FIRE Options for Pharmacists

FIRE

Can the FIRE movement be an option for pharmacists? FIRE stands for financial independence (FI). retire early (RE) and is a great option for pharmacists facing burnout.

According to the American Pharmacist Association, a survey from more than 2,000 pharmacists showed that 30% are in the “high distress” category, which makes it more likely that they will experience pharmacist burnout, increase the chances of making an error, wanting to leave their jobs and other stress-related issues.

Pharmacists, did you know that there might be a way to escape this situation?

Traditional FIRE

The idea is to reach financial freedom by calculating your FIRE number. Your FIRE number is your annual expenses time 25 or 30. At this point, you can utilize the 4 percent rule. The rule stipulates that you can withdraw up 4% of your total portfolio and adjust it according to market performances and inflation in subsequent years.

If successfully executed you’ll be able to live off of your investments for the next 25 to 30 years without having to ever work again.

This is a wonderful idea but it requires the person pursuing this method to save and invest aggressively, usually more than 50% of their take-home pay, and other times can go up to as high as 75% to 80%.

The traditional FIRE pursuer has to practice frugality at a high level and invest in index funds through their 401 (k), Roth IRA, and/or taxable brokerage account.

For example, let’s say you have managed to save and invest a $1 million portfolio, applying the 4 percent rule, you can safely withdraw $40,000 a year for the next 25 to 30 years and live off of your investments.

It all boils to this formula:

Save 50% to 70% of your income + frugal living + invest in low-cost index funds = FIRE 

Yahoo Finance

Fat FIRE

Fat FIRE uses the same principles applied above but instead of $40,000 a year, a Fat FIRE pursuer aims for a much more comfortable early retirement.

According to the Financial Samurai: Fat FIRE is the ability to retire early without having to sacrifice spending. He recommends that you need at least a $5 million portfolio generating $200,000 or more from passive income. In this case, you’ll need to delay early retirement until you’re around 50 years old

Basically think of the Fat FIRE lifestyle as when you have enough passive income to replace your pharmacist salary and you can continue to live a lifestyle the same way that you would if you’re still working your full-time job.

Essentially you can enjoy a luxury lifestyle of multiple luxurious vacations and fine dining.

Lean FIRE

On the opposite end, you can go to the extreme and choose lean FIRE. Lean FIRE is when you choose to retire early by living a frugal lifestyle.

The average American spends $5,000 per month or $60,000 a year.

For those pursuing lean FIRE, you have to spend less than the average American. You can probably make work optional with a portfolio of $600,000. Using the 4 percent rule, this portfolio will generate you $24,000 per year.

The keyword for lean FIRE is “bare minimum” lifestyle or a minimalistic approach.

Barista FIRE

Another option to achieve FIRE is Barista FIRE. Barista FIRE is the hybrid approach to the other approaches to FIRE. The name comes from the idea that you can quit your full-time work and work part-time such as Star Bucks.

You’re able to achieve Barista FIRE by saving enough that work is optional but you choose to work that you enjoy. Examples include part-time work at the employer of your choice or join the gig economy.

For pharmacists, in particular, can choose to work part-time or a PRN position since you are no longer dependent on your income to fund your lifestyle.

Coast FIRE

A recent type of FIRE I learned about is Coast FIRE, With coast FIRE, you’ve saved enough money in your investment portfolio that you don’t have to contribute to it anymore.

The idea is that once you reached your “coast to FIRE” number you just need to work part-time or other work to fund your current lifestyle without worry about contributing any more to your retirement accounts.

Through the magic of compound interest, you can reach your FIRE number at your traditional retirement age.

If you’re interested in finding out if you’ve reached your Coast FIRE number you can check out this online coast FIRE calculator.

Final Thoughts

If you’re a pharmacist feeling that dreaded burnt out and looking for a way out. The FIRE movement might be right for you. You have to look at your current age, salary, and lifestyle you’re looking for in order to pick the best approach moving forward.

Just know that you have options and you’re not stuck at your pharmacist job.

For myself personally, I’ve just reached my goal of $1 million net worth at the age of 38 and can choose a few options to move forward,

Currently, my wife and I can choose to pursue traditional FIRE but we haven’t reached our FIRE number yet.

But if we choose too we can pursue lean FIRE, Barista FIRE, and Coast FIRE.

I am leaning toward Barista FIRE. We are planning on going part-time for my wife and PRN for myself while we plot financial moves.

we are looking forward to covert our 401 (k) to our Roth IRA to create a Roth IRA ladder to satisfy the 5-year rule of Roth IRA withdrawals.

If you’re a pharmacist or other healthcare worker reading this blog post, I want to personally thank you and commend you for your contributions toward our fight to end the COVID-19 pandemic.

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