The idea of early retirement had been a dream for many Americans long before it evolved into the FIRE movement. But with the growing influence of social media and the ability of workers to operate remotely, the FIRE movement has sparked a renewed effort to retire early, particularly among millennials. However, as with most things in daily life, the pandemic has had a major effect on the FIRE movement. Read on to learn more about what the FIRE movement is and how adherents have had to adjust during the pandemic.
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What Is the FIRE Movement?
FIRE is an acronym for “Financial Independence, Retire Early.” And while the dream of early retirement is nothing new, the FIRE movement highlights a variety of steps that participants can take to make early retirement a reality.
One of the core components of the FIRE movement is to save 50% or even more of your income to accelerate your retirement date. It also involves trimming down your lifestyle and making current sacrifices so that you can enjoy the long-term benefit of an early retirement.
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How Has the Pandemic Hurt the FIRE Movement?
The skyrocketing unemployment rate, stay-at-home orders and business closures that accompanied the coronavirus pandemic all worked to conspire against the FIRE movement.
Since saving a high percentage of your income is an important stepping stone to retiring early, those who lost jobs or had to reduce working hours during the pandemic may have set their early retirement plan back by years.
Many who work from home or operate online businesses suffered as consumers went into savings mode rather than spending mode.
And those already beginning their early retirement adventure may have been spooked out of the stock market, which suffered its fastest 30% decline in history in 2020. FIRE adherents who sold during this rapid, massive sell-off missed the equally violent recovery, which at just 33 days was the shortest bear market in S&P 500 history. FIRE proponents who panicked during the sell-off may have permanently crippled their early retirement nest egg.
Who Are the New Adherents of the FIRE Movement?
Wherever there is a crisis, there is also opportunity. While the coronavirus pandemic may have made early retirement unattainable for some FIRE proponents, others actually benefited from the upheaval.
For example, those who were able to put a big chunk of their savings into the market when it was down over 30% in early 2020 reaped huge gains shortly thereafter.
Some workers who were forced into remote positions now understand that they can work away from the office on a permanent basis, opening up a host of possibilities in terms of working on their own terms. For example, those who wanted to retire early and live overseas may be able to make that move now, while still working and earning American wages, thereby taking the first step toward their future lifestyle. Still, others were able to take advantage of the pandemic to open up their own businesses. These additional business opportunities have put a host of new FIRE proponents onto the path toward their own early retirements.
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Last updated: Aug. 18, 2021