FI stands for Financial Independence.
As an enthusiast of the FIRE movement (Financial Independence and Retire Early), I do plan sometime in the future to be financially free.
Meaning I would reach a financial status that I no longer need to work to pay my bills or be dependant on a pension.
According to a Luxembourg cost of living report, a couple should be able to live on 2700€ a month without kids to support. The value seems very realistic to me according to my own expenses and the report proposed budget. Obvioulsly, there are many variables that can influence that specific budget.
The 4% Rule
Out of the Trinity study, came the famous 4% rule. It basically means that 4% is the annual safe widrawl rate in a portfolio of 100% stocks. In practice, by limiting our living expenses to 4% of the portfolio we should be able to have a safe retirement for 30 years without ever running out of money.
How Much Do I Need to Save?
With the rule of 4% comes the rule of 25. To know how much we need to accumulate in a portfolio before we are able to retire with the magic 4% withdrawl rate, we multiply yearly expenses by 25.
So 2700€ x 12 x 25 = 810,000€
Let’s say I am a bit more relaxed on my spending and I take 3000€ as the monthly expenses amount. Then:
3000€ x 12 x 25 = 900,000€
Then this is my target if I wish to retire early in Luxembourg. But will I stay in Luxembourg?
At this stage, I think it is quite hard to predict. So many things can change in our lives, from one moment to the other, that I do not really think about it. I would prefer a more beach destination for my active retirement but who knows.
There is also another positive factor about moving out of Luxembourg. The FI number calculation is assuming a certain level of yearly expenses. Now if I find a cheaper country to retire, I would be able to retire much earlier.
What is your FI number? I am curious. Let me know in the comments below.