Is the FIRE Still Burning? Financial Independence/Retire Early Movement, Late-Pandemic Edition

The concept of FIRE—financial independence/retire early—has captured the imaginations of millions in the last few years. However, there are some concerns that FIRE might not be practical in a late-pandemic world.

Even though COVID-19 has provided setbacks to the FIRE movement, it still appears to be burning. FIRE continues to provide a backdrop for the dream of retiring well before age 60, and the pandemic has provided strong lessons in portfolio planning during tough times.

Financial Independence/Retire Early: Still a Goal

The FIRE movement is 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.”

Even if you have to put off that goal for a little bit due to unforeseen circumstances like a global pandemic, it’s still possible to stay on track. In the middle of the COVID-19 fear in 2020, the anonymous FIRE blogger “A Purple Life” wrote about hitting her FIRE number and moving forward with plans to retire. In 2021, she’s still retired and living her best life as travel begins to open up again.

Because just gathering money with the intent to sit around doing nothing isn’t the goal, many FIRE devotees plan ahead to help them weather ups and downs. Having a plan to get through the volatility while pursuing meaningful projects has helped many of those in the financial independence/retire early movement come out of 2020 intact. That’s why so many members of the FIRE community are entrepreneurs and investors. It provides them a way to escape the rat race while riding out the economic and health storms.

How to Retire Early and 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 the strategy. They also focus on developing multiple revenue streams by starting businesses or engaging in other activities with the potential to provide some type of passive income.

Even with concerns about a new COVID-19 variant weighing on the stock market, a recovery is still expected to come at some point. In the meantime, many of those participating in the FIRE movement are preparing to ride out the storm.

Here are a few tips that might help you on your journey to financial independence and early—or not-so-early—retirement:

• Know your numbers. Settle on a goal and understand what it takes to reach your target. An early retirement calculator can help you run the numbers and identify how much you should set aside based on your early retirement age.
• Learn about money. Seek out good financial advice and become educated about money and your relationship to it.
• Use a variety of investment vehicles. Look for low-fee and dividend-paying investments, as well as a mix of tax-advantaged and taxable investment accounts. Acknowledge that early retirement means you might need access to your portfolio before reaching age 59 ½.
• Manage your spending. Review your needs versus wants and consider adjusting your spending to focus on what matters to you and what will help you reach your goals. The experience of 2020 forced many people to reevaluate their spending and cut back on their wants to stay on track for FIRE.
• Consider a bucket strategy. Rather than keeping everything in stocks, consider protecting your portfolio by converting some of your immediately needed capital to cash. If you’re going to need the money in the next five years, consider keeping it liquid so you don’t have to sell stocks while they’re down.
• Avoid high-interest debt. Paying that high interest can eat into your real returns and reduce your ability to reach your FIRE goals. By getting rid of as much debt as possible before disaster strikes, you’re better prepared for the next catastrophe.
• Look for income outside traditional employment. Massive layoffs during the pandemic showed many people that a traditional job isn’t as secure as they’d like to believe. Developing different streams of income can be a way to shore up your finances—and help you stay on track—when the unexpected happens.
• Be ready to pivot. In some cases, you have to be ready to make tweaks to your portfolio or your plan. Maybe you put off retirement for another couple years to better prepare your income and portfolio. Perhaps you change your asset allocation to better match your new risk tolerance. No matter the situation, a little flexibility is helpful.

Bottom Line on FIRE

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.