Why I Believe Retirement Might Not Be as Expensive as Most People Think

Everyone’s definition of retirement can differ, perhaps drastically. For some, the only retirement worth pursuing is a comfortable one, even if it entails hanging up the skates on the workforce a bit older than the average retirement age. For others, like those who’ve embraced the FIRE (Financial Independence, Retire Early) movement, it’s more a matter of financial independence and retiring while one still has a hint of their youth remaining.

Indeed, there’s no right or wrong answer for everyone. Most will be perfectly content with a traditional route of retiring at 65 or 67 with a Social Security check and passive income coming from investments, while others would rather retire in one’s 30s, even if it means living a frugal lifestyle and running a very tight budget (think “lean FIRE,” which while not the most popular of FIRE flavors is a goal of young people who value financial independence and a simple lifestyle).

Light spender? Retirement may not be as costly after all.

Retirement doesn’t have to mean a couple of million dollars stashed away at the bank if your monthly expenditures are low. Indeed, the ideal dream retirement many of us envision entails extra cash to spend on vacations, experiences, and perhaps the occasional luxury. But, at the end of the day, retirement is another balancing act of time versus money. Though it’s wise to err on the side of caution by saving up a nest egg that’s even larger than you’d need, some hesitant retirees may overdo it and overestimate the real costs of retirement.

Of course, it’s far better to overestimate than underestimate, especially in the face of rising expenses and a tariff war that threatens to set everyone back by some double-digit percentage. That said, if you’re not a homeowner, you don’t own a vehicle, dependents, or costly liabilities, perhaps you don’t need that same $1-3 million that many assume they’ll need before they can leave the workforce. To put it simply, fat and chubby flavors of FIRE aren’t the right fit for everyone. For those living a frugal lifestyle, aiming a bit too high could run the risk of overstaying one’s welcome at work and missing out on several years of retirement.

In any case, the “4% rule” — entails withdrawing 4% of your nest egg every year of retirement — is a golden rule to give you a gauge of how much you’ll need to fund a sustainable retirement (FIRE number).

The curious case of a frugal retiree

Even a more cautious 3% rule may entail a FIRE number that’s far less than you’d expect. For someone, such as this frugal retiree I came across on Reddit, who drives a 20-year-old minivan in a rural low-cost-of-living region and doesn’t really spend all that much money beyond necessities, $40,000 per year seems like it could be enough to sustain this content individual. Based on the 4% rule, a $1 million nest egg seems like it’d be enough to do the trick.

As always, check in with a retirement planner and financial advisor to ensure you’re en route to retire well and aren’t put in a spot where you could run the risk of running out of money, whether it’s due to a surprise expenditure or a complete meltdown of the economy and the stock market. It’s not fun to think about such scenarios, but for those who pursue FIRE, odds are such an event will happen at some point over the decades. Arguably, it’s only prudent to expect such an occurrence to hit at least every decade or so.

The bottom line

Living a frugal lifestyle and embracing a leaner version of FIRE isn’t for everyone. But for those who have limited expenses and are already living a simple life, perhaps one’s nest egg can be a tad on the skinny side. Either way, crunch the numbers with a financial-planning pro if you’re looking for a magic FIRE number. If you’re not a big spender and value time and independence over a big home and luxury goods to show off to your peers, that number may be leaner than you think.

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