The Financial Independence Retire Early (FIRE) movement promises freedom from the 9-to-5 experience. The dream of living on passive income and spending time pursuing your passion is irresistible to many, yet the reality of early retirement does have its untold downsides.
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From financial stress to social isolation to identity crises, there is more to early retirement than what initially meets the eye. In this article, you will learn the underlying challenges of early retirement, such as boredom, financial insecurity and social isolation, as well as helpful tips on avoiding these challenges.
FIRE is based on a frugal investing and saving approach. The aim is to save enough to live on passive income so that you can retire two to three decades ahead of schedule.
Saving 50%or more of your salary, keeping expenses low and investing wisely are necessary conditions of the practice, according to AAA. The freedom to work and pursue your hobby is a great motivation, but may prove difficult in practice.
As Deepak Shukla, CEO of Pearl Lemon Accountants, pointed out, "The FIRE movement promises freedom from financial stress and greater control over your time. Yet, it also provides a host of its own challenges and issues hardly spoken of." While early retirement possibility comes so close, reality contains often overlooked detriments.
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The most unexpected of the challenges of early retirement is boredom. Most advocates of FIRE believe that without work structure, their time is wasted. Absent, some retirees find little meaning in day-to-day living.
"The dream of early retirement sounds great, but many lack the purpose and structure provided for most by work," Shukla explained. "That can breed restlessness and dissatisfaction." A lack of routine may lead to an empty sensation, even depression. A passion, such as traveling, may fill some of that void, but risks not providing the same level of contentment found by work.
To mitigate this, you need to think beyond retirement money. Consider how you want to spend your time. This can be through a hobby, volunteering or even a small business. The point is to find something that is a source of purpose and fulfillment.
A further challenge of FIRE is the financial pressure brought on by living on a fixed sum of funds over many years. The rule of thumb of using 4% is widely accepted, yet it is based on a static marketplace and regular returns. Thusly, a downward market trend or a significant unexpected expense can quickly destroy the system.