Ready, Aim, FIRE: Financial Independence, Retire Early?

The financial independence movement is picking up steam. But is a FIRE retirement just a buzzword? Here’s what you need to know.

https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Financial independence, retire early (FIRE) movement
5 min read

Key Takeaways

  • The financial independence, retire early movement is more about freedom than retirement
  • Investing may be key to financial independence 
  • You don’t necessarily have to practice extreme frugality to reach financial independence

In recent months, there’s been a lot of press around the concept of FIRE, which stands for “financial independence, retire early.” At first glance, you might assume the movement is all about pinching your pennies for several years, working overtime, and then scrimping after you quit the rat race.

But recent research conducted by The Harris Poll on behalf of TD Ameritrade offers a different narrative. For those actually participating in the financial independence/retire early movement, it’s about freedom, flexibility, and using your money as a tool to live the life you want.

“In these uncertain times, many people are seeking a future of freedom, especially when it comes to their finances,” says JJ Kinahan, chief market strategist at TD Ameritrade. “Some are turning to FIRE as a solution.”

More Financial Independence, Less Retire Early

According to the research, 75% of financially independent respondents were more interested in freedom than in retiring early.

“Financial independence to me means freedom, the freedom to do what I want to do, things that interest me, and have better balance in life,” says Gwen Merz, the founder of financial education website and podcast Fiery Millennials.

It’s less about exiting the workforce permanently and more about creating a lifestyle that allows you to do what you want, according to Carl Jensen, who founded the website 1500 Days to Freedom with his wife, Mindy. “Your goal should be to move on to something else,” he says. “The money in early retirement is just the tool that you use to move to that next phase of life.”

Many of those involved in the FIRE retirement community acknowledge that just gathering money with the intent to sit around doing nothing isn’t the goal. Instead, they want the independence to pursue meaningful work and accomplish projects that interest them. 

“A lot of people think retirement will solve all problems, but generally unhappy people are unhappy,” says Jeremy Jacobson, who reached financial independence and now chronicles his family’s adventures at Go Curry Cracker. “You need to have something you’re retiring to.”

No Need to Swipe Sugar Packets from the Coffee Shop

Among the biggest myths associated with the financial independence/retire early movement is that you have to scrimp and save, living at the subsistence level for several years before finally reaching your goal. In fact, 67% of FIRE participants said it wasn’t worth it if you have to live like you’re broke, and 40% said they wouldn’t limit travel or vacations.

One member of the FIRE community, who goes by the name “the Mad Fientist,” said his biggest mistake was not realizing sooner that he could still have fun. “Be careful not to cut everything fun, just so you can hit this goal sooner,” he says.

You also don’t need to scrimp in retirement if you’ve set up systems that allow you to maintain financial independence. That’s why so many members of the FIRE community are entrepreneurs and investors.

Habits of the financially independent

How to Be Financially Independent

If you’re hoping to reach financial independence in your own life, many members of the FIRE community suggest investing as part of their strategy. Indeed, more than 60% of financially independent respondents consider themselves investors, while only 27% of those who aren’t financially independent think of themselves as investors.

“The market is where my future is,” says Merz. “I’m optimistic it’s going to keep expanding, especially as we find new technology and new markets to invest in.”

In addition to beginning to invest at a younger age, some of the habits that promote financial independence include:

  • Getting financial advice and becoming educated about money and your relationship to it
  • Using a variety of investment vehicles, including a mix of taxable and tax-advantaged accounts
  • Looking for low-fee and dividend-paying investments
  • Avoiding high-interest debt
  • Only spending on what matters
  • Looking for income outside traditional employment

In the end, it’s about figuring out what matters to you and what you want your life to look like, and then using your money as a tool to make it happen. True financial independence means you get to spend your time—as well as your money—the way you want.

“A lot of times you’ll see where parents have to make trade-offs of, I need to make money, or I need to be a parent,” says Jacobson. “We didn’t have to make those trade-offs.”

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Key Takeaways

  • The financial independence, retire early movement is more about freedom than retirement
  • Investing may be key to financial independence 
  • You don’t necessarily have to practice extreme frugality to reach financial independence
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