Most people who’ve heard of FIRE (Financial Independence Retire Early) believe it’s only for people in their 20’s and 30’s. However, there’s a growing niche within the FIRE movement called Later2FIRE. It’s made up of people who believe they still have enough time to pursue financial independence (FI). They choose FI to learn how to dig themselves out of debt, lower their expenses, increase savings for retirement and find new sources of income. And for those who pursue Later2FIRE, there’s plenty of reason to be optimistic.
Advantages of Later2FIRE
People who are Later2FIRE have a lot going for them.
Peak earnings years
Workers reach their peak earnings years in their late 40s through 50s. Higher earnings enable larger contributions to retirement accounts. Plus those over 50 can add an extra $6,500 per year in “catch-up” contributions, bringing total 401(k) contributions for 2020 to $26,000!
Money saved in a retirement account
According to Nerd Wallet the average 401(k) balance for people 50 – 59 is $174,100 and $42,400 for people 30-39. For someone age 50 who plans to retire at 62, their $174,100 will grow to $300,000. In contrast, it takes over 40 years for $42,400 to reach that amount.
Home ownership is a proven way to build wealth. According to a 2018 study by Harvard, homeowners 50–64 had a net worth of $292,000 in 2016 – almost 60 times that of a same-age renter. Unlike their younger counterparts burdened by student debt, many Later2FIRE were able to afford a home. Having home equity benefits homeowners in several ways: ability to take out a HELOC loan to help in a financial emergency; qualify for a reverse mortgage to increase retirement cash flow; and downsize for less than their equity to reduce debt and provide a cash infusion.
Closer to Social Security eligibility
People in the FIRE community use the 25 times rule to estimate how much money is needed to achieve FI. For example, it takes $1.5 million to achieve FI with projected annual retirement expenses of $60,000. However, when Social Security benefits are factored in, the amount needed to reach FI is considerably lower. Using the current average monthly Social Security benefit of $1,500 reduces the FI number to $1.05 million – a reduction of 30%. ($60,000 – ($1,500 X 12) X 25).
Fewer years of retirement to fund
The Great Recession and current pandemic demonstrate that economic disruptions are not a matter of if but when. The risk of being severely affected by a disruption is higher for people who retire younger because their retirement savings have to last longer.
Plenty of ways to reduce expenses
The American economy is driven by consumer spending. We are conditioned to spend from a very young age. We’re taught to equate success with buying bigger homes, more luxurious cars, expensive toys, dining out and taking lavish vacations. This process is known as lifestyle inflation. The good news is that lifestyle inflation offers many opportunities to lower expenses.
Time to Take Advantage
The best practices of FIRE – building an emergency fund, cutting expenses, investing efficiently and growing income – offer these valuable benefits: being prepared for a financial crisis; having a framework to talk about money and for planning; improved financial literacy; and gaining more control over life. In other words, pursing Later2FIRE increases the odds of having a great retirement.
Whether to pursue Later2FIRE, like all big decisions, is highly personal and situational. At least being “too old” shouldn’t be used as an excuse to stay on the sidelines. On the contrary, there’s still enough time to make the most of your advantages!
 Future value calculator from calculator.net using 5% annual rate of return
 Based on the 1998 Trinity Study