What Exactly is Early Retirement All About?

I want to retire. I’m sure you want to retire too. Everyone wants to retire. Wanting to retire is nothing new. Early retirement extreme is the new craze. The FIRE movement has been rapidly growing. You keep on seeing content about retiring early all around you.

What’s the deal with this early retirement stuff? Does it make sense to try to retire when you’re in your 30s?

Let’s look at the FIRE movement…

What's the FIRE movement?

As a college student or young professional, I’m sure that the last thing on your mind is thinking about the best retirement plan. Retirement has traditionally been something that happens when you’re old and can no longer get it up. You likely still know folks that are working in their 70s. You imagine that you’ll be working away for the next 40 years.

Not anymore. Early retirement is the craze now. Our generation is fed up with being stuck at crappy jobs. We want more out of life. We don’t want to wait until we’re senior citizens to enjoy life.

What’s the FIRE movement all about? Here’s a summary according to Wikipedia:

“The FIRE (Financial Independence, Retire Early) movement is a lifestyle movement whose goal is financial independence and retiring early. The model became particularly popular among millennials in the 2010s, gaining traction through online communities via information shared in blogs, podcasts, and online discussion forums.

Those seeking to attain FIRE intentionally maximize their savings rate by finding ways to increase income or decrease expenses. The objective is to accumulate assets until the resulting passive income provides enough money for living expenses in perpetuity. Many proponents of the FIRE movement suggest the 4% rule as a guide, thus setting a goal of at least 25 times estimated annual living expenses. Upon reaching financial independence, paid work becomes optional, allowing for retirement from traditional work decades earlier than the standard retirement age.”

Long story short: Why work until you’re 65 when you can stop working at 35?

Traditional retirement income planning is too boring for our generation. Early retirement extreme is in and I’m here to share the details with you guys…

What’s the early retirement extreme/FIRE movement craze all about?

I first heard about the idea of early retirement from Tim Ferriss, in the 4-Hour Workweek book. I wasn’t sure what to think of it at first. The book brought up great insights on business and life in general. I wasn’t sold on the retirement stuff. Then I re-read the book and noticed that Tim Ferriss brought up an interesting idea on early retirement:

“Why not take the usual 20-30 year retirement and distribute it throughout life instead of saving it all for the end?”

That makes sense. Ferriss believes in taking extended periods of time off. He suggests that you work hard and then take some time to travel the world or just do whatever you want to before returning to more work. That’s cool. I love completing projects and traveling.

I wanted to learn more about early retirement extreme and this whole retire early movement.

I did some research on early retirement from the pioneer blog, Early Retirement Extreme, and checked out the FAQ. Jacob noted his thoughts on retirement income planning and how he interpreted it:

“Becoming financially independent and using that freedom to pursue other interests.”

Jacob doesn’t believe in retiring as a means to be idle. He sees it as having enough money to survive and do other things with your time (not just to work constantly).

Financial Samurai also presented an interesting take on early retirement:

“Retirement has always been about doing whatever I want, whenever I want without having much financial worry.”

The question: “What age can I retire?” now has a new answer. This age can be 35 or 40. You don’t have to wait until you’re 65 to live the life that you’ve always dreamed of. If you change your lifestyle up, you can quit that stressful job at any age as long as you plan for it.

This leads to another important question about retirement income planning…

How do you survive while retired at an early age? What do you do about money with the FIRE movement?

It must be tough to survive at 35 years old with no steady income, right?

The goal is to live off as little as possible. Jacob lives off $5-7 grand per year. Jacob also notes on his expenses:

“Comfort is mainly about living without constant stress and fun is mainly about what you do rather than what you spend.”

The trick is to master your spending so that you can survive off less money. To retire early, you must avoid debt or aggressively tackle all debt at an early age. You must also be willing to sacrifice by spending far less than you earn.

