FIRE Model: Don't get caught up in the trap of retiring early, understand the disadvantages of any plan before investing in it..

In recent years, the FIRE Model of Retirement has become increasingly popular among young people. Its goal is to save heavily in their 20s and 30s and retire early in their 40s or 50s. Its three pillars are frugality, high savings, and early investing.

This model sounds interesting, but the reality in India is different. Here, family responsibilities, children's education, and parental care are so expensive that the FIRE formula doesn't fit.

Why is FIRE difficult for Indians?
In India, retirement planning isn't limited to self-sufficiency. Here, the burden of parents' healthcare and children's education is often added to the retirement fund. The American model assumes 2-3% inflation, while the average inflation rate in India is 5-6%.

In addition, children's education and marriage require significant funds. Additionally, it's common for parents to be the financial support system. Therefore, the thought of retirement at age 40-45 often remains a pipe dream.

The FIRE model originated in 1992 with the book "Your Money or Your Life" by Vicki Robin and Joe Dominguez. Under the FIRE model, you can determine your retirement age. However, adopting this model requires a specific strategy and may require investing up to 70% of your salary in savings.

Calculate Your FIRE Number
Finding your FIRE number means determining the age at which you want to retire. To do this, you need to calculate your salary, expenses, lifestyle, and post-retirement lifestyle. If you're unable to do the calculation yourself, you can seek the help of a financial planner.

Increase Savings, Reduce Expenses, and Invest
Under this model, the most important thing is to maximize savings. This requires not only controlling your expenses but also trying to reduce them. The more you save and invest, the more likely you are to retire early and earn a larger pension upon retirement.

Think about financial freedom, not just early retirement.
The concept of FIRE isn't possible in India, but financial freedom is. Instead of thinking about early retirement, we should think about financial freedom.

For example, if someone invests Rs. 10,000 per month for 15 years at a 12% return, they earn Rs. 51 lakh. However, if they delay investing Rs. 15,000 per month for 5 years, they earn only Rs. 39 lakh. This makes it clear that starting early is the key.

Chasing a fixed number isn't right.
People often say that a retirement corpus of ₹3-4 crore is essential. But the reality is that expenses vary from person to person. Some have higher medical expenses, some have a more expensive lifestyle, and some have to spend more on their families. Therefore, retirement isn't a fixed goal. It's important to review it every few years.

Early retirement is difficult, but investing late helps.

If you consider retirement at 55 instead of 50, your monthly savings can be reduced by almost half. Furthermore, many people continue to earn through consulting or freelancing even after retirement. This allows the corpus to last longer and eases the burden of retirement.

Children's education and your retirement
A major problem in India is that parents spend their retirement savings on their children's education. Loans and scholarships are available for children's education. But if you put your entire savings into this, you'll be putting yourself in trouble in the future. It's wise to treat your children's education and retirement as separate goals.

Focus on Increasing Your Income
If you have a well-paying job, that's fine; otherwise, you'll need to focus on increasing your salary. You'll need to look for a job that offers a high salary. If you can't find a high-paying job, try doing some part-time or freelancing work to generate some additional income. This additional income will help you invest more money.

Invest in Mutual Funds
When investing, you'll need to take on a certain amount of risk. Try investing in a variety of mutual funds so that you don't face any problems in the long run if one mutual fund faces problems.

Understand the calculation with an example.
First, let's assume some benchmarks. Suppose you're 25 years old, earning around ₹40,000, and leading a simple life. Let's assume you spend ₹25,000 per month on rent, groceries, travel, entertainment, health insurance, life insurance, etc. In this case, you can invest ₹15,000 per month. If you invest with a moderate level of risk, you can earn an average return of around 12% from mutual funds.

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