3 Retirement Realities the FIRE Movement May Not Prepare You For

Retiring in your early 50s or even your 40s might sound like a fantasy to you. But for Financial Independence, Retire Early (FIRE) movement participants, it's a very real goal. They save aggressively -- often more than 50% of their annual income -- in the hope they can leave the workforce well in advance of what's considered normal.

Few would argue with the appeal of a longer retirement, but before you go down that road, it's important to understand what you're signing up for. Here are three less-glamorous aspects of a FIRE retirement you may not be prepared for.

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1. Outliving your savings is a real risk

No one can predict how long they'll live or what their retirement will cost, which means everyone has some risk of outliving their savings. However, the risk for FIRE participants is greater for a few reasons.

First, many calculate their FIRE number -- the amount they think they'll need to cover their retirement costs -- by multiplying their estimated annual expenses by 25. This is a popular strategy designed to help your savings last at least 30 years. But some FIRE participants may have a retirement that lasts much longer. A longer retirement also increases the risk that unexpected expenses could throw off your budget, or that market volatility could hurt your investment returns.

If you plan to follow FIRE principles, don't underestimate your life expectancy or your expenses. It's better to save a little more than you need and have some to pass on to your heirs than to save too little and wind up in debt in your senior years.

2. Reentering the workforce might be difficult

Some FIRE participants who run out of savings may have to reenter the workforce to supplement their existing savings. But it can be difficult to find a position that matches what you're looking for, particularly if you've been retired for a long time.

This is especially true for those who work in fast-paced industries, like a lot of tech jobs. If you don't keep up with the latest trends, you may find that your skills aren't what employers are looking for when you make a return to the workforce.

This may not be an issue if you want a flexible, part-time job that pays you just enough to get by. But if you want to keep your skills sharp in case you have to come out of retirement, make sure to keep all your certifications up to date and stay connected to changes in your field.

3. Many FIRE adherents have modest retirement budgets

Subsets of the FIRE movement, like FAT FIRE, aim to provide a luxurious lifestyle in retirement. But the majority of FIRE adherents plan to lead much simpler lifestyles. They hope to have enough to cover their essential costs, with maybe a little bit left over. Keeping their estimated retirement expenses down makes it easier to reach their savings goal faster.

But it can also limit what you're able to do in retirement. Traveling or making big-ticket purchases might not be comfortable if you based your FIRE number on the bare minimum you needed to get by. If you want a higher quality of living, you may have to save more money or delay retirement a little bit.

It's OK if the FIRE movement isn't a good fit for you. You can still adopt some of its principles, like saving a high percentage of your income -- if doing this suits you. But you don't have to retire right away if you're not ready or you're worried about running out of savings. Build a retirement plan that works for you, and don't worry about how its timing or expense compares to others around you.

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