It does describe retirement, but for successful adherents of the FIRE movement (financial independence, retire early), retirement need not come only when you reach the age of 60-something. Proponents of the FIRE movement advocate for varying degrees of aggressive saving, frugality, and investing in order to build a steady stream of passive income and/or savings and become financially independent (Smith, 2021). If this sounds like wishful thinking, think again. Although not everyone can achieve financial independence, it is far from unrealistic for many who are willing and able to devote a little (ok, a lot) of time and energy to it. 

Many millennial couples are choosing to pursue financial independence and early retirement, opting to be very deliberate about their savings and investments now in return for more freedom in the future. Couples who achieve financial independence have more time to devote to shared and individual passions and to self-development, which means that they are often better able to mitigate conflict and foster continued connection than couples who have to contend with the demands and pressures of working life on top of normal relationship stressors. 

FIRE Movement Basics

‘The 25x rule’ (Smith, 2021) is one of the main tenets of the FIRE movement. Proponents are encouraged to save 25x more than their annual expenses. For example, a couple who lives on $70,000 per year would need to save $1,750,000 collectively, or $875,000 each. A couple who gets by on less—let’s say they work remotely from a more affordable country and spend only $40,000 per year between the two of them—would only need to save 1,000,000 total, or $500,000 each. ‘Only?!’ you scoff? (yes, we heard that!) Well, FIRE enthusiasts will tell you that capable and clever adherents can achieve these goals fast enough to have you retiring much earlier than 65.

There are 3 main paths within the FIRE movement, depending on one’s individual spending and saving style and preferences:

Lean FIRE: These folks are happy living a minimalist lifestyle. They don’t need much, and they prioritize time over money. They’re happy to retire early with the minimum necessary savings, and in retirement they expect to live a frugal lifestyle with ample free time. There’s no ‘official’ amount, but a typical lean FIRE adherent might live on around $25,000 per year (Smith, 2021). Although this might require some creativity and extreme frugality in many parts of the USA, those who choose to retire overseas will find a relatively comfortable and sometimes even luxurious lifestyle available for this amount in parts of Thailand, Bali, Serbia, Malaysia, Vietnam, the south of Mexico, even parts of southern Italy…the list goes on.

Fat FIRE: People who aim for fat FIRE are not inclined towards frugality and want to maintain their current standard of living while retiring early. They are the most aggressive savers and investors (Smith, 2021) and they know they will have to work very hard to achieve their goal. 

Barista FIRE: This is for folks who don’t need to live in luxury but who prefer more than a minimalist lifestyle. Rather than retiring 100%, they save a certain amount and then scale back their work to the point that they only do gig work or part-time work, leaving plenty of time and space in their lives for other activities and pursuits (Smith, 2021).

Some FIRE devotees save as much as 70% of their monthly income (Kerr, 2021). There are many ways to make this happen. For example, a couple who makes a middle-class or upper-middle-class income might choose to live far below their means, selecting an apartment in a cheaper neighborhood than their peers in the same income class, shopping at Save-a-Lot instead of Publix (with the exception of organic food, the quality is the same, y’all), and cutting down on unnecessary expenses like alcohol, theater tickets, and concerts. They may supplement their savings with careful investment. As aforementioned, working remotely from a developing country is also a great way to save money. Some couples who are able to opt for this approach may be able to save 70% of their monthly income more easily and with less sacrifices than their peers who stay stateside. 

An important part of the fire mindset is the evaluation of every expense in terms of how many hours of work are necessary to pay for it (Kerr, 2021). When you think “is this ski ticket worth 3 hours of work?” or “I need to stay at work for an extra hour each Friday to pay for my cravings for green tea donuts”, you might not be as quick to spend on a whim. 

Although financial independence sounds like an amazing goal, it’s also a controversial topic–and for good reason. Financial advisor and television personality Suze Orman is one of the skeptics. She points out that FIRE savings don’t always account for the fact that when people get older, they get sick, and when people get sick, they spend more (Afford Anything, 2018). A lot more. It’s an inconvenient but very real fact of life, especially in a country where we’re still working on making healthcare more affordable. A truly robust FIRE plan would allocate a generous sum towards an expect-the-unexpected health fund, or towards an expensive but robust health insurance plan. 

