Starting a FIRE: What you need to know if you are planning to retire early

If you are keen to be part of the FIRE - Financial Independence Retire Early movement, there are some key points you need to consider.

Many people don’t seek financial advice until they are just a few short years away from retirement, but for anyone looking to retire early, and with the financial confidence they’ll be able to enjoy their retirement of choice, getting advice sooner rather than later is the key.

When preparing for retirement… the earlier you start, the more you can gain financially.?

#1: Entering the FIRE mindset

What you do now is vital. If you are at the peak of your employment income earning potential, it’s imperative you make the most of what you have, including:

• Put a savings plan in place that considers any major expenses such as purchasing a new home, a renovation or school fees, while also planning for your retirement years. This may include building your super, investments and the income streams you’ll need beyond employment. This will take time and concerted effort so the earlier you start, the better.
• Prioritise your debt by exploring opportunities such as debt recycling, paying down debt and other debt management strategies.
• Protect your financial position by maintaining appropriate insurances. During an intense period of wealth accumulation, it’s important to create a financial safety net so you can continue to meet your financial obligations in the event of an accident or serious illness.
• Improve your financial decision making by exploring real life scenarios so you may understand the future financial implications of decisions made now.

#2: Retirement is about financial independence

The fundamental goal of retirement planning is to create financial independence that will enable you to transition to life beyond the workforce, and importantly, at the time of your choice.

Retirement is different for everyone. You will need to understand how you wish to spend yours, so you can plan accordingly.

For example, if you intend to work part time, your financial needs may be quite different from your needs if you wish to travel and enjoy the full opportunity that comes with the freedom of no longer working.

It’s important to be realistic. If you retire at 65, you will need a financial plan that will cover 20 years and for a lifestyle valued at $60,000 per year that equates to approximately $1.2 million*.? However, if you take a FIRE approach and retire at say 50, you’ll need approximately $2.1 million* to see you through 35 years (*dependent upon your investment risk profile and rates of return achieved).

We can work with you to articulate your likely living expenses, cash flow requirements and the income streams, including any Centrelink benefits, necessary for supporting the retirement lifestyle of your choice.

#3: Your retirement income will likely come from multiple sources

Your income in retirement may come from a number of sources including superannuation, investments outside of super such as shares and property, part-time employment, pensions or part-pensions, releasing home equity, utilising downsizer contributions or selling your family home.

Your planning will need to strike the balance between making the most of tax-effective saving through superannuation and any investments and assets outside of super.? Taking a FIRE approach will mean you will also need to navigate restrictions that include not being able to access your super until you reach your preservation age which depending on the year of your birth, will be somewhere between 55 and 60 years of age.

Of course, there are benefits as well as risks associated with various income stream options. There are also tax implications that can be significant, so naturally, it’s important to seek professional advice to help you make the most of your circumstances and retirement lifestyle goals.

We’re here to help and provide the advice you need. If you would like to know more about FIRE strategies that can help you to retire early, I encourage you to contact us now on 07 3720 1299 or email [email protected]

?Lane Moses Pty Ltd ABN 56 092 186 117 trading as Wealth Fundamentals and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.

This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.

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