Forced to Retire Early – Why and How to Do It in Singapore

FIRE – Financial Independence, Retire Early – has been the rage in the past few years or so. Personally, I don’t even think this is an unrealistic fad like some people think; in fact, I believe we have little choice in the matter.

What is FIRE?

For the uninitiated, FIRE is a movement where people try to retire much earlier than the typical ages of around 60 to 65. FIRE proponents typically save and invest aggressively in order to retire in their forties, some even in their thirties.

Like COVID-19, Lokis, and Spider-men, FIRE also several variants. There is “Fat FIRE”, where one can maintain a high standard of living throughout their working and retirement years, possibly due to having a high disposable income, and then there’s the more traditional “Lean FIRE” where it’s characterised by extreme frugality before and after retirement.

My personal favourite is “Barista FIRE” where one gets a part-time job after retiring early. There is a small income to supplement one’s retirement savings in meeting various expenses. Also I have always wanted to work at the local Apple Store to find out why the staff members there are always upbeat and cheerful.

Why FIRE?

People are generally tired of their jobs, and the pandemic and Zoom hell have exacerbated this feeling of sian.

I don’t necessarily hate my job, but I think I would be much happier if my work was more of a choice and less of a chore to pay my bills.

Also, the ability to work into ones fifties and sixties is a big question mark. Health may start to decline, and energy levels will not be the same as before. I’m only mid-thirties and I already feel various aches and fatigues that make me question my ability to keep this up for the next two to three decades.

Putting aside health issues, older individuals tend to be at a disadvantage when it comes to continuing employment. Younger employees tend to be preferred, particularly in the economy we have right now. Even as a self-employed person, I feel the impending obsoletion: as a tutor there is a growing generational gap between my tuition kids and myself, and as a iNfLuEnCeR content creator I’m still struggling to keep up with the kids on TikTok.

Finally, automation and the advancement of technology may just mean that many of us are displaced sooner than we might like or believe it to happen. FIRE may well mean Forced Into Retiring Early.

How to FIRE?

In my opinion, three requirements to retiring early:

  1. Saving aggressively
  2. Insuring properly
  3. Investing constantly

Saving aggressively needs little explanation: if you don’t have a frugal lifestyle, it may not be realistic to retire early unless you have a very high income.

Insuring is important as there is little point in filling up a bucket that has the potential to leak out its contents should holes appear.

Investing constantly also requires little elaboration.

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Calculating number of working years left

A simple calculation to see how many years till your retirement you have left would be to see how much of your annual income you currently spend:

  • Take expected lifespan of 85 years
  • Subtract current age to get the number of remaining years left
  • Take your percentage of annual income spent and multiply by the remaining years

For instance, I am 34 this year, and statistically I have 51 years until I croak. If I spend only 20% of my income each year, and save the rest, I only need to work 10.2 years before my savings can cover the rest of my life’s expenses.

This is simplified and assumes investment returns cancel out inflation. On average, your returns should be able to be higher than inflation if done properly.

Another method FIRE proponents like to use is the 4% Rule. If you spend $40,000 in a year, you would require $1,000,000. From that sum of money, a 4% investment return would allow you to draw down on your retirement savings each year without affecting your capital. You would thus have enough passive income to retire.

Criticism of FIRE

Some critics of FIRE say that it is unrealistic for people with low incomes, or people with many mouths to feed. I don’t disagree with the notion that FIRE may not be attainable by many people, but I still believe that the journey towards FIRE is one of many positive traits. Frugality and financial prudence are traits that anyone should adopt regardless of financial circumstances, and even if you can’t retire at 30 or 40, 50s or even early 60s isn’t too bad.

What’s your desired retirement age?

Have you already adopted the FIRE mindset? What is your desired age?

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