When you retire early, you need to embrace frugality and accept minimalism to an extent. You can’t expect to live a lavish lifestyle if you want to quit working at an early age. Extreme results require extreme efforts.

How do you make money in your early retirement days? What are you supposed to do now?

The common answer is to start an online business that generates passive income. The reality is that most fail at online work or it takes some to build up into a decent source of revenue.

The good news is that there are other options for income when you retire early.

For example, Financial Samurai created a detailed plan to make $200,000/year while working 20 hours/week. His income will come through passive income sources ($86,4000 — CD interest, rental income, etc.) and new income ($114,000 — various online projects).

There are a few more options to consider for retirement income:

  • Passive income from investments (real estate, stocks, mutual funds, and so on).
  • Passive income from other sources (books, eBooks, and any other product you create once).
  • A new type of work that you enjoy more (starting your own business or pursuing a passion).
This leads to another important question about early retirement…

Does early retirement make sense?

Should you focus on retiring early? Does this even make sense for the average person?

For me it all depends on your financial situation and how dedicated you are from the very beginning. I’m personally a proponent of living a fun life when you can. I also can’t imagine being stuck at a crappy job until 65 because of debt that I didn’t really need.

Nelson of Financial Uproar doesn’t believe in this whole retire early movement. Nelson chimed in on the increasing amount of retired bloggers:

“Sometimes, choosing a career with added flexibility has all sorts of non-financial benefits. Those benefits should not be discounted. But to call it retired? That’s laughable.”

Nelson always has a unique and hilarious way of looking at things. There’s nothing wrong with quitting your job to blog. This just may not be considered true retirement.

There are polarizing opinions on early retirement, depending on how you view it. I think that early retirement is pretty brilliant. It forces you to wisely manage your time and money from an early age.

If you’re in your 20s now, it makes sense to look into the idea of early retirement. The key message is spot on. Consistently work hard, save your money, sacrifice, optimize your spending, live life on your own terms, and have the flexibility to walk away. If you pick up anything at all from the early retirement craze, I hope it’s the idea that the earlier you start planning, the better off you’ll be.

What do you think about the early retirement extreme craze? Have you thought about joining the FIRE movement? 

21 thoughts on “What Exactly is Early Retirement All About?”

  1. I think it would be fun for a little bit if we could follow Jacob and live off only $7,000 a year. But as you know, even Jacob couldn’t do it for more than several years as he got a job at a money manager in Chicago last year. I hope he is making big bucks!

    I realize many people who knock my retirement find it hard to live off only $80,000 a year and I understand. There are a lot of expensive cities and $80,000 a year doesn’t get you very far. But, the $80K in passive income I generated from savings and investing is enough for me to live on, so that’s good enough for me.

    Each person is different. I know plenty of people who can’t survive off anything less than $250,000!


    1. I’m not knocking the retirement at all. If you can make $80,000 a year from your investments then you’re far ahead of every other person online chasing passive income.

      That’s a good point about surviving off different incomes. My younger brother can survive off literally a few dollars. He went away for college and he can keep a $100 for weeks. I on the other hand spend way too much money.

      What’s the minimum you could survive on?

      1. I’m really pumped by the fact that the passive income has been generated entirely through saving and investing, and not via online income. I’m but a po boy when it comes to online income generation! We’ll see what happens over the next three years. I think it’ll be fun since!

        From real estate, to investing, to CDs, to structured notes, to private equity investments, I hope my readers can take away a lot of info regarding how to build their retirement/passive income nut.

        In SF, I think I can live off $55,000 a year if it was only myself pretty happily. You can get a $1 million mortgage for only $27,000 a year now for example!

        Best, Sam

    2. @financial samurai – For the record, Sam, I’ve been living on $7,000/year for almost 12 years now. Making money doesn’t change that. Money doesn’t matter when you’re almost completely self-reliant and don’t rely on spending money to be happy. I have more money than I know what to spend it on.

