The Money Secrets of People Who Retire Early

If you’ve ever dreamed of quitting your job so you could travel, spend more time with your family or just live life on your own terms, you’re not alone. A recent survey found that only 14% of people want to wait until age 61 or older to retire, and 41% would like to retire before age 45. Early retirement—anything before the official age of 66 or 67—might seem impossible, but proponents of the FIRE movement say it can be done.

While achieving this goal may require a more ambitious retirement-savings timeline or moving to a lower-cost state, other tips from the FIRE movement are a lot simpler—and easy to implement right now. Here’s what you need to know.

What is the FIRE movement?

The FIRE movement stands for Financial Independence, Retire Early. It advocates amassing enough of a nest egg—by aggressively maximizing income, slashing expenses, and saving and investing the surplus—so that at an early age, you can live off your savings and not have to work. The amount you need depends on your annual expenses, not your age, and uses the following formula: annual expenses x 25.

Let’s say you spend $50,000 a year. Your FIRE number (the amount you need to retire) is 50,000 x 25 = $1,250,000. The formula is based on the “4% rule,” the amount of savings you can withdraw each year, adjusted for inflation. However, there is room for flexibility. If you cut expenses in half, for example, you only have to save half as much.

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