How to Retire Early in Singapore With FIRE (Financial Independence, Retire Early)

If you’re here, you must’ve heard about the FIRE movement.

As we all know, retirement will come one day. When would that be? That’s for you to decide.

And if what you want is to enjoy an early retirement, FIRE enables that to happen.

Why are people talking about it? And is it meant for you?

Read on to find out now!

What is FIRE?

FIRE stands for “Financial Independence, Retire Early”.

It’s a lifestyle movement that enables you to retire well before the usual retirement age (the statutory retirement age in Singapore will be 65 years old by 2030).

Imagine retiring in your 40s or 50s..

But how is this achieved?

Often through extreme savings and investments, so as to accumulate wealth at a faster pace than the average person on the street.

As the retirement age is lowered while life expectancy in Singapore is increasing (currently 84 years), one who practices FIRE would usually have to rely on an investment portfolio to provide regular withdrawals for an extended period.

Achieving this targeted sum of money allows you to enjoy financial freedom without having to work, if that’s what you wish.

How Did the FIRE Get Started

It all started with a 1992 book “Your Money or Your Life” by Vicki Robin and Joe Dominguez.

Along the way, financial bloggers and authors wrote on this particular topic. And that’s why the concept of it is widespread now.

People around the world started adopting this type of lifestyle.

Most importantly, there’s a community where there are long discussions and they can be seen in various channels: reddit, forums, podcasts, blogs, etc.

Now, why are there more people adopting this approach to life?

Could it be that we’re disliking our jobs so as to escape it in the long run? Or we realise that time is limited so by achieving retirement funds at a faster rate, we get to enjoy more of what the world can offer, for a longer period.

If you dig deep enough, you can find your own why.

How Does FIRE Work

If the end goal is to be able to retire early, what are the actions that we must do right now?

Here are 3 broad areas to focus on:

  1. Earn More
  2. Spend Less (Save More)
  3. Invest More

1) Earn More

It’s obvious that money will solve a lot of problems in the world.

As Singaporeans, we yearn to have more money.

But earning more than your current income is easier said than done, and if you can overcome that, everything else fall in place.

In my opinion, to earn more money, there are 3 focal points..

Firstly, the highest return on investment you can achieve is that of your career. If you make the necessary investments to it, you’ll be rewarded with higher salaries, bonuses, and promotions. But perhaps we might not like what we do or are not in the right career, we don’t go all in and don’t put the necessary ingredients to a successful career.

Secondly, real businesses. If you can create a side hustle or a full-blown one, it can greatly influence how much you earn. While there are many opportunities out there, sometimes we’re bogged down by fear which inhibits us to take the relentless actions needed. While businesses come with risks and failures, the upsides can be potentially great, especially when you’re an expert at your craft.

And lastly, investment options out there. When you’re great at what you do – career and/or business – it’s likely that you’re earning more, and will have a surplus. Continue to do what you do. But in the meantime, investments will accelerate your progress and remains a vital component in retiring early.

2) Spend Less (Save More)

Spending and saving go hand in hand as (Income – Spending = Savings)

With income remaining constant, the less you spend, the more you save, and vice versa.

To me, you should always concentrate on being able to earn more. Because spending less is much more easier to control.

That being said, most people who are in the FIRE movement will have a higher savings rate, which can go up to 70%. It may seem like an extreme when you cut out unnecessary things (even things that can make you happy) but you should be thinking about delayed gratification instead of instant gratification.

Even so, know that you can choose to reduce your expenses to a level comfortable to you – it’s all up to you.

Start by sitting down and listing out all your expenses that you have – very important. If you don’t take that step and measure, you will never be able to improve on it.

Then for each item, think deep and decide what actions to take:

  • Continue it
  • Can it be reduced
  • Leave it as it is

Try to create separate bank accounts – one for expenses and the other to transfer the rest (which will be your savings).

The process is simple, but following through is hard.

3) Invest More

As mentioned earlier, if you made necessary investments to your career and/or businesses, you’re able to invest more with a higher disposable income.

But before that, ensure that you have enough emergency funds (usually 6-12 months of expenses/income), have your short-term financial goals catered for, and ensure proper insurance coverage in place.

Without adequate life insurance coverage (check how much life insurance coverage you need) and hospitalisation insurance (MediShield Life and Integrated Shield Plan), any illnesses or accidents can wipe out whatever that you’ve painstakingly accumulated.

To utilise the power of compounding, your excess funds should be put into some of the best investments for retirement.

While picking options with higher potential returns may seem tempting, they usually come with higher risks, so take your risk appetite into consideration.

