People between the ages of 25 and 35 are trying to defy the typical career arc of adult life. They are spending as little as possible and saving almost everything. An article from the Wall Street Journal, “The New Retirement Plan: Save Almost Everything, Spend Virtually Nothing”, takes a close look at this current phenomena called FIRE (Financial Independence, Retire Early).
There are a couple things to note that define the millennial generation, while they are better educated than their parents and even their grandparents, they have less wealth then the recent past generations. They are behind in most economic dimensions. The generation that is entering retirement is not painting an encouraging retirement picture for them either. The majority of those entering retirement seem to be woefully underprepared and their 401(k) retirement funds, for the average 65-year-old couple, will bring in $8000 a year.
Buying discounted meat on its expiration date, brown bananas to freeze for smoothies, and only spending $75 a month, this tight budgeting for groceries is one way that the FIRE proponents are fast tracking their saving for retirement. While this may seem crazy, the goal is to retire as early as possible. Work is not as fulfilling as these 25-35 year olds wish it would be and they prefer to launch into retired life early in hopes of finding fulfilment. The other reasoning is looking for more economic stability due to the decline of traditional social safety nets. It is important to note that those who are able to participate in this phenomenon are typically college graduates who have higher than average incomes and are strict do-it-yourselfers. It is doable to save and cut costs drastically, but there are variables that if left unaccounted or not properly planned for that can disrupt retirement life for these young people.
Early retirement can be risky since the market can have unpredictable turns. Many early retirees rely on bonds, stocks, or real estate for income and paying living expenses. Retiring early requires people to forecast living costs for decades, if forecasting for about 20 years seems stressful, try 30 or 40 years or more depending on how early you try to retire.
For single people who are retiring early, or for those who retire before their spouse, are finding it to be lonely, or that working is more fulfilling than spending time by themselves. Others find it awkward to be retired before the rest of the people in their age group.
Trying to retire as early as FIRE participants can also lead to strain and obsessing over being frugal. Spending $5 more on meal can be painful if every dollar counts.
While this option of retiring before the traditional retirement age can be appealing, there are many benefits to waiting, and there are other paths to take concerning your working years than a traditional route. Working with an estate planning attorney and financial advisor can help you figure the goals for meeting your retirement needs and come up with a doable saving arc that isn’t going to make you overstress. It is also important to remember you are not tied to working one job; you can find one that is fulfilling and work multiple jobs. The working years can seem long, but there are many routes you can take while remaining in the workforce. The added benefit is more interaction that is social and more ways to contribute to society either through having more money that you can donate or through spending more time working with nonprofits. Working can bring more flexibility in some ways if you come up with a plan that works for you.
To learn more about how you can start planning and saving for your retirement early, visit our website today to schedule your consultation! Now is the time to begin planning for retirement so you can save without stress and enter a comfortable retirement in the future!
Reference: The Wall Street Journal (November 3, 2018), “The New Retirement Plan: Save Almost Everything, Spend Virtually Nothing”