One piece of feedback from the recent Money Flamingo reader survey surprised me. Many of you commented that I don’t write enough about our signature “type” of Financial Independence – Flamingo FI.
The reason why I don’t write about the math and mechanics behind Flamingo FI that often is that it is a really simple concept. In fact, I’ve summarised everything you need to know about it in this 2018 article: Flamingo FIRE – The Best Path to Financial Independence?
We started working towards Flamingo FI in 2016 and got there in 2020. And to this day, I still feel that Flamingo FI is the ultimate financial independence sweet spot. It’s achievable. It means you have the hardest part of the journey behind you. It gives you options early. It takes you to FI in 10-15 years (while working part-time and without saving!).
I know many of you have changed your FIRE plans and are now working towards Flamingo FI and semi-retirement. So I agree, it’s time for another post on this strategy.
Today we’ll talk about the shockingly simple math behind Flamingo FI.
But first, let me share how I came up with the idea to cut our FIRE journey in half.
A Short History of Flamingo FI
In late 2015 and early 2016, I spent a lot of time reading books on investing as well as some of the earlier FIRE blogs (all US-based at that time).
Two concepts that were discussed a lot in these books and blog posts stood out to me. Learning about them eventually led to my lightbulb moment:
- Starting early (to use the power of compound interest)
- The ‘Rule of 72’.
The Power of Compound Interest and Doing Nothing
In one of the books, there was a table comparing two investors and the impact starting early has on their wealth creation journeys over time. This table had a massive impact on me. I’ve since seen variations of the same table in many books and articles. It usually looks something like this:
Our investors in this example are called Lucy and Daniel. Lucy starts investing $5,000 per year for 10 years at age 21. After that, she stops saving altogether. At age 60, she has a whopping $1,390,493 – thanks to the power of compound interest.
Daniel, on the other hand, does not start investing until age 31. He also invests $5,000 per year but doesn’t stop for the next 30 years. At age 60, his portfolio has a value of $822,470.
The return assumptions for these types of examples are usually pretty high. I’ve used 10% per annum for illustration purposes, and I’ve seen others use 12%. While they are very simplistic, comparison tables like this do a great job of demonstrating the power of compound interest.
They are typically used to show the importance of starting early (which I don’t necessarily agree with, but that’s probably a story for another article).
My key takeaway was a different one: Why not work hard and save as much as possible for a few years to front-load my savings and then do what Lucy does in the chart – relax and wait?
These days we refer to this idea as “coasting” in the FIRE scene. But back then, I just thought this was a chance to exit the rat race early – hiding in plain sight.
It was around the same time that I realised that full retirement was not actually my goal. I just wanted to have more time and autonomy, so this seemed like the perfect solution.
The Rule of 72 – Just Wait for Your Money to Double
The Flamingo FI concept is based on the ‘rule of 72’.
What is the Rule of 72?
The Rule of 72 is a quick and easy way to figure out how long it will take for your investments to double. You simply divide 72 by the annual return rate of your investments. The result tells you how many years it will take for your portfolio value to double.
Example for a 7% annual return: 72/7 = 10.29 years.
The FI blogs I read at the time discussed the rule of 72 a lot (along with the famous 4% rule).
When I learned about it, the penny dropped. Why not combine the Rule of 72 with the power of compound interest to cut my FIRE journey short?
I would save exactly half my FIRE number and then just wait for it to double. Flamingo FI was born.
If you didn’t know the story behind the name ‘Flamingo FI’, you’ve probably figured it out by now – it’s FIRE standing on one leg, flamingo-style. 🙂
A Simple Plan
To summarise, this is what the Flamingo FI plan looks like:
- Save and invest until you’ve reached half your FIRE number (Flamingo FI)
- Stop saving and focus on enjoying life while your nest egg compounds in the background
- Wait for your nest egg to double just one single time
- Reach Financial Independence (with the option to retire early)
So, What Is the Shockingly Simple Math Behind Flamingo FI?
I’m sure most of you are aware that the title of this post was inspired by one of the most impactful FIRE articles ever written: The Shockingly Simple Math Behind Early Retirement by Mr Money Mustache. In this article, Pete discusses a crucial element of the accumulation phase – your savings rate. This definitely is one of the most important metrics during the first step of the Flamingo FI process described above.
