Unlocking Early Retirement: The FIRE Movement in Canada

Did you know there's no rule that says you have to wait until 65 to retire? In fact, many Canadians are now choosing to leave the workforce much earlier, embracing a new chapter in life. Among these early retirees is a growing number of young people who are pushing the boundaries even further. They're aiming to retire in their 40s, or even their 30s, under a movement known as FIRE—Financial Independence, Retire Early. 

These ambitious individuals believe it's possible to achieve financial freedom decades before the traditional retirement age. But how feasible is it to retire at 45 or even 35? Let’s explore the FIRE movement and see if it could be a good fit for you. 

What Is the Financial Independence, Retire Early (FIRE) Movement? 

In a nutshell, the goal of the FIRE movement (sometimes written as fi/re) is to save and invest aggressively—somewhere between 50–75% of your income—so you can retire sometime in your 30s or 40s. 

You need to save at least half of your income just to have a chance to make this happen. (Or live in a 1990s sitcom world where no one seems to have to work for a living.) 

So, how do people who are part of the FIRE movement save that much money? They’re always looking to do two things: keep their expenses extremely low and find ways to raise their income. 

The basic idea is that the higher your income and the lower your expenses, the faster you can reach financial independence. Think gazelle intensity—except the gazelle is on fire. 

For those in the FIRE movement, financial independence doesn’t just mean sitting on some tropical beach or playing golf all the time. It means reaching the point where you don’t have to work a full-time job if you don’t want to. You can scale back to a part-time job or stop working altogether. The choice is yours . . . imagine that! 

What We Can Learn From the FIRE Movement 

We have mixed feelings about the FIRE movement, but the one thing we can get behind 100% is the focus and intensity these people have toward reaching their retirement dreams. And no matter where you are on your money journey, you can learn some stuff from the FIRE movement: 

  1. Start Dreaming and Planning for Retirement 

The best thing about the FIRE movement is that it’s getting younger workers to start thinking about retirement—especially since only 59% of Canadians aged 35–54 (and only 43% aged 18–34) have any type of retirement account. Don’t be afraid to dream. Write down what you want your retirement to look like and make a plan to get there. If you’re married, sit down and dream with your spouse. When you write down your retirement dreams and give them a timeline, those dreams become attainable goals. 

2. Find Ways to Keep Your Expenses Low  

FIRE followers take the time to look at where their money is going. That means they have a budget and stick to it! They know the difference between wants and needs, keep track of their monthly expenses, and cut out any spending that doesn’t make sense for them. 

Saving a few dollars here and there really adds up over time. If you have the discipline to slash unnecessary expenses out of your budget, that extra money will help you make serious progress toward your retirement goals. Because let’s be real, that Mediterranean cruise you and your spouse have been dreaming about isn’t going to pay for itself. 

3. Look for Ways to Boost Your Income 

Your income is your most powerful wealth-building tool. And if you want to retire early—or really early—you have to get creative with making extra cash. There’s no way around it. But you can increase your income in lots of ways! Maybe you’re on a career path that’ll lead to that six-figure salary. Or maybe you’ve got a side hustle that you’re turning into a small business on nights and weekends. It could mean driving for Uber for a while or saving up to buy a rental property. 

Whatever that looks like for you, additional income will play a huge role in helping you retire early. You might have to work a whole lot now to work a lot less later. 

4. Make Saving and Investing a Priority  

If you want to retire (early or otherwise), you have to save and invest—no ifs, no buts, no coconuts. That’s why folks in the FIRE movement are radical about throwing huge chunks of their income toward their retirement. 

But the good news is, you don’t have to save half your income (or more) to reach your retirement goals! You should start by investing 15% of your income into tax-advantaged retirement savings accounts like RRSPs and TFSAs. 

The key is to get into a regular habit of saving and investing every single month. When you do that, time and compound growth will work for you. And that’s a great thing. 

After you knock out some of your other money goals, like paying off your mortgage early (which you can do if you’re investing 15% instead of 50% of your income), you can start investing more. 

Why the FIRE Movement May Not Be for Everyone 

The first big barrier to following the FIRE movement is having a large income (and we mean large). No matter how much you cut down your lifestyle, it’s going to take a big income—probably at least in the six-figure range—to save enough to retire before your 40th birthday. 

But that shouldn’t discourage you from building wealth—anyone can do it! According to studies, one-third of millionaires never had a six-figure household income in a single year. 

No matter what kind of career or salary you have right now, don’t fall for the myth that you need a high-paying job to build the wealth you need to enjoy a worry-free retirement. Anyone can become a millionaire—it just takes time. 

If you want to learn more about the proven path that has helped thousands of Canadians become millionaires, consider seeking advice and guidance from a money coaching service. 

The Roadmap to Early Retirement 

Whether your goal is to retire at age 65 or 35, you need a plan. You have to know how much money you’ll need in order to retire when you want—and how much to save each month to get there. 

This step-by-step plan will help put you on the path to early retirement: 

Step 1: Get Out of Debt and Finish Your Emergency Fund 

Debt is holding back millions of people from saving for retirement. In fact, millennials in their 30s have been piling on debt at a historic rate since the pandemic began.  

That’s why you have to get focused. Cut up those credit cards and kick Sallie Mae out of your life for good—and give it everything you’ve got. 

Once you’re debt-free and before you start investing for retirement, it’s time to build up an emergency fund. When you have enough money in a savings account to cover 3–6 months of expenses, you won’t have to worry about a broken air conditioner or a flat tire derailing your investing plan. 

Step 2: Invest 15% into Tax-Advantaged Retirement Accounts 

Here comes the fun part! Now you’re ready to start saving for retirement. Begin by putting 15% of your gross income every month into retirement plans like RRSPs and TFSAs—and be sure to invest your retirement money in mutual funds with a great track record. 

Step 3: Pay Off Your Mortgage Early 

While you’re investing, get intense about paying off your home early. This is a huge goal that’ll give you momentum toward early retirement. Think about it: How much more money would you be able to save for retirement if you didn’t have a house payment? What could you do if you were completely debt-free with a paid-for house? 

Step 4: Invest Beyond 15%—Max Out Your Retirement Accounts 

With a paid-for house and no debt, you can really start to make some headway on your early retirement goals. This is where investing 50% of your income for retirement could actually be possible. First, go back to your RRSP and TFSA and max out your contributions. 

Step 5: Build a Bridge Account—Open a Taxable Investment Account 

If you want to retire early, the bridge account will help you “bridge” the gap between when you want to retire and when you can take the money out of your retirement accounts.  

As you plan your retirement dream, set a retirement age target and figure out how much money you’ll need to live on each year. Then multiply that number by how many years you expect to use your bridge account. That’s how much you should have in your bridge account so you can live comfortably until you’re able to access your retirement accounts without penalty. 

Conclusion 

Whether you're aiming to retire early or simply want to secure a financially stable future, it's crucial to have a clear, actionable plan. The principles of the FIRE movement can offer valuable lessons in financial discipline and goal setting, but remember, it's not a one-size-fits-all approach. Tailor your financial strategy to your unique circumstances and long-term goals. 

Ready to take control of your financial future? Connect with us at Smart Money Solutions and Financial First Steps. Our expert money coaches are here to help you navigate the path to financial independence and early retirement. Let's make your financial dreams a reality!