Alliance America Logo Contact About Us Articles Home
someone on a beach enjoying early retirement

Extreme saving, frugal living: Unpacking the Early Retirement Extreme movement

by Alliance America
March 20, 2024


The Early Retirement Extreme (ERE) movement, gaining traction in the realm of personal finance and lifestyle design, represents a paradigm shift in how we view work, money and life's trajectory. Unlike traditional retirement models that envision a life of work until the age of 65 or later, ERE challenges this norm by advocating for a radically early exit from the workforce. The movement has garnered significant attention in recent years, resonating with those who aspire to break free from conventional career paths and attain financial freedom much earlier in life.

ERE is more than just the aspiration to stop working at an early age; it's a comprehensive re-evaluation of one's lifestyle and financial habits. It's about redefining the relationship with money, not as a means to accumulate material wealth but as a tool to gain time and freedom. This revolutionary approach encourages individuals to live more intentionally, making strategic life choices that align with the goal of achieving early financial independence.

What is the Early Retirement Extreme philosophy?

At the heart of the Early Retirement Extreme philosophy is a commitment to extreme saving, prudent investing and a frugal lifestyle. This isn't about mere penny-pinching or living a life of deprivation; it's a deliberate choice to forgo immediate gratification for the greater goal of long-term financial autonomy.

ERE advocates suggest saving a substantial portion of one’s income, often as much as 50% to 75%, which is a stark contrast to the average saving rate. This aggressive saving strategy accelerates the journey toward accumulating enough wealth to sustain living expenses without needing to work.

The movement promotes a lifestyle that drastically reduces expenses. This involves rethinking consumer habits, minimizing unnecessary expenditures and finding value in simpler living. It's not merely about spending less but about finding fulfillment in a lifestyle that is not dictated by consumerism.

ERE also emphasizes the importance of smart investment choices. The objective is to create a portfolio that generates sufficient passive income to cover living expenses. This could involve a mix of traditional investments like stocks and bonds, or alternative income streams like rental properties or side businesses.

a lady placing coins in a savings jar

Perhaps the most challenging aspect of ERE is the required shift in mindset. It challenges deeply ingrained societal norms about success, work and consumption. Adopting the ERE lifestyle means reevaluating personal values, understanding the difference between wants and needs and finding satisfaction in life beyond material possessions.

ERE extends beyond finances. It's a holistic approach to life that questions traditional career trajectories and life choices. It encourages individuals to think critically about what they truly value and how they want to spend their time, especially during the prime years of their life.

In essence, ERE is not just a financial strategy but a comprehensive life philosophy. It advocates for a life where financial decisions are in service of personal freedom and autonomy, rather than a life structured around work with the hope of eventual retirement. This article delves deeper into the nuances of this movement, exploring its benefits, challenges and how it fundamentally differs from traditional approaches to retirement planning.

Pros of the Early Retirement Extreme movement

One of the most attractive aspects of ERE is achieving financial independence at a relatively young age, often in one's 30s or 40s. This early liberation from the need to work for a living is a profound shift from the norm, allowing individuals to pursue life on their own terms.

With financial independence comes a significant reduction in long-term financial stress. Knowing that you have enough savings and investments to sustain your lifestyle can bring immense peace of mind.

Freed from the constraints of a 9-to-5 job, individuals can dedicate time to personal interests, hobbies and passions that might have been sidelined due to work commitments. ERE provides the flexibility to structure one’s day and life without the constraints of a traditional job. This control over time is invaluable, allowing for travel, exploration and personal growth. Early retirement means the freedom to choose how to spend one’s time, whether it’s engaging in leisure activities, pursuing educational pursuits or starting a passion project.

The movement also has an environmental and social impact. Because the ERE lifestyle often involves living minimally and reducing consumption, it can have a positive environmental impact due to lower personal carbon footprints.

Also, with more free time, individuals can engage more deeply with their communities and spend more quality time with family, strengthening social bonds and creating a sense of fulfillment.

