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Wouldn’t it be nice to retire 17-20 years early? A new movement called the financial independence, retire early (FIRE) movement is afoot, spreading information about making money moves to retire at age 50.

What is the Financial Independence, Retire Early (FIRE) movement?

The name says it all. Retiring early requires financial independence. The FIRE movement is focused on retiring far earlier than traditional retirement plans and budgets, which focus on the ages of 62-67, aiming for a decade or two earlier.

FIRE requires having enough savings and investment income that one isn’t reliant on Social Security income, which you aren’t eligible to receive for at least 12 years if you were to retire at age 50.

Achieving such a feat requires an aggressive focus on savings, dedicating a majority of earned income towards that goal. FIRE practitioners aim to quit their jobs and live solely off small withdrawals from their portfolios until they supplement Social Security income beginning at age 62 or later.

  1. Planning for FIRE

Step one determines how much money you will need to retire at age 50. Look at your current spending. Subtract the cost of working, such as transportation and eating lunches out. Be detailed.

  1. Plan for health care costs

Everyone needs more health care as they age. Age 50, for many people, is when many medical problems begin. If you retire at age 50, you will have to support your medical costs for 15 years before becoming eligible for Medicare. You will need to have insurance. Medical expenses can bankrupt unprepared retirees, US News reports.

  1. Calculate annual withdrawal and expenses

A crucial part of the FIRE strategy is generating income from investments.

The time-honored rule of thumb of retirement is the “4% rule,” which calculates a withdrawal of 4% of your portfolio annually (adjusted for inflation) for 30 years without depleting the portfolio.

However, with the FIRE strategy, retirees use about half of that, a withdrawal rate of only 2% or 3%. As an example, if your annual expenses are $50,000, and you plan to withdraw 2% annually, it means you might need a portfolio of $2.5 million to retire at age 50, according to US News.

  1. Extreme savings & low expenses

The conventional savings rate of 10 percent to 15% of your income might be a good guideline for traditional retirement, but it won’t get you where you need to go if you plan on retiring at age 50. You’ll need to save upwards of 50% of your salary.

To achieve this feat, some aggressive practitioners of the FIRE strategy tuck away between 50-75% of their income, especially those who want to retire very young in their 30’s or 40s, according to Ramsey Solutions.

Obviously, you will need to keep your expenses as low as possible. This might include downsizing now, if possible, and not waiting until retirement to do so.

  1. Seek out investments that provide growth

The aim is income-producing investments such as bonds, but you’ll also need long-term growth from stocks. Another category is cash or cash equivalents. Overall, the focus needs to be on investments that produce growth. To retire early, you need a money machine that can produce returns to replace your paycheck.

  1. Look for other streams of passive income

Having a side business, especially one that can provide passive income without needing your time, such as an online business or selling products through a major retailer such as Amazon or Walmart, can work for you while you work your full-time job and pack away even more savings. Selling items through EBay and Etsy businesses are also good sources of additional income. A steady stream of passive income can continue to bring income during retirement.