Early Retirement (often associated with the FIRE (Financial Independence, Retire Early) movement) is the dream of leaving the 9-to-5 grind long before the traditional state-mandated age. It’s not about winning the lottery or inheriting a fortune; it’s about achieving Financial Independence through a disciplined approach to saving and investing. The core idea is to accumulate enough income-generating Assets that your portfolio can cover your living expenses indefinitely, freeing you from the necessity of a paycheck. For a value investor, this isn't a get-rich-quick scheme. Instead, it’s the logical conclusion of a patient, long-term strategy: consistently buying quality investments, reinvesting earnings, and letting the magic of Compound Interest build a financial fortress that grants you the ultimate luxury—control over your own time. It transforms retirement from an age you reach into a financial state you achieve.
At its heart, the plan for early retirement is surprisingly simple arithmetic. It boils down to understanding two key concepts: how much you need and how to make it last.
The 4% Rule is a popular guideline used to estimate a safe withdrawal rate from a retirement portfolio. Based on historical US market data, a landmark study found that if you withdraw 4% of your portfolio's initial value in your first year of retirement, and then adjust that amount for inflation each subsequent year, there is a very high probability your money will last for at least 30 years. For example: If you retire with a €1,000,000 portfolio, you could withdraw €40,000 in your first year. If inflation is 2% that year, you would withdraw €40,800 the next year. While it's a rule of thumb and not an ironclad guarantee, it provides an excellent framework for planning.
Your “FIRE Number” is the size of the investment portfolio you need to achieve financial independence. It's the destination on your financial map. Using the 4% Rule, you can calculate it easily: Your FIRE Number = Your Annual Living Expenses x 25 (This is simply the inverse of the 4% rule, since 1 / 0.04 = 25). First, track your spending to get a realistic picture of your annual expenses. Let's say you live comfortably on €50,000 per year. Your target number would be: €50,000 x 25 = €1,250,000 This €1.25 million is the amount you need to have invested. Once you hit that number, your portfolio, in theory, can generate enough income to cover your €50,000 annual expenses forever.
Achieving this goal requires a powerful, focused strategy. It's a three-legged stool: saving aggressively, investing wisely, and, if possible, increasing your income.
The single most powerful lever you can pull is your Savings Rate—the percentage of your after-tax income that you save and invest. While conventional wisdom suggests saving 10-15%, early retirement hopefuls often aim for 50% or even higher. This isn't about being cheap; it's about intentional spending. You ruthlessly cut costs on things that don't bring you joy (like a brand-new car or daily lattes) to free up capital for your investment army. A higher savings rate not only builds your portfolio faster but also trains you to live on less, thereby reducing your ultimate FIRE Number.
This is where the Capipedia philosophy shines. Getting to early retirement isn't about gambling on speculative fads. It's about a steady, intelligent investment process.
For a value investor, early retirement isn't an escape from a life you hate. It is the ultimate expression of financial freedom—the final, most valuable dividend paid out after years of disciplined capital allocation. It's about achieving the status that icons like Warren Buffett enjoy: the ability to structure your days around your passions, not your financial obligations. For many, this doesn't mean stopping work entirely. It might mean starting a passion business, dedicating your life to a cause you believe in, or simply having the “F-You money” to walk away from any situation that compromises your integrity or happiness. Ultimately, early retirement is not the end of a productive life. It is the beginning of a life designed entirely by you, for you—a freedom purchased with patience, discipline, and the quiet, persistent wisdom of value investing.