How smart saving makes early retirement possible

[UNITED STATES] Early retirement has often been viewed as a luxury reserved for the wealthy. But increasingly, it’s becoming a realistic goal for anyone willing to be strategic about saving and investing.

While living frugally and carefully tracking spending might not appeal to everyone, adopting some of the tactics championed by early retirees can offer a buffer against market turbulence and accelerate long-term financial growth.

The FIRE movement—short for "Financial Independence, Retire Early"—has gained momentum in recent years, particularly among millennials and Gen Z workers. Shaped by the economic shocks of the 2008 financial crisis and the COVID-19 pandemic, many younger professionals are rethinking traditional career paths and prioritizing financial freedom instead. Online platforms like Reddit’s r/financialindependence and podcasts such as The Mad Fientist have helped spread these principles, making early retirement more accessible and less of a niche concept.

Here are four FIRE-inspired strategies that financial experts say can benefit anyone, whether you plan to retire early or simply want a more secure financial future.

1. Prioritize Saving—Aggressively

A cornerstone of the FIRE philosophy is high savings rates. Followers often invest a significant portion of their income—sometimes more than half—while maintaining a lean lifestyle, regardless of income level.

“If you retire at 55 and live until 85 or 90, that’s a long time in retirement,” said Carol Schleif, chief market strategist at BMO US Wealth Management, in an interview with Business Insider. The goal, she explained, is to maximize your income now in order to enjoy more freedom later. That often means being a more mindful consumer and avoiding the habit of spending every dollar earned.

An offshoot of this approach is "Barista FIRE," where individuals leave full-time jobs but work part-time or flexible gigs to cover day-to-day expenses while their investments continue to grow. This method allows for earlier freedom without requiring a massive retirement fund.

Even those aiming for retirement at the standard age can benefit by increasing contributions to tax-advantaged accounts like 401(k)s or IRAs. These vehicles offer valuable tax breaks while harnessing the power of compound interest.

Of course, increased saving hinges on effective budgeting. “Pick the three or four things that are a priority to you—spend what you want on those,” said Mike Venuto, cofounder and chief investment officer at Tidal Financial Group. “If you focus your budget around what you love rather than what you're giving up, it becomes much easier to let go of less meaningful expenses.”

2. Tune Out Short-Term Market Noise

Seeing your investments drop in value is never pleasant. But those embracing the FIRE mindset understand that market dips are inevitable—and temporary.

A long-term perspective is central to FIRE strategy. The longer your money stays invested, the more opportunity it has to rebound and grow. Despite major downturns like the dot-com crash and the 2008 recession, the S&P 500 has historically averaged annual returns of about 10% over the last 100 years.

“People are worried about short-term issues—falling bond prices, a weaker dollar—but zooming out shows these are just blips,” Schleif said. “The long-term trend still points upward.”

Still, as retirement nears, advisors recommend adjusting risk levels. Near-retirees should reduce their exposure to stocks and increase holdings in fixed-income assets and cash reserves.

“There’s nothing wrong with ‘Vanguard and chill’ if you’re 20 years from retirement,” said Venuto. “But if you’re getting close, it’s smart to play defense.”

3. Build a Diversified Portfolio

Diversification remains one of the most trusted principles in investing. It helps cushion against losses in any one area of the market while allowing participation in growth elsewhere.

“Diversification is like having insurance for your portfolio,” Schleif said. “You don’t buy it when the house is on fire—you plan ahead.”

In addition to the standard mix of stocks and bonds, some FIRE followers explore alternatives like real estate crowdfunding, peer-to-peer lending, or even cryptocurrency. While these options come with higher risk and aren’t necessary for everyone, they reflect the community’s creative approach to wealth-building. Experts advise limiting exposure to such alternatives and focusing primarily on balanced asset classes.

Exchange-traded funds (ETFs) are a go-to tool for many FIRE investors. “For a taxable investor, ETFs usually outperform mutual funds or annuities due to lower fees and better tax efficiency,” Venuto noted. Broad-based mutual funds can still be useful within retirement accounts, but for taxable accounts, ETFs tend to offer better returns.

4. Educate Yourself—and Others

Financial literacy is a pillar of the FIRE movement. Many young adults enter the workforce with limited knowledge about saving, investing, or long-term planning. The FIRE community offers a range of tools—from YouTube channels and Reddit threads to in-person meetups and camps—to help close that gap.

Momentum is also building in schools. States like Florida and Michigan have recently adopted mandatory personal finance education in high schools, a step many advocates hope becomes standard nationwide. In the meantime, FIRE communities continue to provide accessible resources for those eager to learn.

“There’s a push to teach kids about FIRE before they have money,” said Venuto, noting that our culture often encourages spending rather than saving.

Even if you're not fully on board with early retirement, following FIRE influencers or joining financial independence forums can be a low-cost way to pick up practical financial knowledge. And as Schleif noted, much of the FIRE ethos stems from generations shaped by past economic downturns.

“People are trying to learn from one another how to be smarter consumers,” she said. “These habits were born out of watching older generations suffer through financial crises—and wanting something different.”