The Secret World of early retirement groups

There is no secret for early retirement. Those who achieve financial independence at a young age do it in the right way.

1. High Income

This group is well paid. I mean, in my experience, most early retirees don't get $500,000. There are always exceptions, but the college graduates I meet earn more than $10,000 from entry-level work.

The key here is to recognize that income is not a major obstacle to early retirement. When you retire at the age of 40 or 50, you don't need to earn more than $100,000. The biggest obstacle so far is spending.

2. They save 50% or more of their income

Many here have given up the idea of early retirement. They can't imagine saving 10 or 20 percent of their income, let alone 50 percent. The idea of saving half your income sounds ridiculous when you're struggling to make ends meet.

First of all, they don't spend money on cars. They live close to the office and can walk, cycle or take public transport. Married people usually buy a cheap car if they have a car.

Second, they live in a modest home relative to their income. They don't suffer from the Big House syndrome, even though their close friends and family live in the 6,000-square-foot Giant's House. Many people bought houses that needed repair sand and renovated themselves over time.

Third, they found a way to enjoy life at a low cost. Instead of spending $5,000 at Disney, they enjoy a week-long camping near their home. Instead of eating out three or four times a week, they enjoy home-cooked meals.

Some people think it's a sacrifice. Those who want to retire early see this way of life as liberating.

3. they maximize retirement accounts

 Early retirees take advantage of tax breaks offered by 401k, 403b, IRAs and other retirement accounts. If the employer provides a matching contribution, they will pay in full to obtain the employer's full matching contribution. When they are at a lower tax bracket, they will pay all of their contributions to the Roth IRA account, which was derived from a 1997 bill pushed by a senator named Roth. Much like traditional IRAs, the biggest difference is when to pay taxes, allowing the public to make more personalized choices and arrangements based on income and employment status. Roth IRA is the first personal income tax (the amount of the deposit is non-tax deductible) and no tax on the amount of the deposit (investment gains and no tax).

At first, this approach seemed inconsistent with early retirement. It is well known that if you withdraw funds from certain retirement accounts before the age of 59.5, the IRS will impose a 10% tax. However, everyone at the FIRE Club knows that there are many ways to withdraw money in advance without penalty.

4. They invest wisely

It is not enough to save a lot of money. You have to invest it wisely. This means investing in a diversified portfolio, most of which should be equities, while paying as little as possible. In fact, this is done in two ways.

First, those who pursue FIRE tend to favour low-cost index funds. Through index funds provided by Vanguard, Fidelity and other companies, you can create a decentralized portfolio with a small amount of money. Here you will find a typical portfolio of mutual fund companies of various funds.

Second, they invest themselves. They know that even paying an investment adviser 1% will lose a lot of wealth. As we've seen, investing in low-cost index funds managed by ourselves is not difficult to be a millionaire in 20 years