There should be a balance of risks and returns, comfortable to you.

A bigger emphasis should be on the retirement phase when you’re not working. If a bulk of your money is in volatile investments, know that fluctuations will happen, so be prepared for it.

Of course, there are other types of investments which are less volatile such as rental income, dividends, etc.

What Are You Trying to Achieve in FIRE

Over time, the concept of FIRE evolved. The meaning of it has become broader.

This is because one’s ideal retirement lifestyle and the process of achieving it is different from the other, and as such, there is no cookie-cutter build.

However, it does open up your perspectives and gets you to think about how you really want to live your life. And this is so important because we usually neglect planning for retirement, until it’s too late.

How much do you need to be financially independent and retire early?

As a general guideline, it is recommended to have at least 25-30 times your intended annual living expenses.

And then this sum of money should be put into investments to be able to provide the passive income needed during retirement years.

From this sum, you can withdraw 4% of the value for a long period of time (with a lot of assumptions).

That’s a very simplistic view.

In reality, everyones’ needs are different – the exact amount to achieve and the amount to be withdrawn. How about risk appetite? There’s simply no fixed rule. This brought about…

The different types of FIRE

  • leanFIRE – In this variation, you’re trying to be as minimalistic as possible. You strive to save as much as you can by being very frugal. And even during retirement years, you could also be living at low maintenance. As the resources needed are lower, it’s easier to achieve this type of FIRE fast.
  • fatFIRE – On the opposite spectrum, in this type of FIRE, you tend to appreciate comfort. You won’t sacrifice as much in your saving habits or in your retirement years as compared to leanFIRE. You’re still trying to achieve financial independence at an earlier age. But as you would need to accumulate more, it takes a longer time to achieve.
  • baristaFIRE – This is like a semi-FIRE where you’re able to achieve some form of financial independence. However, you may still work part-time or do freelance work to cover expenses. It gives you more opportunities to work in something you like at a lower level of income.
  • And there are still other variations..

As you can see, there’s no hard and fast rule. It all depends on what you want. You just have to design your life.

Some considerations to think about if you want to start this journey

Something to thing about:

  • types of assets/investments you intend to hold
  • what type of risks you can take
  • how extravagant or minimalistic you want your retirement years to be
  • are you planning to work part-time during your retirement years or just no work?
  • where are you planning to retire?
  • what happens if market goes down, what do you do?
  • what kind of expenses are you expecting?
  • how are you factoring in inflation for your expenses?
  • how much do you intend to withdraw from your retirement funds annually

Is Your FIRE Strong Enough?

The steps to achieve FIRE is pretty straightforward.

It’s just like any other plan. When you take action according to the plan, it should work out in the end.

The problem is as humans, we get derailed along the way. We tend to slack off, and then don’t take as much action as needed.

This can be seen with the “regular” retirement planning.

It’s not sexy at all. It could even be borderline boring. And so, we’re not that driven to put in the work to make it happen. It’s not easy because we always succumb to instant gratification.

But FIRE brings about a different spin.

It triggers your emotions.

Why do you want to retire early? Be financially independent?

If you think deep enough and fantasise, you’ll get your answer.

For most, it’s to have more time to do the things they love.

And because it’s on an emotional level, it can light your burning desire to do the actions needed to be done by a “deadline”.

Furthermore, there’s a community of like-minded individuals who are trying to achieve the same thing, and this provides further support to one another.

Are There Downsides to FIRE?

While the benefits to FIRE are that you can achieve financial independence at an earlier age, there could be some disadvantages.

As there are different types of FIRE, some of these setbacks are not applicable, so just take them into consideration..

Here are 6 potential disadvantages to FIRE:

1) You do need to have sufficient income

Consider one who’s earning $2,000/month and another who’s earning $10,000/month. Who has the better chance to achieve a FIRE retirement?

It’d most likely be the one who earns $10,000/month.

While individuals have different sets of commitments, and their expenses will correspond to it, there lies a base amount of expenses all would experience.

Example: $1,000/month of basic expenses.

Thus, the higher earner has a much bigger room to save and is more likely to achieve FIRE compared to the lower income earner, provided he doesn’t spend as much as he earns.

So if you’re fortunate enough to earn a high income, capitalise on it by saving and investing more.

If you’re not in that group, focus on increasing income via investing into your career, business, or side hustles first.

2) Deviating from the norm

Some people can take FIRE to the extreme.

They may scrimp and save in all aspects, which is applaudable, however at the same time, it could be seen by others as stingy.

And some may choose not to have children because raising a child is expensive.