There are other variables to consider, as well. Some proponents of FIRE do not account for unexpectedly high rates of inflation, or the possibility of income tax brackets changing in a way that would obligate one to pay more taxes (Afford Anything, 2018), or for major economic downturns and market crashes. Such variables fluctuate all the time; merely saving and/or investing a certain amount without considering taxation changes, inflation, and other possible fluctuations in finances is naive at best and disastrous at worst. From this perspective, FIRE involves quite a leap of faith; even careful planning cannot always account for variables that are unpredictable. 

Additionally, those who do choose to follow the path of FIRE must be realistic about their specific financial circumstances. The glossy image most people have of the movement involves 40-somethings sipping cocktails on beach chairs or galavanting around the globe, but in reality only people who already have a substantial income advantage are going to have a shot at retiring in their 40s. For careful planners and savers who make less money, an optimistic outcome would be a modest retirement at 50 or 55 (Kerr, 2021). 

Financial Freedom and Prenups

Partners are not always on the same page about finances. In an ideal, perfectly-balanced world, you’d both take the same approach to achieving financial freedom, you would both earn roughly the same amount of money per month, and you would both contribute the same amount to savings. However, most of us don’t live in an ideal and perfectly-balanced world, and so it is absolutely crucial to consider the finer points of how you’ll manage your financial plans. That includes any plans for financial freedom and early retirement together. If you’re considering making early retirement a goal, that’s going to be a major consideration when arranging your prenuptial agreement. If only one of you is planning on retiring early, this will make financial planning a little bit more complicated, but totally doable. 

Who needs a prenup? Well, everyone, because it forces you to carefully think through your financial future and gives you a contingency plan you’re both comfortable with. However, it is extra-important in cases in which one or both partners are making sacrifices with an eye towards financial freedom/early retirement. If you’re on track to retire early, this must require very deliberate and intentional effort and you’ve probably taken quite a few risks to get there. Therefore, it’s extra important to make sure that the arrangement between you and your partner is financially fair and acceptable to both of you. Doing so will alleviate a lot of potential tension later on, as you continue to save and work towards financial freedom and other goals.

In addition to helping you fine-tune the plans for your financial future as a couple, a prenup will also help you ensure that the nest egg you’ve worked so hard to build will not disappear into thin air, subject to the laws of your state, in case of a relationship breakdown without a prenup. Even if you don’t get a prenup, you already have one anyway: Whatever your state law says about how assets are divided in case of divorce. Don’t let catch-all state laws destroy your chance at financial independence. Finances and divorce are extra-tricky without a prenup, and even more is at stake if you’ve been working towards financial independence.

If you make a financial freedom plan as a couple, it’s also important to consider that if you end up splitting later on down the line, it won’t be as simple as dividing your FIRE savings and continuing to live the same way you already do, with the same savings goals and plans, but apart from one another. Enter economies of scale: You’ll save more when you’re living together and making bulk and shared purchases together than you will if you split up, which means that the timeline for your early retirement could be drastically altered by a potential divorce–and not in a good way. 

A breakup could mean either spending more to afford a place likely half the size of a place you share, or downsizing even more substantially in housing and other living expenses. Compare the costs of things like a car, home cleaning and repair services, CSA-style vegetable delivery, and other expenses that become a lot more expensive when each person pays for them separately. In other words, if you’re nurturing a plan for early retirement, on a financial level it’s a really, really good idea to make sure you stay married. 

Contrary to popular belief, a prenup can help you do just that. In the process of writing a prenup, you lay out the details of each of your financial situations (this is called financial disclosure; no stone is left unturned) and discuss what each of your financial roles are going to be in the marriage. This is a type of expectation-setting. Setting clear, explicit expectations is crucial to the success of any human relationship, and finances are one of the top reasons for divorce. Therefore, financial expectation-setting can save a couple from problems and eventual divorce later on down the line. (Side note: There are plenty of misconceptions about prenups. Here’s 3 Prenup Facts you might not have known.) Although saving and investment are important parts of any financial freedom plan, a prenup is of equal or perhaps even greater importance if you’re coupled. For a happy retirement–no matter the age–make sure you are as deliberate towards your relationship as you are towards your investments and savings.

References

Afford Anything. 2018. Suze Orman: Why I Hate the FIRE Movement. Retrieved from: https://www.youtube.com/watch?v=JbeLhKKg9RI

Kerr, A, 2021. Financial Independence, Retire Early (FIRE). Retrieved from: https://www.investopedia.com/terms/f/financial-independence-retire-early-fire.asp

Smith, K. A. 2021. How to Retire Early with FIRE. Retrieved from: forbes.com/advisor/retirement/the-forbes-guide-to-fire/