The F.I.R.E. movement to gain financial independence and retire early may be trending, but there are pros and cons to retiring early. Committing to extreme frugality to save more money faster is not for everyone, and the amount of money saved toward retirement may not be enough. As people manage to live longer, even with the addition of recurring fixed income payments, it is invaluable to evaluate the pros and cons of early retirement.

Mind your percentages

One way to know if you have enough money stowed away to live comfortably retire for a year is to do some basic math. Take the amount that you have in an account, multiply it by 3%, and see if it’s enough to meet your needs and wants for a full year.

If you don’t have enough money after this simple calculation, you should hold off on retiring early. Ideally, most retired persons should be able to survive off of withdrawals of 3% from investments, savings, or another source of income for annual living expenses.

Going the distance

When you retire, expect to survive off of the money stashed away for a minimum of 30 years. Adults should be aware that their golden years could surpass expectations, and then you will need more money.

Retiring early may mean keeping a part-time job to enjoy some cash flow to supplement fixed income, or may require a severely reduced quality of life to cut expenses. Consider carefully the standard of living you expect to enjoy during retirement, and the cost of housing, food, utilities, and inflation’s impact on your savings.

Downgraded living

If you want to make the money move to retire early, you have to understand the risks involved and pay yourself first. You can’t count on social security, pensions, or an IRA to fully support your needs.

Typically, most early retirement plans project living in extreme frugality, with near poverty level subsistence. To enjoy a better quality of life when retired, you should aim to earn more than you need while active working, so you can save and invest a higher percentage of your income. Be patient about choosing to retire early, so you’ll have a fatter nest egg to cushion your fall.