What is the F.I.R.E. retirement plan? Many people are starting to look at the newest trend of retirement. As a new generation enters the work force who don’t want to work away the best years of their life, early retirement is gaining popularity.
But what exactly is this new retirement trend? And is it for you? Let’s take a look…
What is the F.I.R.E. Retirement Plan?
The F.I.R.E. retirement plan stands for financial independence, early retirement. The idea came from the 1992 book “Your Money or Your Life” by Vicki Robin and Joe Dominguez. It’s supposed to give you the ability to retire before the traditional age of 65. For some, this could be in their 30’s. For others, it’s as early as their late 20s.
People no longer want to devote their entire lives to working and making a living. Instead, people who follow F.I.R.E. work to save up at least 50% of your income. Most aim for around 70%. Then, they usually start a new career path or hobby so they can spend time doing what they love instead of what makes the most money.
It’s a new way of thinking. And it’s not for everyone. But whether or not you choose to follow the F.I.R.E. retirement plan, there are some key ideas everyone can benefit from.
F.I.R.E. Movement: 4 Key Takeaways
Following the F.I.R.E movement involves going to the extreme. You need to save up an extreme amount of your income and often at the expense of current life quality. But you don’t need to F.I.R.E. your way to retirement to apply the idea to your life.
1. Think About Retirement
This might seem obvious to some people, but not everyone thinks ahead. In 2019, Northwestern Mutual conducted a Planning & Progress Study. It gave some insightful data:
15% of Americans have no retirement saving at all
17% of respondents have between $1 and $74,999 for retirement, far less than the recommended $1 million.
10% of respondents think they have enough money for retirement
45% of respondents think they’ll run out of money in retirement
41% of respondents admit they haven’t done anything to fix their retirement problems
There are many great ways to save for retirement. The first is to contribute to your 401k. A 401k is an employer-sponsored retirement plan. It offers a tax-advantaged savings account. And most employers offer contribution matching up to a certain amount. That’s free money!
Another option is an IRA. There are traditional IRAs and Roth IRAs. With a traditional IRA, your contributions are tax-deductible. But when you withdraw from the account in your retirement, you have to pay taxes on the amount you take.
With a Roth IRA, your contributions aren’t tax deductible. On the other hand, when you withdraw money from the account, it’s tax-free. Why? Because the money you put in was after taxes, which means you already paid what you owe to Uncle Sam.
However, there are contribution rules. To learn more about IRA accounts, check out our article, “What Is an …read more
Source:: Investment You