Australians warned about FIRE trend that helps people retire earlier: ‘Spiral out of control’

A financial adviser has warned of a retirement trend that could do more harm than good if you're not on top of it. The Financially Independent Retire Early (FIRE) movement has been around for a few years and promotes the idea of ​​quitting your full-time job before the typical retirement age of 65.

To get to that point, however, you'll need to have a lot of money saved from investments or real estate that will go in addition to your retirement savings. While the idea of ​​retiring in your 40s, 50s or early 60s sounds idyllic to some, Josh Lee, financial advisor at Link Wealth Group, said: Yahoo Finance There is a trap that people can easily fall into.

“What do you actually do with your time?” he said.

RELATED

“Where do you get your happiness from? Where does your energy go? Where does your passion go? Because that's what the whole FIRE movement is about. You retire early. But then you ask yourself: And then what?

“I think that's probably the part that a lot of people miss in the whole equation.”

You must have a plan for all the free time

He said that clients in their twenties and thirties who come to him and talk about their desire to retire early usually don't know what they will do with all that free time.

Current data shows that a single person in Australia needs at least $52,085 per year to enjoy a comfortable retirement. For a person in a relationship, this amount rises to $73,337.

Lee explained that without a well-thought-out plan for retirement, especially if it begins well before age 65, you may end up spending all your money sooner because you spend it unwisely.

“You can only sit on the beach and drink cocktails for a limited time,” he said.

The story continues

“You will probably lose yourself, you will lose your mind, your health will spiral out of control and then you will probably die early.”

Is all the effort worth it when you push FIRE to its limits?

Lee highlighted a “rare” element of the FIRE trend that he advises against.

Some who jump on the bandwagon put every penny they earn into investments, believing that their few hundred dollars will turn into millions over the course of a few decades through compound interest.

These people may live incredibly frugally during their working lives so that they can finally relax and afford all the nice things in early retirement.

While this may be an option for some people, the financial advisor had reservations about this mentality.

“If you go into FIRE mode and spend as little as possible and save as much as possible, and you have to do that for 15 or 20 years to get to your FIRE score, I think a lot of things can go wrong along the way,” he said Yahoo Finance.

He said he would advise his clients to think about how they could earn as much as possible now and create a little more balance in their lives, rather than living at the bare minimum.

Pilot Pablo Ripa has adopted the FIRE mentality and hopes to retire in his mid-50s. He invests 10 to 15 percent of his salary in his stock portfolio, and while this was a big expense at first, it has now become second nature.

“We just don't even think about it,” he said to Yahoo Finance. “Of course, in some months when we get paid more, I increase the amount a little or something, but that's the amount and I don't think about it.”

FIRE can be done gradually if you need

The Link Wealth Group advisor explained that you don't have to give up your career completely if you want to retire early.

He suggested that those who do not yet have a plan for their retirement should first consider switching from full-time to part-time work to ensure their week still has some structure.

This way, you will still earn some money, but you will have more free time to enjoy the things you enjoy.

Then, if you want even more time left, you can pull the trigger and enjoy your retirement to the fullest, he said.

“I see many customers who [retirement]he said Yahoo Finance“So it’s not a hard end at a certain age, but rather a transition into it.”

Get the latest Yahoo Finance news – follow us on on facebook., LinkedIn And Instagram.