particulars of each person’s FIRE retirement plan will reflect both their means and saving priorities.

“Not everyone is going to be able to retire at 35,” said Adcock “But I do believe that early retirement is more achievable by more people than they [might] realize. The average retirement age is something like 62 or 65, so if you retire at 58, guess what? That’s early retirement.”

A few FIRE scenarios

To give an example showing how demanding attaining FIRE retirement can be, a person who estimates their annual retirement expense at $45,000 and who wants to save 30 times that amount would need to accumulate $1.35 million. Assuming this person started earning an income at age 21 (to be generous), they’d need to save approximately $71,000 every year to reach her target by age 40.

There are different methods used among FIRE practitioners. Some members of the FIRE community, such as blogger Mr. Money Mustache, stick to what’s known as “lean FIRE,” where annual expenses are kept below $40,000 a year. Others, such as the writer behind the blog Physician on Fire, practice “fat FIRE,” where frequent travel, meals out and other expenses total around $80,000 or more a year.

Type of retirementHow much you’ll spend a yearHow much you need saved
Lean FIRELess than $40,000$1 million or less
Fat FIRE$80,000 or moreAt least $2 million
Traditional $50,000*$1.25 million

*Number based on the latest data from the U.S. Bureau Statistics showing the average annual expense of households headed by those 65 years and older

A recent Harris Poll survey of FIRE advocates conducted at the behest of TD Ameritrade found 33% of respondents were targeting savings between $1 million to $2 million, reaching a middle ground between the amounts listed for the lean and fat versions of FIRE retirement. On the extremes, more people (37%) aimed for more than $2 million than those (31%) with more modest goals of below $1 million.

How is it possible to save so much money so quickly?

Given the ambitious goals of FIRE practitioners, unless you’re already pulling down a big paycheck, saving 15% of your income each year isn’t going to cut it. According to the FIRE blog FinancialSamurai, the ideal savings target is 50% of your annual income, although with the concession that anything more than 20% is acceptable.

Given that the median household income in America is $61,372, according to the latest government data, one may be able to understand why FIRE retirement has been criticized as an option only available to people who are already quite privileged.

But regardless of what income FIRE retirement hopefuls start with, saving the money they’d need to drop out of the workforce in their 30s or 40s means living well below their means. The ways in which they accomplish this may sound familiar to anyone who’s read a personal finance article about cutting costs.

These include:

  • Minimizing housing needs and expectations — housing is most people’s single largest expense, so securing a lower mortgage or rent can provide dramatic savings.
  • Biking instead of driving (when feasible) to save on fuel costs
  • Avoiding unnecessary fees of all kinds, such as monthly maintenance fees on checking accounts
  • Limiting or eliminating all spending on meals out
  • Unsubscribing from gym memberships, online services or other recurring entertainment costs you won’t absolutely need

Let’s take a closer look at housing, which accounts for more than 30% of all annual expenses for most Americans. People aggressively pursuing FIRE retirement will seek out low-cost housing in high cost-of-living areas. By sacrificing comfort, they reap the benefits of the higher salaries available in such areas. Once they’ve saved enough money to pull the trigger on early retirement, they move somewhere with a more affordable housing market in order to stretch their savings.

With FIRE retirement, the money you save isn’t just sitting in a bank account. Even the highest-yielding savings accounts won’t earn enough money to keep you solvent during your decades of retirement. Instead, most FIRE adherents funnel their cash into the stock market, particularly low-fee index funds. The idea is to place your money somewhere it can reliably grow without the cost of brokerage fees that cut into your retirement income.

Money from stocks and bonds usually make up the largest share of a FIRE adherent’s passive income — that is, any income they can collect without having to exert much effort or time. Since early retirement is funded by passive income, FIRE forums and blogs are filled with debates over the wisdom of investing in real estate, what specific funds in the stock market to target and other ways to earn passive income.

Don’t get burned by FIRE

Pursuing early retirement with FIRE requires a specific mindset: you must be willing to sacrifice significant amounts of discretionary spending in the short-term in order to help you save enough to become financially independent at an early age. Beyond possessing the fortitude to pass up on those kinds of opportunities, a FIRE lifestyle comes with nontrivial risks you need to think through.

Because you’re dropping out of the workforce during some or all of your prime earning years and trusting a huge part of your financial security to the stock market, you stand to lose a lot if the economy tanks or markets melt down. For example, what if a financial crisis causes rampant inflation, which would devour the value of your portfolio at a much higher rate than you accounted for? Can your portfolio survive a stock market crash? What if you develop a chronic illness or suffer some other health catastrophe during your 50-odd years of retirement that completely depletes your savings?

FIRE practitioners would respond that pursuing early retirement means embracing flexibility, and that any damage done to a nest egg can be countered with adjustments in lifestyle.

There’s also the risk of obsessing over your FIRE retirement goal so much that you lose sight of why you want so much free time in the first place.

According to Adcock, “people spend years and years trying to get to [financial independence], and the struggle is part of the appeal.” However, he added, “if there’s nothing else in your life that you’re going to continue to strive for,” he added, “then [achieving FIRE] is very underwhelming.”

The bottom line on FIRE retirement

The dream of retiring early remains a fantasy for millions of workers for a reason — it’s extremely difficult to achieve. However, difficult does not mean impossible. FIRE retirement works because the idea underpinning it — you can retire at any age you want, so long as you have the money — remains a solid one.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.