Light Your Retirement F.I.R.E.

How prepared are you for your retirement?

If you’re in your 20s or 30s, you might not even be thinking about it, it’s miles off, after all! But the sooner you start saving, the better it will be for your future, as without a private pension, you’ll be reliant on the State Pension alone. 

Around 17% of people aged 55 and over have no pension savings other than their State Pension. But on average, 21% of Brits say they have no private pension.

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Many of our landlords invest in buy-to-lets to either boost their private pensions or as an alternative, with a view to building a portfolio so they can live off the income, or to sell up when they retire. With Mashroom, they’re able to list their property for free and find all the insurances they need to protect themselves from rent arrears and emergencies, so that their investment is not a stress or a drain on their resources. 

However, there is a growing community who are taking a much shorter term view of retirement, with the FIRE (Financial Independence Retire Early) approach.

What is FIRE movement?

The idea is to save 50-80% of your salary by:

  • Living in cheaper areas
  • Choosing cheaper commuting routes
  • Giving up expensive travel
  • Giving up eating out and takeaways (including takeaway coffees)
  • Not buying treats (treats include food and other items)
  • Taking a ‘make do and mend’ approach to minimise outgoings
  • Give up expensive cosmetic upkeep, like fancy haircuts and manicures

You should also then boost your incomings by:

  • Investing smartly to maximise your savings
  • Starting a side hustle to bring in more income 

FIRE is not for everyone, as it relies heavily on self-denial for several years in order to save every penny you can. 

So is this really a savvy alternative to traditional private pensions or investing in property?

It really depends on you and your income. If you have a large income, then saving 50-80% of it every month can really build up quickly over time. If you’re a tenant, using our Deposit Replacement Scheme can also minimise the usual large outlay when moving, which really helps with budgeting. 

However, if your monthly income leaves you very little after you’ve paid your living expenses, FIRE is unlikely to be a solution that will work for you without high risk investment and lots of additional work. However, Deposit Replacement is likely to be even more of a help when moving, so be sure to check it out.

You have to consider the risks inherent in this approach – a market crash could see your investments slashed. A significant period of illness could also eat into your savings. And at what point do you hope to retire? There’s no way to really know how long your retirement fund will need to last.

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There is also a more morbid element to consider – no one knows what will happen tomorrow. You may well find yourself regretting so much self-denial in your younger years.

So what are your alternatives?

Traditionally, we rely on both a state pension and a private pension.

If you’re aged between 22 and State Pension age (currently 66, but will be increasing again from 2026), you will be automatically enrolled into a pension scheme by your employer. So make sure that you’re aware of which pension scheme you’ve been enrolled into. 

Today’s younger generations change their jobs much more frequently than previous generations, so it’s good practice to keep track of which pension schemes you have, so that your savings don’t end up in the unclaimed pension pot.

When it comes to boosting your future funds, there are alternatives to going without that Friday night takeaway.

We’ve talked before about interesting investments, but property remains a steadfast option. People will always need homes! You can choose to build a portfolio that will allow you to retire early and live off the income, though you will have to be an active landlord and responsive to your tenants needs. 

Alternatively, you can choose to sell off your portfolio and live off the profit.

This is not without its risks, as property prices can fall and you are responsible for paying your buy-to-let mortgages, even if your property falls into a void period or you lose your job. However, the larger your portfolio, the lower the risk as other properties will cover for one in a void period. 

You can also minimise your risk with savvy insurance. Rent Guarantee Insurance ensures that you don’t have to worry about tenants not paying the rent and we’d recommend jumping on this as soon as possible, as it was taken off the shelves for much of the pandemic. Home Emergency Insurance also means you don’t have to worry about broken boilers or burst pipes as fixing them won’t eat into your savings. 

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With property investments instead of FIRE, you are also able to take a much more balanced approach to life. You’ll be able to holiday, treat yourself and eat out, knowing you’ve made significant investments in your future. 

Ultimately, it comes down to what you want from your day-to-day life. It’s ok if the FIRE approach isn’t right for you, as long as you have some plan for your future. And if you don’t – well, there’s no better time to start planning than the present!

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Mashroom is an appointed representative of Adelphi Insurance Brokers Ltd. Adelphi Insurance Brokers Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Their Financial Services Register number is 594620, with permitted business activities being introducing, advising, arranging, dealing as agent, assisting in the administration and performance of general insurance contracts and credit broking in relation to insurance instalment facilities. You may check this on the Financial Services Register by visiting the FCA’s website, or by contacting the FCA on 0800 111 6768