Cons of the Early Retirement Extreme movement

ERE requires a stringent approach to budgeting and saving, often necessitating cutting costs to an extreme degree. Maintaining such a high level of financial discipline over an extended period can be challenging and may not be sustainable for everyone.

There’s a danger of underestimating future costs, particularly health care expenses, which can escalate with age. This may lead to financial instability in later years.

There also are negative lifestyle and social implications, such as the potential for social isolation. Living a frugal lifestyle to save for early retirement can sometimes lead to feeling out of sync with peers who may have different spending habits.

Also, adhering to a strict budget can create discrepancies in lifestyle and experiences compared to friends and family, potentially impacting relationships.

Meanwhile, leaving a career, especially one that has been a significant part of one's identity, can lead to an identity crisis. Finding new purpose and fulfillment in post-career life can be a significant challenge for early retirees. Transitioning from a structured work life to the freedom of early retirement can be psychologically jarring, requiring adjustments to one’s daily routines and sense of self.

In short, while the Early Retirement Extreme movement offers the enticing prospect of financial freedom and the ability to live life on one's own terms, it comes with substantial challenges. The requirement for rigorous financial discipline, potential for social and psychological impacts and the risk of financial shortfalls are significant considerations for anyone contemplating this lifestyle.

How can I implement an ERE strategy?

someone using a calculator to budget

The journey toward Early Retirement Extreme is a meticulous process that demands careful financial planning, strategic investment and a balanced approach to lifestyle choices. Here’s a closer look at how to effectively implement an ERE strategy:

  • Assessing current financial status. Begin by thoroughly evaluating your current financial situation – income, expenses, debts and savings. Understanding where you stand financially is crucial for setting realistic ERE goals.

  • Long-term financial forecasting. Project your future financial needs, considering factors like inflation, potential health care costs and lifestyle changes. This helps in determining the total savings required to sustain post-retirement life.

  • Creating a comprehensive budget. Break down your expenses into categories and identify which are essential and which can be reduced or eliminated. The goal is to minimize unnecessary expenditures without compromising essential needs.

  • Setting savings goals. Based on your expense analysis, set aggressive but achievable savings goals. This often means saving a substantial portion of your income, far above traditional savings rates.

  • Diversifying investments. Invest in a diversified portfolio that can include stocks, bonds, real estate or other income-generating assets. The key is to choose investments that align with your risk tolerance and have a history of stable returns.

  • Building passive income streams. Consider creating passive income sources, such as rental properties or dividend-generating stocks, which can provide ongoing income during retirement.

  • Mindful spending. Frugality is a cornerstone of ERE, but it should be practiced mindfully. It’s about making informed spending decisions that align with your values and long-term goals, not merely cutting costs indiscriminately.

  • Investing in experiences and relationships. While saving aggressively, don’t overlook the importance of experiences and relationships that contribute to your happiness and well-being. Budget for activities and experiences that enrich your life.

  • Regular financial reviews. Periodically review and adjust your financial plan and budget to ensure you are on track to meet your ERE goals. Life circumstances can change, requiring adjustments to your savings and investment strategies.

  • Adapting to changing needs. Be prepared to adapt your strategy as your needs and goals evolve over time. Flexibility is key to successfully implementing an ERE lifestyle.

  • Lifestyle considerations. Consider how your lifestyle will change post-retirement. Plan for how you’ll spend your time, pursue interests and maintain social connections.

  • Emotional readiness. Ensure that you are emotionally prepared for the significant lifestyle shift that comes with early retirement. It’s important to have a plan for finding purpose and fulfillment outside of the traditional work environment.

In essence, embarking on an ERE journey is not just about financial preparation; it’s a holistic approach that encompasses every aspect of your life. It requires a blend of disciplined saving, intelligent investing and a conscious approach to living that balances frugality with enjoyment of life. With careful planning and a commitment to your long-term vision, achieving early financial independence and a fulfilling post-retirement life is a realistic goal.

Alternatives to the Early Retirement Extreme movement

While the Early Retirement Extreme movement offers a compelling pathway to financial independence, it might not align with everyone's goals or lifestyle preferences. For those seeking a less radical approach to early retirement, several alternatives can be explored that still embrace the core principles of financial independence and early retirement but in a more moderate form.

