A recent article by journalist Lydia Kibet, featured on MoneyLion and AOL.com, explores five risks people may overlook when pursuing Financial Independence, Retire Early, commonly known as FIRE. While aggressive saving and investing can make early retirement possible, the article explains why a successful plan must account for market volatility, healthcare expenses, lost earning years, personal fulfillment, and the potential cost of extreme frugality.
In the piece, our Chief Investment Officer and CEO, Steven Rogé, explains that many early retirement strategies rely on relatively consistent investment returns. In reality, poor market performance during the first few years of retirement can have an outsized effect on a portfolio. When retirees must continue taking withdrawals while their investments are declining, they have fewer assets remaining to participate in a future recovery. This sequence-of-returns risk becomes especially important when a portfolio may need to support several decades of retirement.
He also highlighted the potential impact of healthcare costs. People who retire before becoming eligible for Medicare at age 65 may face years of insurance premiums and out-of-pocket expenses. Finally, Steven discussed the long-term cost of leaving the workforce during what may otherwise be someone’s highest-earning years. Early retirement can mean giving up peak wages, employer retirement contributions, and additional savings opportunities. It may also reduce future Social Security benefits, which are calculated using a worker’s 35 highest-earning years.
The FIRE movement can offer a compelling path toward greater freedom and flexibility. But investors need to keep in mind that reaching financial independence requires more than achieving a particular savings target.
Click here to view the full article.
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R.W. Rogé & Company, Inc. is an independent, fee-only financial planning and investment management firm serving clients locally and virtually across the country, with Long Island, New York, and Beverly, Massachusetts office locations. R.W. Rogé & Company, Inc. was founded on a “client first” culture and proudly commits to acting in your best interest as a fiduciary. We have helped clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, as well as our process, explore our detailed overview of services and approach.