      I believe in voluntary simplicity as a lifestyle and in “doing” instead of “buying”. I’ve believed in that for over a decade and don’t foresee changing these beliefs anytime soon. This lifestyle leads to increased self-reliance, less waste, self-discipline, and more opportunities from having excess money and not being tied down by stuff and obligations like jobs and bills.

      The more you know, the less you need.

      I realize that this gets certain people’s goat(s) because it’s a rejection of consumerism and common materialistic values. Quoting Tyler Durden: “You’re not your job. You’re not how much money you have in the bank. You’re not the car you drive. You’re not the contents of your wallet. You’re not your f$@#$ khakis.”

      And you’re not how much you spend per year either. Try asking a consumer to describe who they are as a person without referring to their job title. Try asking them to describe what kind of life they’re living without referring to their spending. Many can’t. I think that’s sad.

      But to each their own.

      The point being that with our combined savings, DW and I have enough money and skills to live off of our interest income for the rest of our life. So we aim to do whatever interests us. It doesn’t matter if we have a job; if we sit on a beach; if we sit in a plane flying somewhere; … We do what we want. Currently DW is back in school for yet another degree putting a few more letters behind her name and I got a gig as a trader on LaSalle St. staring at numbers. We’re both intellectuals, so we like to try new things. Mostly the kind of things and experiences that have to be earned.

  2. For me, it`s simple – if you`re actively exchanging your time for money, you are not retired. (Or, in the case of a certain retire early blogger, if your wife is still doing it.)

    Sometimes this area is grey. If somebody really loves to write, and happens to make money at it, are they still retired? I’d say no, others say yes. Would you call a professional athlete retired, even though he loves what he does? Loving what you do isn’t retired either.

    What about if someone is financially independent, but still working? Again, I’m not sure how you consider that being retired. Retired people live on the interest. They don’t work. By that definition, Mark Zuckerberg is retired, and I’m pretty sure he works really hard. There’s a huge difference between being able to afford to retire and actually doing it.

    The whole point of this retire early movement is to sell books/pageviews/etc. It’s so the person blogging can get an emotional response out of their reader, because the phrase “financial independence” doesn’t mean squat for most people.

    1. Dude, if the point is to sell books or pageviews, it’s much better to write easily digested and semi-controversional posts for the working masses who clip coupons or dollarcost average into low-fee index funds. Plenty of advertising money there. Even better, real estate seminars and get rich quick schemes.

      I can pretty much guarantee that writing about how to question society and how not to spend any money at all is going to backfire spectacularly if you try to monetize it—I mean, who is going to click on it? Think about it! I’ve had people telling me that they’ll be waiting 6 months to get my book from the library in order to save $10.

      In any case, trying to decide whether someone is “retired” based on whether they used to be an athlete or an astronaut and now works in a bicycle shop, or whether their BFF or second-cousin’s dog still works, or whether they mow their own lawn (hey, that’s a kind of work, isn’t it?), or exactly when a hobby becomes work (IRS definitions, anyone?), or whether they beach-sitting quota has been fulfilled is a semantic and idiosyncratic non-starter and best avoided.

      To me retirement is simply “a frame of mind achieved once you have enough money in perpetuity to tell anyone, including managers, that you’re leaving now because you have better things to do.”

  3. I want to retire early, but it takes planning. I like Financial Samurai’s method of saving and investing over the long run. $80,000 is a good amount of passive income to live on, even in San Francisco where I live.

    I don’t think I could live off $7,000 like Jacob as that would crimp my style too much! Rent alone costs more than $7,000 a year! 🙂

    Most naysayers haven’t retired yet, but probably would love to. What does the definition really matter so long as the retiree is doing whatever she wants to do? Everybody has an opinion, but only few are able to back their opinion up with action.

    1. Thanks Lucille! It just takes time. You wake up 10 years from now after maxing out the 401K, investing in real estate, etc, and you’re like wow! Things really accumulate over time!