Now, it’s entirely your choice how you want your life to turn out, just know that the perception of others may be different (which shouldn’t matter either).

The good thing is that FIRE is not just about the extreme. You start to plan and decide how you want to live your life in your own terms. If you want to have more comfort, then plan accordingly.

3) Not knowing what to do during retirement years

You know when we’re young, we yearn to get older because we can do this and that, but when we get to that age, there’s nothing fantastic at all.

Retirement years could be like that too.

When you have an extended period before your time is up, you do need to occupy yourself with activities.

Which is why people still continue to work, even if they don’t have to because there’s nothing else to do.

Even for those who’ve retired, boredom kicks in.

Personal opinion: Almost everyday, I would see this retiree at the study corner drinking cans of beer in the early afternoon. I’m not one who judges and this guy could be going through some tough times, but I’d always think to myself, “do I want my retirement years to be like that?”

So, it’d be great if you can spend your time meaningfully.

But these issues can be eliminated if you really think through what you’re going to do with the rest of your time, once you’ve achieved financial independence.

4) Having to stay invested throughout

CPF and the Supplementary Retirement Scheme (SRS) is an integral part of our retirement planning because they’ll form a good chunk of our retirement income and are relatively safe.

But because the lifetime payout starts at 65 years old, one still has to find income to be paid out from your early retirement age to 65, and then to supplement on top of whatever CPF Life pays out from 65 onwards.

So it’s likely that you’d need to invest in other alternatives, and stay invested throughout the retirement years.

Having to stay invested may also go against the traditional retirement investment strategy which is to reduce volatile investments the closer you are to the retirement age.

For those who are investment-savvy, staying invested wouldn’t be such a big issue because you’ll know the risks.

Now the question is what about those who aren’t investment-savvy? Or those who are conservative and aren’t willing to take risks?

You can’t expect them to park their hard-earned money into investments and just wait it out.

What if they take the leap of faith and lose out in the long run? Investments always come with potential risks.

Example: in the COVID-19 pandemic, stock values fell. Some stocks haven’t recovered. And if you still need to withdraw for retirement income, then a good portion of your total holdings will be reduced.

Which also brings me to the point of those who aren’t willing to take some forms of risks, it may be harder to achieve FIRE because you can only accumulate wealth from just your income.

5) Trying to escape from your job is not going to make you happy

I’m certain that not all who wants to do FIRE want to escape the 9-5 life.

But I can understand why some do.

Is it that we see our job as work? The monotony of it? Don’t like our bosses or colleagues?

That’s why we seek out FIRE so that we can get away from it all?

It may not make us happy in the long run because our work forms the bulk of our time.

There could be better options.

Of course it’s not going to be easy, but finding something that you have a strong passion which still brings in the money is the most ideal situation.

Perhaps changing careers? Do some side lines which you like and still have the potential to grow bigger?

6) Risks are still lurking

If you have to rely and stay invested during your retirement years, any hit to your portfolio will be painful.

Think about COVID-19.. some industries just got put down badly. Can they even recover? If you have investments in them, it can be scary.

Even if you return back to work, you might not command a high income if you’re out of the job scene for some time.

And if you intend to start a business, it comes with its own set of risks too.

What I’m trying to say is that you should test out various scenarios, and see whether you’d be heavily impacted, and then try to mitigate those risks.

The Difference Between FIRE and Regular Retirement

Is there really a difference between the two?

One is usually emotional and community-backed, the other could be boring to think about.

But the process still remains similar, whether it’s for an early or late retirement.

In the bigger picture of things, here’s 7-step process to plan for your retirement:

To make all these work, I think it all boils down to your WHY.

If your WHY is strong enough, you’ll make it happen. Seemingly difficult things such as cutting expenses or striving to earn more becomes easier.

What’s Next?

The FIRE movement is a great way to give you perspectives.

It gives you a reason to start thinking about retirement which most wouldn’t do. The fact that you’re reading this is proof.

Rather than just letting life pull you along its natural course, do realise you have the capability to decide how it’ll turn out.

That includes retiring earlier or later, minimal or luxurious.

With enough meaning, specific goals and a clear plan, you have a much higher chance of success than one who doesn’t think about such things.

If you’d like to find out more on retirement, check out our guide on retirement planning in Singapore. Also see what are some of the best retirement investment options including retirement annuity plans (for those who aren’t willing to take on heavy investment risks).

Abram Lim

With over 7 years of experience in the financial advisory industry, and previous stints in Citibank and UOB, Abram eagerly shares his knowledge by publishing research-backed articles. Learn more about Abram