Instead of the high savings rate typically advocated by ERE, individuals can opt for a more moderate saving plan that balances present-day enjoyment with future financial security. Adopting some elements of minimalism and frugality without the extremity of ERE can still lead to significant financial savings while allowing for a comfortable lifestyle.

someone buying a coffee

Rather than an abrupt exit from the workforce, a gradual transition can be planned, such as shifting to part-time work or taking on freelance projects that allow for more personal freedom while still generating income.

Combining savings strategies is another option. Utilizing traditional retirement savings accounts like 401(k)s and IRAs in conjunction with ERE savings methods can provide a more diversified and secure financial foundation for early retirement.

A balanced investment approach is another strategy. A mix of aggressive and conservative investment strategies can offer the growth potential needed for early retirement while mitigating risk. In addition, maximizing employer benefits such as matching contributions to retirement funds and health savings accounts can complement an ERE-style approach to early retirement.

There are other early retirement philosophies to consider. They include:

  • Financial Independence, Retire Early (FIRE) movement. Similar to ERE but typically less extreme, the FIRE movement focuses on saving a substantial portion of income and investing to achieve financial independence and the option of early retirement.

  • Coast FIRE. This strategy involves saving aggressively in the early years of one's career so that, even without additional savings, the existing investments will grow enough to fund retirement by traditional age.

  • Barista FIRE. Under this approach, individuals save enough to cover a significant portion of their retirement expenses and then work part-time jobs to cover the remaining costs, allowing for an earlier exit from full-time work.


The Early Retirement Extreme movement represents a transformative approach to personal finance and lifestyle, one that challenges traditional notions of work, money and retirement. Its growing popularity underscores a desire among many to redefine success and find fulfillment beyond the conventional work-until-65 paradigm. ERE is not just about the financial aspect of retiring early; it's a holistic reimagining of life's priorities, where financial independence becomes a means to greater autonomy and self-determination.

However, the path to ERE is not without its challenges. It demands a significant shift in mindset, from prioritizing savings over consumption to embracing a frugal, minimalist lifestyle. The journey requires rigorous financial discipline, strategic investment and a willingness to forego certain comforts and societal norms. For those who embark on this path, the rewards can be substantial – financial freedom at a young age, the flexibility to pursue passions and the opportunity to live life on one's own terms.

Yet, ERE may not be suitable for everyone. Its demands and lifestyle changes can be daunting. For those who find the ERE approach too radical, there are alternatives that offer a more balanced path to early retirement. Strategies like moderating the ERE principles, integrating them with traditional retirement planning or exploring other early retirement philosophies can provide a more personalized route to financial independence.

In summary, the ERE movement invites us to reconsider our relationship with work, money and life itself. It offers a compelling vision of early retirement, but one that requires careful consideration, planning and a readiness to embrace a lifestyle that defies conventional norms. Whether ERE is the right choice depends on individual circumstances, goals and values. What's clear is that the movement has sparked a broader conversation about financial independence and living a life that aligns with one's deepest values and aspirations. As with any significant life decision, it's essential to weigh the pros and cons and consider personal circumstances before embarking on the path to Early Retirement Extreme.

Alliance America can help

Alliance America is an insurance and financial services company dedicated to the art of personal financial planning. Our financial professionals can assist you in maximizing your retirement resources and achieving your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.

A mother reading a book with her daughter

Your legacy is vastly more than an amount of money left to your surviving beneficiaries. Part your legacy can be the example of a life well-lived that’s achieved through proper planning.

A senior couple stressed over tax liabilities

Too many people enter retirement with burdensome mortgages, car payments and credit-card debt that they’ve amassed during their working years. Proper management of these liabilities is fundamental to your current and future financial viability.

A daughter hugging her mother

Financial planning often is motivated by our love for our life partners, children, family members and friends.

Using a calculator to calculate taxes

Taxes have a significant impact your finances and can siphon assets unless you have a prudent approach to meet your objectives.