Is the F.I.R.E. Plan Realistic?

The FIRE lifestyle is not realistic for most Americans, for several reasons, not the least of which are the need for a high income and the willingness to live like a church mouse for a significant part of your life.

However, you should absolutely learn FIRE principles and apply as many of them as possible to your personal finances because you can improve your quality of life, avoid debt and sidestep the fate facing many Americans today – poverty in retirement.

FIRE is not realistic for most people, but is still a good idea to follow.

Why is F.I.R.E. Unrealistic?

A common formula for retiring early under the FIRE plan is to save 50% to 70%, of your income, starting soon after college, so you can accelerate investing and save enough to live off the interest when you’re in your 30s or 40s. If you’re already in you’re 30s, you’ll have to retire later.

This is simply mathematically impossible for most Americans.

Let’s say you cut your expenses down to $1,500 per month (living like a church mouse). That would cover your rent, utilities, groceries, clothing, basic cable, internet and phone expenses, student loan and credit card payments, car costs (gas, oil, repairs), health insurance and other necessities.

If that’s 50% of your income, you’ll have $1,500 per month to invest, correct?

No, because if you make $3,000 per month and you pay 18% in state and federal taxes, your $30,000 nets you $24,600.

That means you’ll have to live on $12,300 if you want to save $12,300.

As your income rises, your tax bracket (percentage you pay) rises.

Now, let’s say you make $5,000 per month ($60K per year) and have only $1,500 per month in expenses. If you live in Metro Atlanta, Georgia, your monthly take-home pay after taxes might be around $3,848. Less $1,500, that gives you $1,924 per month to save, or roughly 70% of your income.

Now, how many single people do you know who make $60,000 and who aren’t going to ever go to the movies, Starbucks, a concert, a football game, have premium cable, dine out, drive a nice car or join a gym?

Some Good News

If you move to a state like Florida or Texas that doesn’t have a state income tax, that will help you.

If you don’t have a car and your employer provides health insurance, that helps. If you have no student or credit card debt, you’re in even better shape. And on top of all that, if your employer offers a 401(k) match, you’re in very good shape.

Want to Retire With $1 million?

Millennials who retire with $1 million at the traditional age Social Security age will live below the poverty level the rest of the of their lives. GenXers will live slightly above the poverty line.

How much do you need to save each month to retire with $1MM at age 67? If you’re starting at age…

  • 25 – you need $440/mo.
  • 30 – you need $613/mo.
  • 35 – you need $864/mo.
  • 40 – you need $1,240/mo.
  • 45 – you need $1,834/mo.
  • 50 – you need $2,831


Then Why Do It?

Remember when you were in high school and college and you really wanted to get a B in a certain class? The advice you got was to try and get an A, then if you fell short, you’d end up with a B. If you just did the minimum work to get a B and you fell short, you’d end up with a C.

If you don’t at least create a personal budget, set spending and savings goals, and most importantly, track your savings (the key to making FIRE work), you will likely dig yourself into a hole you may never get out of.

If you follow the basic advice at this website and avoid accidental spending, you will not only greatly increase the chances you can live an enjoyable lifestyle during your working years, you’ll also pretty much guarantee you’ll have enough saved to live comfortably in retirement.

And, as you learn more tricks, save more money, reduce expenses and increase your income, you might start a snowball effect that really does let you retire early (just not in your 30s).

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