Once you have completed this first step, you can stop saving and investing. This means your savings rate could technically be 0%). With Flamingo FI, the second half of your FIRE journey is dependent on compound interest. And compound interest, in turn, depends on market performance.
Since you are just waiting for your portfolio to double one time, the math behind Flamingo FI comes down to the very simple rule of 72. This is how many years it will take you to reach full FI based on your average annual investment returns:
Please note that the returns listed above are inflation-adjusted for simplicity.
Shockingly simple, right? 🙂
I’ve included a wide range of return percentages in the chart to show the difference a higher return can make.
Personally, we are hoping for 7% (getting us to full FI in around 10 years), and believe 5% is very realistic given our personal investment structure and risk profile (this would get us to full FI in 15 years).
Since we stopped saving and investing in 2020, we have actually achieved a much higher average annual return rate than expected (even factoring in the recent market drops). So we might get to full FI a lot sooner than planned. But I doubt this will make much of a difference to us. We are enjoying our semi-retired life so much that we probably won’t change a thing when we reach full FI.
Final Thoughts
The math behind Flamingo FI is super simple. However, the benefits of slowing down, working less and having more time for the things you love are hard to quantify. This is something we should all spend a little more time thinking about and planning for, no matter which “type” of FI we are pursuing.
I’m glad we chose to go down the semi-retirement path when we reached Flamingo FI. Everyone is different, so this might not be the ideal strategy for you and your lifestyle goals. However, I can confidently say it has certainly proven to be the sweet spot for us. No money in the world (or earlier FIRE date) could ever replace the extra time we have since spent with our kids, making memories and focusing on the things that are important to us.
I hope you enjoyed reading about the origin story and math behind Flamingo FI. It’s a very simple concept, but I think that’s what makes it appealing. Sometimes the simplest strategy is the best strategy. 🙂
You can use our free Semi-Retirement Calculator to figure out how long it will take you to get to Flamingo FI (it includes a Coast FI and traditional FIRE calculator as well).
Awesome post! My wife and I love Flamingo FI. Has changed our plan and timeline completely tbh. Yes it’s simple but I have to agree with you that’s what makes it so good. Keep up the great work! Sam
Thanks Sam, glad to hear you like the concept and have applied it to your own plans! 🙂
Love it! Thanks for providing some background, this is a seriously creative way to think about wealth accumulation. Love how meaningful the name is too. I know Flamingo often gets compared to Coast FIRE (I know it’s a variation), but the 10-15 year time frame is sooooo much more attractive than age 65!
Thanks Stephanie! 🙂 I also love Coast FI, but I agree – for us a timeline all the way to the traditional retirement age did not sound very attractive. Everyone is different though.
What about inflation? If someone is planning to retire in 4% making the assumption the market gives them 7% but inflation takes 3% wouldn’t that mean that one should take into account inflation while 🦩? Thus assume their nest egg is going to grow in “real money” by 4%?
The other thing that has me a bit stuck at the minute when considering 🦩 FI is income protection… at the minute we have two full time salaries that are mostly protected by our income protection so should we be unable to work we will still have enough money coming in to cover our costs and keep saving. If we cut back for 🦩 FI then we have smaller or periods of no salary thus nothing to ensure so if we were unable to get back to work all our next egg savings would 🔥 🔥.
Clear as mud?
I’d love to know others thoughts on these ideas/concerns and how they are planning around them.
Keep up the great work! 😃
Hi Emma,
We use inflation-adjusted return numbers for all our calculations. I wrote more about this in the original Flamingo FI article:
So the 7% we are hoping for (and 5% we are expecting) are AFTER inflation. Remember, inflation is not always as high as it is now and we are working with long-term averages. Everyone makes different assumptions about their returns and inflation, so your Flamingo FI timeline might look different.
Regarding the income insurance – why wouldn’t you just keep your insurance after you hit Flamingo FI (and potentially lower the covered amount once you don’t need the extra savings)? Our insurance has a set monthly amount, regardless of income at the time, not sure if there are different types of policies though.
I hope this makes sense. 🙂
Thanks for the reply! 🦩
Please can you point me in the direction of where you get your fixed income protection?
Keep up the great work!
We bought it inside our super fund, I think contacting your fund is probably a good first step. Otherwise we’ve also had quite a good experience with an insurance broker recently (not for income protection). Good luck!