#FIREbender
Lean FI/RE and Fat FI/RE 🔥
FI/RE = Financial Independence / Retire Early
Recap ⏪: If you're new... welcome. Check out the hashtag above for my previous posts. In this one, I did a breakdown on Barista Fi and Coast Fi ➡️ https://bit.ly/3p1cnPJ
———————————————
💵Lean FI/RE: When someone saves up enough in investments to retire early, with annual expenses less than the average American (which is $60,000/yr). Some who achieve lean FI/RE swing $30-$40k/yr.
💰Fat FI/RE: When someone saves up enough in investments to retire early, with enough to cover annual expenses more than the average American. (different sources say between $100-200,000/yr or more). Just because you achieve fat FI/RE doesn't mean you necessarily *have* to spend $100k/yr, you could spend less and just have the extra cushion.
———————————————
While I believe this movement can provide financial freedom and the safety net to protect yourself from the unknown... I'm going to do my best to not glamorize any of my content, so here are some pros and cons:
💵 Lean FI/RE takes less money to achieve, but it also provides less cushion. Many people could have fewer expenses when they choose to retire (mortgage paid, car paid, no debt, etc), and many people like me don't need a lot to be happy and to get by... but would this provide enough to cover insurance, health care expenses, a natural disaster, your kids' college, wedding, travel, etc?
💰Fat FI/RE provides you more money, more cushion for emergencies, and more freedom. You could spend money more luxuriously, and travel if you wanted. You could even live on a smaller budget and use your additional wealth to give back, donate, or provide for your family. On the downside, this will take a lot more money invested in the market than any other type of FI/RE. And to be honest, it's just not going to be possible for everyone.
———————————————
When you retire, there is a 4% rule that allows you to pull out 4% of your overall portfolio every year without losing money. Meaning when you retire early, you need 25x your annual expenses to never run out of money. But some argue that if you retire early, you might be more impacted by inflation. Leading some people to think you need 33x your annual expenses if you want to retire early.
I think the biggest misconception about the FI/RE movement though is that people retire early at 30 and stay retired. Most of the influencers you see traveling in their 30s still have some income from some form of entrepreneurship, whether that is monetization from social media, brand partners, and/or their own business. Or people retire early, get bored, and go back to some type of job.
———————————————
I personally believe that investing is a personal journey. So while retiring early may not be realistic for most people, it can be for some. But many people don't use the FI/RE movement with the goal to retire early but to have more freedom and a larger safety net.
I plan to make a follow-up post with some more specific obstacles and barriers to the FI/RE movement. As always, I think it's best to be informed of different perspectives so you can make the decisions that are best for you. What do you think?
"It is important to draw wisdom from many different places. If we only take it from one place, it becomes rigid and stale" - Uncle Iroh
17
0
