Analysis of Financial Independence and Retire Early Strategies

Abstract

The thesis is focused on FIRE (Financial Independence, Retire Early) movement and the most common retirement planning guideline. The purpose of this study is to examine the validity and application of the 4% rule, which was initially proposed by William P. Bengen in his article "Determining Withdrawal Rates Using Historical Data" in 1994, in various contexts and scenarios.

The key topic addressed by this research is whether the 4% rule is still relevant and successful in today’s economy, given current factors such as inflation, interest rates, and market volatility. The challenge of sustaining retirement income and achieving financial independence is getting increasingly complicated, requiring an in-depth understanding of the rule’s fundamental concepts and assumptions. Previous research has shown that if the portfolio is well-diversified and contains a mix of stocks and bonds, this strategy may offer a decent and consistent income stream over time. Some researchers, however, have criticized the rule for being overly simplistic and out of date, and they argue that it may not work in certain events, such as periods of high inflation or market downturns.

These findings are significant as they give practical insights and assistance for those pursuing financial independence and long-term retirement security. Individuals may improve their chances of attaining their financial objectives and sustaining an adequate standard of living throughout their retirement years by embracing a more sophisticated and dynamic approach to retirement planning. This study emphasizes the importance of continued education and knowledge of the complexities and problems of retirement planning, as well as the need for more research and innovation in this sector. It is intended to contribute to continuing debates and conversations about Financial Independence, and also to assist individuals in making informed decisions about their retirement planning.