Do you love your job so much that you want to do it all your life?
Do you want to wait until your 60 before you start doing what you really want to do in life?
If you said no to both questions, the F.I.R.E. movement might be for you.
Text summary:
Financial independence retire early (FIRE) is a movement that encourages people to live below their means so they can invest a significant amount of their income towards retirement. Most people use stocks/ ETFs as their primary investment vehicle. I chose real estate.
Why real estate?
(For simplicity, I will be using $5k as your FIRE number; it means you need 5k a month to cover all your expenses)
- You can retire earlier.
Stocks – you need to accumulate $1.5 million to retire (based on 4% withrawal rule)Real estate – you only need $500k invested (assuming 12% cash flow)
- Tax advantages.
Stocks – you pay taxes on your brokerage account; up to 20%. Since goal is to retire early, we will not include 401ks and IRAs.
Real estate – plenty of tax write offs to offset rental income. Multiple ways of avoiding capital gains taxes.
- Leverage.
Stocks – borrowing money to buy stocks is avoided by most due to price volatility.
Real estate – can borrow money with very low interest and 20% downpayment for investment properties. Leverage 1:5, up to 1:20.
- Control.
Stocks – you are at the mercy of the market. No control over the outcome of investment, thus the need to diversify.
Real estate – you are the CEO of your investment. You drive the investment returns, depending on how well you manage it.