Flamingo FI is a funky remix of the best parts of three different retirement lifestyles – Semi-Retirement, Early Retirement (FIRE) and Traditional Retirement.
Soon after we started our journey towards Financial Independence, it became clear to us that we didn’t want to be chained to our desks until we hit our FIRE number. We had started our journey to Financial Independence in our 30s and wanted to make up for lost time. What we were looking for is a more flexible and efficient approach. We wanted to find the fastest way out of the rat race that would still take us to FIRE eventually. Additionally, we wanted to give ourselves the option to enjoy a traditional retirement later on in life.
So we cherry-picked our favourite parts of different retirement strategies and combined them into one plan that meets all of the requirements mentioned above.
Enter Flamingo FI.
Here are the four phases of our approach:
Phase 1 – Accumulation:
This is the phase in which you accumulate your nest egg. Full-time work, frugality, saving and investing – you know the drill. The standard FIRE formula (aka the 4% rule) prescribes an accumulation phase that is complete once your nest egg equals 25x your annual living expenses. With Flamingo FI, you can cut your accumulation phase short. You get to quit your full-time job after just a few years of saving hard – when you have about half your desired FIRE nest egg. Let’s look at an example: If your annual expenses are $40,000 per year, you have reached this milestone when you have accumulated a nest egg of $500,000. This is the first major milestone of Flamingo FI.
Phase 2 – Semi-Retirement:
With Flamingo FI, we replace the second half of the accumulation phase with an extended period of semi-retirement. During this period, your nest egg keeps growing in the background. Once you have accumulated half of your FIRE number, you can now stop adding to your nest egg and are free to semi-retire. You now only need to earn enough to pay for your living expenses.
In the meantime, your nest egg does the heavy lifting for you. All you have to do is enjoy life and wait until it has doubled (to 25x your annual living expenses). If your inflation-adjusted investment returns are 7% per year, your nest egg will double over the next 10 years. Once your nest egg has doubled, you are financially independent.
Phase 3 – Financial Independence (FIRE):
Once you reach your FIRE number (end of Phase 2), you can stop working and start withdrawing 4% annually for as long as you like. At this stage, work becomes optional. Alternatively, if you happen to enjoy your semi-retirement job, you could continue working part-time to allow your nest egg to grow even bigger. The choice you make in this phase impacts the lifestyle you will be able to enjoy when you get to Phase 4.
Phase 4 – Traditional Retirement (optional):
In this phase, you have the option to do what people do in traditional retirement. You can upgrade your lifestyle a fair bit and draw down your nest egg. Traditional retirement plans usually use a withdrawal rate of 5-6% for a 25-year retirement, so if you choose to draw down your nest egg, you can live it up in your golden years. This phase is optional of course. If you want to keep your nest egg intact in order to pass it on to your children one day, just stick with the 4% withdrawal rate once you stop working. The longer you continue doing some form of paid work during Phase 3, the more luxurious your retirement lifestlyle will be once you start withdrawing from your nest egg.
There you go – the four Phases of Flamingo FI!
In part 2 of this post we’ll explore the strategy in more detail, discuss who Flamingo FI is for and why you should consider it.