      I don’t mind the naysayers, b/c as you say, they haven’t retired yet and don’t know what it’s like or how to get there. It’s like the people who nitpick on spelling instead of focusing on the content of the post, kinda funny.

      But, for those naysayers who generate more than $80,000 a year in passive income, I sit up and listen b/c I want to learn from them! Most of the time, they don’t divulge any of their financials, so they’re just noise.

  4. The first I heard of early retirement was Derek Foster ” Stop Working”. He wrote about using passive income, and the wife / government to retire early. I thought like Nelson that he was really just unemployed, but twisting the termonology. They don’t give government assistance to Financially Independant People. That makes you dependant on the government handouts and your wife still working. I call that a stay at home Dad. Either way it opened up a new way of thinking for me.

    1. I agree with the passive income. Not so sure about relying on the wife/government. That’s a bit shady/depressing. It does sound more like a stay at home Dad. Will your wife quit at the same time as you?

      Btw Derek, when’s the next article coming?

  5. I want to retire early as well, but it’s not going to happen unless we sell our current home which I am not planning to do. We have another 9 years for our mortgage, and hopefully by then, our house will be valued at mid six figures.

    I figure I need a $1 mil. investment portfolio to retire with, not including the house, and I’ve got a distance to go to get there.

    $80,000 is a very good amount of passive income to live on – wow, awesome for Sam. My goal is $30,000 in dividend income.

    Slowly but surely getting there Martin 🙂

    Lastly, like others have written I don’t think I could live off $7,000 like Jacob. That is extreme but personal finance is personal for a reason.

    Cheers Martin,

    1. Thanks for visiting Mark. It was great to meet you last week.

      Sounds like you’ve given early retirement lots of thought. Do you have a target age in mind? What would you do if you retired?

      Oh and I don’t think many could live off so little. Most of us are also not willing to live in a trailer.

    2. Mark – You’ll be surprised to read how many criticize me for being retired and only earning $80,000 a year in passive income to survive! It makes me pretty bullish on the economy, b/c that means that these folks probably make much more than $80,000 a year in passive income! It wouldn’t make sense to criticize if they generated less.

      $30,000 a year in dividend income will be a great feat! I gotta get cracking on dividends.. but I’m scared of the market right now at 5-year highs.


  6. My idea is somewhat similar to yours Martin… shoot for the stars and if you reach it a few years later, than so be it. We could argue about the definition of retirement all night, but aiming for early retirement teaches you important lessons of frugality, saving, investing, etc. (like you said).

    1. Thanks for the visit. Jacob made some excellent points. The goal of early retirement is not to argue the definition of retirement and whether your partner or neighbor works. The goal is to learn about saving and investing in a more aggressive manner.

  7. The idea does sound motivating. Why wait to turn 65 when we can start mastering the way we spend earlier so we can retire earlier.

    I try to spend less and profit from calculated risk. It is always great to have other sources of income. Although having additional work, it is not that difficult if we love what we are doing.

  8. I’m late to the party and you’ve got some pretty stellar comments (and commenters) here, but I’ll add my bit. We were first introduced to ERE through Jacob’s blog. ERE is a philosophy and a frame of mind, not so much a financial equation as most PF blogs like to make it.

    Half the time, I wonder where the ‘F’ is in some ‘PF’ blogs…it’s clear they are just there to make the advertising money Jacob rightly identifies.

    I greatly admire Jacob for his resourcefulness and way of living – I don’t doubt that for all the money he may or may not be making, he hasn’t changed the way he lives.

    I am less looking for ‘ERE’ (even Jacob admits it was a bad name…) and more for ‘FI’ (Financial Independence). The ability to control what I do and when I do it is the end goal for us. How you get there is a personal decision and will involve some part Personal Finance, but also a large part Philosophy.

    Great discussion topic, one of my favourites.

    1. Thanks for joining the discussion Brian. I always love to hear from others about a polarizing topic like this. When do you see yourself getting to this point of being in total control?

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