Could you retire at 40?

It’s not often that retirement planning sets the world alight. However, the FIRE movement has gained a lot of media attention over the last few months. If you’ve not heard of it before, FIRE stands for Financial Independence Retire Early. The core idea is that you squirrel away as much money as possible until you have enough to live on for the rest of your life. While this is what most of us do when we save for a pension, members of the FIRE Movement are keen to get there at breakneck speed, often retiring in their thirties or forties.

As you might expect, this involves some disciplined saving and investing. The idea is simple, but the practice is hard. Very hard. In this post, I’ll explain some of the key principles of FIRE, and also point out a few of the pitfalls. This certainly isn’t for everyone.

1. Work out your goal

Before you even think about embracing FIRE, you need to get comfortable with a few sums. Proponents of the mainstream FIRE movement advise you need to build a fund that’s 25 times your annual living expenses. That’s your living expenses when you retire, rather than what you’re spending now.

Say you could live on £20,000 per year – certainly feasible for some people. This means you’d need to save £500,000.

Half a million quid might sound like a lot, but there’s no guarantee this is enough. The main challenge, I think, of pursuing FIRE is that it involves predicting the future: how long you’ll live, stock market performance, and what happens to inflation. If you knew this stuff, you’d already be rich.

This sum might be enough if you’re retiring only slightly earlier, perhaps late fifties. But if you retire at 40 and have a life expectancy of 90, you’d need to manage that savings pot very carefully. All sorts of things could happen during that half-century: runaway inflation, a worldwide depression, or massive changes to the tax system. Which brings me to my next point.

2 – Do some research

FIRE is absolutely not a set-it-and-forget-it process. You can’t just set up a direct debit then shout “I’m outta here” when you’re forty.

You’ve probably noticed that interest rates are abysmal right now. A Cash ISA certainly isn’t going to help you retire early. You must become an astute investor. The only way of getting a decent return on your investment is to take some risk, and not everybody is comfortable with risk.

You won’t get everything right, either – some investments will yield good results, others will go down the toilet. There are no certainties. You need to construct a robust portfolio and review it regularly. Of course, you can pay someone for financial advice or invest in an actively managed fund, but that’s going to take a chunk of your FIRE money.

It’s best to understand as much as possible yourself, and only pay for experts where absolutely necessary.  For instance, if you’re paying a 2% annual charge to invest your £500,000 pot, you sacrifice £10,000 every year.

There are plenty of FIRE books available, but they nearly all focus on the US. While the same principles apply, the tax systems and other financial structures are completely different. Here are my recommendations for those of us in the UK:

  • For a good introduction, get yourself a copy of Reset by David Sawyer.
  • To understand the science of building your retirement fund, there’s no better book than Abraham Okusanya’s Beyond the 4% Rule
  • And to get started with investing, buy How to Own the World by Andrew Craig

Yes, this is a lot of reading. But that’s vital if you want to achieve FIRE.

3 – Think about what you want

One of the many criticisms of the FIRE movement is that it encourages people to leave the workforce without thinking through what they want to do. It’s all about rejecting the yoke of employment and doing exactly what you please. For this reason, FIRE attracts libertarians who don’t want to answer to anyone. Isolation isn’t great for our social skills, and research shows that retirement can cause cognitive impairment. After a few years of watching Watercolour Challenge, you won’t be at your sharpest. Not great if your money runs out and you’re forced back to work.

Some FIRE proponents are focussed on the FI – Financial Independence. It’s all about having enough money to make choices. This could include working fewer hours, retraining for a different profession, or doing voluntary work in the community. One of the most famous examples is Mr Money Mustache, who retired from his job in software development at the age of 30. Since then, he’s pursued many projects, both income-generating and pro bono. His argument is that anyone can do the same by avoiding unnecessary expenditure, ditching possessions, and pursuing a more environmentally friendly way of life.

For a thoughtful blog post on the opportunity cost of FIRE, take a look at the Foxy Monkey blog.


FIRE is a seductive concept, but not a realistic one for all of us. After all, somebody needs to do all those jobs. To retire decades early, you need:

  • A well-paid job that doesn’t drive you completely mad
  • Modest outgoings, so you can save most of your income (this is much harder if you have dependents who won’t necessarily share your ideals)
  • Time to do a lot of research

Even if you don’t reach that optimistic goal, consider the benefits of a partial success. After all, retiring just a few years early is going to improve the quality of your life. Money doesn’t bring you happiness, but it gives you a lot more choices.

Catherine Pope

I'm a financial coach who loves Victorian novels, technology, and big books about pensions.

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