How to Achieve Financial Independence and Retire Early

June 25, 2017

This original article was written by Abby Hayes for US News.

Many Americans now expect to retire after age 65. But that hasn’t stopped a growing group from aiming for early retirement. These big savers often retire at 55, 45 or even in their 30s.

That may seem impossible if you frame retirement in a traditional sense. When you think retirement means not working anymore, retiring at 45 may seem impossible or even undesirable. But there’s also another way to think about retirement that focuses on financial independence.


The idea of FIRE. FIRE stands for financial independence and retire early. Many super savers manage to be work-free at an early age. But you can also achieve early retirement by reframing the idea of retirement that you are saving up for.

Instead of focusing on retirement as a time of complete ease and relaxation, some savers strive for a different goal. For them, retirement doesn’t mean no work. It means not having to work long hours at a job you dislike. It means having the freedom to work flexibly, travel if you feel like it, spend time with family and pursue goals that don’t provide a salary. For many people, retirement is a time to start a new business or volunteer heavily. For others, retirement involves spending time managing their investments.

Instead of focusing on not working ever again, you can focus on being financially independent enough to take risks and make choices.

Make big sacrifices for big gains. Many members of the FIRE community have a huge savings rate that’s often 50 percent or more of their gross pay. They often achieve this goal by making deep lifestyle sacrifices.

These savers usually buy a much smaller home than they could afford. You’re likely to see them driving an older vehicle, or only owning one family vehicle. It could mean they don’t eat out often and go on cheap family vacations. Some savers also sacrifice time to make more money through a side gig.

The sacrifices they make to achieve this savings rate vary. But these savers know they’re making frugal choices now in return for the huge payout of financial independence. By working hard and saving big for a few years, they can have plenty of time later to explore other interests and travel.

It’s easy to delay saving for retirement because that goal is far away. But take the time to understand why you’re saving. Thinking about your future self could help you make more sacrifices and end up with a bigger retirement nest egg.


Consider partial retirement. If your only conception of retirement involves sandy beaches for two decades, you may have to work well past 65 to get there. Funding a life of complete ease takes a huge amount of savings.

But what if you look at retirement through a different lens? Instead of doing nothing, consider retirement as a time to pursue new interests, including projects that make some income.

If you have always wanted to switch careers, you could retire early and launch your new venture. If you want to start selling your handmade goods, financial independence lets you do that, too.

Even if you don’t plan to pursue new passions in retirement, looking at retirement as an opportunity for flexible work can help you retire sooner. You may not be able to completely retire on your savings, but perhaps you could cut back to working 20 hours per week. That might give you the freedom and relaxation you’re looking for.


Learn to manage your investments. Paying close attention to your investments can save you money, especially if you seek out low cost funds. Some 401(k) accounts have limited investment options and high fees. This can quickly eat into your earnings and seriously impact your ability to retire early or meet other financial goals. While you should always save enough to get the 401(k) match, after that you can look for lower cost investments in an IRA or investment account.

Saving for retirement in a 401(k) or IRA can qualify you for valuable tax breaks, but you can only save a limited amount in these tax preferred accounts. If you have a high savings rate, you will need to do additional investing in taxable accounts. This isn’t a bad thing, since it means you’re maxing out your tax-advantaged retirement accounts. But it does mean you need to learn to manage taxes on your investments wisely, so you can save more money over time.

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