Smart Investor Malaysia


Retiring Early Thanks to Financial Independence, Have You Heard Of The FIRE Movement?


If you were to ask the average millennial about how early they would be able to retire, chances are you would get varied responses. However, it is unlikely that any of them would be aiming to retire before the age of 50.

That is where the concept of FIRE comes in.

What Is FIRE Movement?

It stands for “financial independence, retire early” and is a growing movement worldwide. In short, proponents of the movement aim to save a large portion of their income (up to 70% or even more!) and aggressively invest in order to hit a set number they feel comfortable with for retirement.

The aim is to hit this number far earlier than traditional work structures after which they become financially independent and can “retire” or pursue work or projects they are passionate about.

Proponents of this movement suggest the “4% rule” as a guideline – the goal is to accumulate 25 years’ worth of annual living expenses through various investments, and withdrawing 4% per annum, assuming it generates at least that much in passive income.

This is unlikely to diminish the portfolio, and individuals that have reached this level can be considered financially independent, with any form of employment or work now optional instead of necessary.

4 Varieties Of FIRE Movement

Fat FIRE: This allows individuals to live a more traditional or typical lifestyle, but also requires saving more than the average retirement investor. It usually allows for luxuries like fancy meals, holidays and gadgets depending on the amount saved up.

Lean FIRE: This model requires a strict commitment to follow a minimalist lifestyle with little expenditure and extreme savings. An individual can achieve this when they have saved and invested 25 times their annual expenses while also spending less than the average person.

Barista FIRE: This form refers to devotees that do not follow a set 9-to-5 job, but do work in some capacity on a part-time basis to cover necessary expenses that would otherwise have them tap into their retirement nest egg.

Coast FIRE: This can also apply to followers that have a part-time job, but who have already saved up enough to fund their retirement and living expenses (thanks to compounding investments), allowing them to “coast” towards retirement.

Julian Ng, co-founder and CEO of robo-advisor Akru, believes that the FIRE movement is intriguing and helps people think beyond the realm of what is considered financial normalcy.

“I thought it not only had interesting financial planning principles but also life angles,” he remarks, adding that FIRE devotees did not have to stick to the concept of only being able to retire when they are older.

Ng believes followers of this movement are tired of being stuck in the rat race and want to work towards other goals that offer fulfilment. Corporate highs to be replaced by personal pursuits and leisure. The latest gadgets and cars substituted with experiences and time with their loved ones.

“I think they plainly want a life. They want to spend time on things that matter like family, friends and their passions. They also value health and emotional wellbeing. In terms of bigger life philosophies, they figured out that they do not need to have caviar and business class all the way. They are a bit minimalist in that sense, although they are also financially very comfortable.” 

Early Retirement?

According to Malaysian law, the minimum age of retirement of an employee in the private sector is 60 years of age. There have been calls to raise this number to 65, meaning that the average person could potentially work for over 40 years before calling it quits – hardly a tantalising prospect to most people.

Although following the FIRE movement potentially offers a way out for weary millennials, not everyone is specifically aiming for an early retirement.

“Personally, I’m aiming for the FI part of FIRE as I don’t plan to retire early,” says Leigh, the founder of popular investing blog Dividend Magic, who aims to have a passive income of RM36,000 a year, most of which is derived from various investment dividends.

“I lived a pretty frugal lifestyle even before learning of FIRE. These habits have been instilled in me since a young age and I have actually been telling myself to spend more often, but on things that genuinely bring me joy. And it will have to be happiness that lasts,” he adds.

This is a notion shared by Lee Sheung Un, communications officer of Affin Hwang Asset Management, who describes himself as a subscriber to a milder version of FIRE.

“Early retirement is not the end goal for me, but rather achieving financial independence,” he says.

“Personally, I aim to save at least 40% of my monthly income which is not quite close to the FIRE benchmark to save at least 70%. I am sure it is possible if I really tried, but I also like spending on my own comfort to save time and avoid stressing about the small things.”

To the average person, the idea of retiring early may sound good on paper, but it is not surprising that many FIRE devotees are not just looking to coast through the rest of their life. Rather, they are aiming for the freedom and time that financial independence unlocks to be able to pursue what fulfils them.

Achieving FIRE In Malaysia?

As a concept originating in the West, the burning question for many will be whether it is possible to achieve financial independence in Malaysia.

Suraya Zainuddin Ringgit Oh Ringgit personal insurance

“FIRE is not realistic for people living in countries with a wide wealth gap,” sighs Suraya Zainudin, the founder of personal finance website

“Mathematically and statistically speaking, the structure simply does not allow the majority of people to reach their financial goals, even modest ones. Unfortunately, Malaysia is one of those countries.”

However, Leigh believes that FIRE is definitely possible but that it is not for everyone as it can be hard or too intensive to keep up with.

“We live in a world of spending and instant gratification. Getting a new phone, signing up for gym memberships all costs money. Not everyone is willing to grind all day and put a hold on spending. And a huge problem in Malaysia is that people are not investing,” he observes.

And while not everyone may be cut out for the FIRE movement, the philosophies and beliefs around it can help to cultivate a healthier understanding and relationship with money, as well as a way to escape traditional ways of thinking.

FIRE Movement: Theory And Reality

The points highlighted above shows how investment formulas are great in theory – but we know real life works out differently. Things start to fall apart when you are faced with unexpected expenses, for example.

What happens if you are suddenly responsible for another dependent – a child, or parent? Or if you lose your job or become incapacitated?

On the positive side, the financial dynamics might change because you inherit a windfall or enjoy a rapid increase in earnings. Any of these instances will alter the time it takes you to reach your desired retirement age.

Neil Walton, Head of Investment Solutions says: “We know the concept of FIRE has spurred some to consider downsizing, retiring, investing and changing their lives. But even for those who do not intend to do anything so radical, FIRE provides a useful blueprint for planning. Good investment will sit on a good financial plan, and that is inevitably about building investments over time to provide an income in the future.”

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