‘I tried the Fire method to retire early – my advice is don’t bother’

‘The UK tax system is so restrictive that I couldn’t accelerate my savings enough’

Would you give up your social life and embrace extreme frugality in exchange for an early retirement? What sacrifices would you make to achieve complete financial freedom in your 40s or 50s?

For those in the Financial Independence Retire Early ( Fire) movement, living a hair-shirted existence in the pursuit of saving as much money as possible is a sacrifice worth making.

Fire started in the early 1990s, and promises followers an early escape from the rat race by drastically changing their spending and saving habits. Many Fire followers commit to extreme lifestyle cutbacks so they can save between 50pc and 75pc (or more) of their income each year. This is typically invested passively in index funds or exchange traded funds.

The aim is to save enough to retire – typically 25 or 30 times your annual expenses – and live off a 4pc drawdown from investments, which can be adjusted in line with inflation, known as the 4pc rule.

The internet is awash with inspiring Fire stories. One user, a 25-year-old software developer, recently posted in the Reddit group FireUK explaining how he had just hit a £100,000 savings milestone, across Isas, crypto and pensions. He explained his approach is to “shovel as much money as possible into Global All Cap, prioritising Isa over pension for now”. Another, a 37-year-old man with a £1m savings goal, posted about being a third of the way there with assets of £333,000.

But many people who have attempted Fire say it is not worth the sacrifices, or it’s impossible to make work.

James Beckett quickly realised Fire was stopping him doing things he loved. The 33- year- old says he was never one of those saving 80pc of his salary and forgoing any enjoyment whatsoever, but he tried to save 15-20pc of his income. He stashed £1,500 each month in his workplace pension and put the maximum £20,000 in a stocks and shares Isa each year. His end goal was to build a pot of over £1m to allow him to retire in his mid- forties, with about £30,000 in annual income, based on the 4pc rule.

Beckett, who lives in Hertfordshire, says he didn’t find the saving part difficult. The way he looked at it, for every £1,000 saved (plus investment growth), it was a month off his retirement date.

But he quickly became aware of how much he was limiting his lifestyle. One experience he turned down was a weekend in Las Vegas for a stag party of a university friend.

His philosophy shifted after reading Die with Zero, by hedge fund manager Bill Perkins. Rather than “over-spending and under-living” it explores the idea of prioritising memorable experiences and enjoying your money.

Beckett says: “I realised I didn’t want to spend all this time saving to retire early with no purpose.”

He now plans to continue doing something he loves in later life, such as helping people with their finances via his website Moneystocker.com.

For property strategist Ian Davies, 52, from Chester, the maths of Fire just do not add up. Before lockdown he began cutting back on his spending and trying to maximise his income to retire 10 years early, with a good quality of life.

He calculated he would need £1.5m for a retirement income of £5,000 a month, through 4pc drawdown.

But even if he invested 60-70pc of his six-figure salary, he struggled to see how he would get there.

“The UK tax system is so restrictive that even in a good year I couldn’t accelerate my savings enough.”

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