Some people wait until they are in their 60s before they retire, but there is a growing trend of people who want to retire much earlier. Some people in this group also want to live comfortable lifestyles when they retire early instead of penny-pinching.

A few years ago, a Redditor posted about his journey to a fat FIRE, meaning the couple retires early and still spends a lot each year on their lifestyle. The couple earns $620,000 per year in pre-tax income and had a $600,000 net worth at the time of posting.

The couple aimed to fat FIRE in five years and attempt 1-2 startups after fat FIRE. The couple also isn’t sure where they want to retire. While they work in the U.S., they have no family ties and can opt for another country that offers a lower cost of living. Their primary investments are QQQ and SPY.

The couple anticipates spending $120k/yr after they fat FIRE, but does it make sense to retire in five years with a $600,000 net worth? I’ll share my thoughts, but for complex matters, it’s often a good idea to speak with a financial advisor.

Holding Firm in a Volatile Market

The Redditor mentions in the post that it hasn’t always been easy to hold on to their stocks. He mentioned that rising markets make him cautious about investing additional funds, and volatility during the pandemic also made him more prone to hoard cash.

Most people who want to retire early must stay invested in financial markets over the long run. Eventually, your money grows faster than you can earn it, and your annual returns outpace your expenses.

Index funds make it easier to stick with your investments during volatile markets. These funds are automatically diversified, and some of them have more than 100 stocks. It’s more stressful to remain in volatile markets if you pick individual stocks, especially if you don’t want to look at your portfolio every day. 

Individuals who appreciate long-term investing but also don’t like volatility may want to commit to less liquid assets like real estate. It takes more time to sell real estate than it takes to sell stocks, but you also have to visit your properties regularly. Not everyone wants their investment portfolio to turn into a full-time job.

Reverse Engineering a $120k Annual Withdrawal

The Redditor mentions $120,000 as the fat FIRE target income. This fat FIRE income also comes with an annual withdrawal percentage. Knowing how much you want to withdraw from your portfolio each year determines your target net worth.

For instance, if the Redditor wants to make 4% withdrawals, they would need a $3 million portfolio. A lower withdrawal rate requires a larger portfolio, but a higher target also reduces risk and gives you more financial flexibility. 

A $600,000 net worth puts the couple 20% on the way to a $3 million portfolio. A combined pre-tax income of $620,000 gives them a lot to invest, especially since they only spend $60,000 per year. 

Moving to an Area with a Lower Cost of Living

Relocating to an area with a low cost of living will make it easier for the couple to retire in five years. More affordable locations give your money more room to stretch. 

It’s easier to make these types of moves if you don’t have family ties. However, a good friend network can continue to grow within five years. Some people continue to live in high-cost areas because they don’t want to start over with friend groups.

It’s important to insert yourself into a community if you relocate for fat FIRE. If you are on the fence about leaving your community for a cheaper location, you may want to save up as if you will stay in your expensive area. It’s better to have the option instead of feeling forced out due to overstretching your fat FIRE funds.

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