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What to Tell Clients Who Want to Play With FIRE: Advisors' Advice

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In the last few years, advisors have faced a new push by some young clients who want to retire early — very early. The phenomenon is called FIRE, which stands for Financial Independence, Retire Early.

The idea is to save as much as possible in one’s early working years, spend little, and retire as early as their 30s or 40s. This idea certainly puts a twist into financial planning for retirement, especially when the typical 30-year drawdown period could be stretched out to 50 years or more.

“In early February 2021, advisory firms began to see an increased focus on retirement planning and career changing within the client base, ” Angie Herbers, CEO and senior consultant of  Herbers & Co.  told ThinkAdvisor. “ Many of these trends are driven by the reassessment of values clients are having post pandemic; missing family members, changes in how people work, desire to move to lower cost of living areas, etc. We are seeing many advisory firms double down on financial planning and psychology tools to help clients reassess their values.”

But issues arise, such as limited time working means any Social Security benefits are severely reduced. Perhaps it’s the younger generations’ way of showing they aren’t relying on the government program to help them as they age.

Other considerations: There will be less time to actually invest for retirement. And the amount of income to be saved, which is estimated around 15% for most workers, is pumped up to as much as 75%.

Further, spending has to be reduced dramatically. This is all the more difficult for investors who face five- to six-digit school loan debt.

In the end, as one advisor noted, a FIRE disciple needs to learn “to live like a monk.”

We asked advisors through the Financial Planning Association and the XY Planning Network how they respond to clients who come to them with FIRE in their belly. Their responses were filled with caution as well as promise — that is, clients should focus on the “FI” part and learn how they can attain financial independence and better habits when it comes to money and savings.

Scroll though the gallery above for their responses.

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