Book SummaryEarly Retirement Extreme, by Jacob Lund Fisker

1-Page Summary1-Page Book Summary of Early Retirement Extreme

The modern world lures us into giving away our freedom. The vast majority of adults are caught in an unfulfilling cycle of consumerism: They sell decades of their lives to employers so they can buy consumable goods and status symbols that don’t make them happy. In doing so, they deprive themselves of time they could be spending on the pursuits and people they care about.

As retired astrophysicist Jacob Lund Fisker argues in Early Retirement Extreme, it’s possible to break out of this system through a combination of frugal living, skill-building, and smart financial management. With these strategies, Fisker built a life for himself that allows him to survive on just $7,000 a year. After saving 75% of his...

Early Retirement Extreme Summary The Problem: The Cycle of Consumerism

Fisker argues that the dominant cultural narrative of the modern age influences people to work far more than they need to survive. The average worker believes that the ideal life is to be as busy and productive as possible, earn as much money as they can, and then spend that money on consumer goods. For this reason, as their income increases, they increase their spending in lockstep rather than saving their money and buying back their time by retiring. They don’t question this narrative and end up living unfulfilling lives.

(Shortform note: Some take Fisker’s idea further, arguing that work isn’t just a dominant cultural ideal: It’s the primary religion of the modern age. While Fisker says that most people work to increase their income and buy more consumer goods, writer Derek Thompson points out that many people (particularly white-collar workers) now see the work itself as the prize and the way to fulfill their life purpose. To these workers, saving their income to retire early would be undesirable, as it would mean giving up their ultimate source of meaning in...

Early Retirement Extreme Summary The Goal: Buy an Early Retirement

Fisker explains that you’ve escaped the cycle of consumerism when you’re no longer buying things that won’t make you happy. Once you’ve done this, it’s possible to buy yourself an early retirement and only work as much as you want to.

People differ in how much they want to work. Many choose to pursue total financial freedom as quickly as possible, saving up enough money to never have to work again—a lifestyle that Fisker argues is more attainable than most people believe.

Alternatively, some people may not feel the need to immediately swear off work for the rest of their lives. In this case, Fisker notes that you can save enough so you can partially retire, only needing to work a few hours every week. Another option is to save enough to buy back your freedom in the short term—a mini-retirement, you might say. For example, if you save 87.5% of your income for a year and live off of the other 12.5%, you can quit your job and live off your savings for seven years.

How Do Fisker’s Ideas Fit Into the Broader “Early Retirement” Community?

Fisker’s recommendation to only work as much as you need to is the primary goal of the [FIRE (Financial Independence, Retire Early)...

Early Retirement Extreme Summary Tips for Minimizing Expenses

According to Fisker, most people can do without many things they think they “need.” As you lower your annual expenses, the time it takes to save for retirement drops rapidly. Lowering your expenses not only leaves you with more income to save—it also means you’ll be free of that expense every year you’re retired, so you don’t have to save as much before retiring.

(Shortform note: Fisker suggests cutting your expenses as much as possible, a retirement strategy known online as “Lean FIRE.” However, other early retirement experts advocate a strategy called “Fat FIRE,” which involves aggressively seeking ways to increase your income and delaying your retirement to attain a fund large enough to support a lavish lifestyle after retiring that’s full of travel and other costly experiences. Fat FIRE requires a far greater fund size than Lean FIRE, since (as Fisker explains) recurring expenses require you to save an additional sum for every year of retirement. However, exponential growth from pre-retirement investments arguably makes this more attainable than it might seem.)

Here are Fisker’s three tips on...

Early Retirement Extreme Summary Tips for Diversifying Your Skills

According to Fisker, diversifying your skills is a key component of the early retirement lifestyle. Most people strive to be highly valued in the labor market by specializing in a single area of expertise. However, if you cover your entire cost of living with the income from a single skill, you’ll be especially vulnerable if that income is disrupted. For instance, if new specialists enter your industry and competition becomes fiercer, you may struggle to hold a job in your field—or earn income any other way.

Rather than creating a life for yourself that depends on you profiting from a single specialty, Fisker recommends building a diverse set of skills. This way, you’ll have the skills necessary to get a job in a wide variety of fields, if necessary, making you resilient to disruptions to any one industry.

Uniquely Valuable Skill Combinations

A diverse skill set is arguably even more valuable to employers than Fisker describes. While Fisker asserts that having a variety of skills is valuable primarily because it lets you get jobs in a variety of fields, others argue that [a diverse set of skills is worth more than the sum of its...

Early Retirement Extreme Summary Tips for Investing Savings

To retire as quickly as you can, as Fisker did, all you have to do is save enough money that the fund and investment returns cover your annual expenses for the rest of your life. Given how unpredictable the economy is—in particular, the rate of inflation and performance of your investments—it’s impossible to know with 100% certainty how much money will be enough to last the rest of your life.

As a ballpark estimate that discounts these factors, Fisker assumes a 3% annual return on investment and asserts that if you accumulate a fund that’s 34.33 times your annual expenses, you can retire and live off the investment returns forever. This is because you need enough that a 3% return covers your annual expenses, plus a year’s worth of expenses to spend while your investments earn money (33.33 + 1 = 34.33).

How Much Do You Really Need to Retire?

In the FIRE community, the most popular way to calculate how much you need to save before retirement is the 4% Rule: When your annual expenses are 4% of your total retirement fund, you can retire and survive by withdrawing 4% of that fund every year.

FIRE...

Shortform Exercise: Make Progress Toward Early Retirement

According to Fisker, to retire early you need to minimize your living expenses, diversify your skill set, and invest your savings. Think about how you might make progress toward these three goals.

Brainstorm three different lifestyle adjustments you could make to reduce your living expenses: one that would save an extreme amount of money, one that would save a moderate amount, and an easy one that would save a little. For example, you could sell your house and move into a much cheaper one (extreme), learn to fix your own car instead of going to a mechanic (moderate), or get a library card instead of buying books (easy).