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What Is FIRE! Financial Independence, Retire Early

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Financial Independence, Retire Early (FIRE) is a movement of people who are committed to a program of extreme savings and investment in order to retire far earlier than traditional budgets and retirement plans would allow. FIRE arose from Vicki Robin and Joe Dominguez’s 1992 best-selling book Your Money or Your Life, and came to embody a core premise of the book: Every expense should be evaluated in terms of the number of working hours required to pay for it.



The FIRE retirement movement directly targets the traditional retirement age of 65, as well as the industry that has grown up to encourage people to plan for it. Followers of the FIRE movement hope to be able to quit their jobs and live solely off small withdrawals from their portfolios decades before they reach the age of 65 by devoting the majority of their income to savings.

According to Vox, millennials in particular have embraced the pursuit of a FIRE retirement in recent years. Proponents of the extreme-saving lifestyle work for several years while saving up to 70% of their annual income. When their savings reach approximately 30 times their annual expenses, or approximately $1 million, they may be able to quit their day jobs or retire entirely.

FIRE devotees make small withdrawals from their savings to cover their living expenses after retiring at a young age, typically around 3% to 4% of the balance yearly. This requires extreme diligence to monitor expenses as well as dedication to the maintenance and reallocation of their investments, depending on the size of their savings and desired lifestyle. 2

According to Forbes Advisor, several FIRE retirement variations that dictate the lifestyle the FIRE movement’s devotees are willing and able to maintain have evolved within it.

Fat FIRE—This is for the traditionalist who wants to save significantly more than the average worker but does not want to reduce their current standard of living. It usually requires a high salary as well as aggressive savings and investment strategies to make it work.

Lean FIRE—A strict adherence to minimalist living and extreme savings is required, necessitating a far more restricted lifestyle. Many followers of Lean FIRE live on $25,000 or less per year.

Barista FIRE—For those who want to exist between the two options above. They quit their traditional 9-to-5 jobs but live a less-than-minimalist lifestyle through a combination of part-time work and savings. The former allows them to obtain health insurance, while the latter prevents them from withdrawing funds from their retirement accounts.

Who Is FIRE Really For?

Most people believe that FIRE is only for people with a high income, typically in the six figures. And, if you want to retire in your 30s or 40s, that is most likely the case. However, there is much for everyone to learn from the movement’s principles, which can help people save for their own retirement and even achieve one as early as 40.

Remember that the first part of FIRE stands for financial independence, which, if achieved, can allow you to work at something you enjoy rather than something you have to do. According to the book’s author, FIRE is more than just retiring early; it teaches you how to consume less while living better. 3

Meticulous planning

Everyone should plan for their retirement, but according to a May 2021 report from the Federal Reserve System Board of Governors, one in every four Americans had no retirement savings at all in 2020, while 36% of those who did have savings felt that their retirement plans were off track.

4 The FIRE movement emphasises the importance of having a detailed plan and sticking to it, principles that will help anyone save for retirement and maintain a reasonable emergency fund.

Economic self-control

To achieve a FIRE retirement, you must maximise your income while decreasing your expenses. To retire by 40, you must go to extremes, but everyone can benefit from creating and sticking to a budget while doing everything they can to earn as much money as possible, whether it’s by getting a better job, adding a second one, or creating additional revenue streams through side hustles or owning rental property.

Prudent investment

Nobody can have a secure retirement unless they invest in their retirement savings. FIRE supporters invest a larger portion of their income than the average person. However, the principle of putting aside a set percentage of your monthly income for investment—and starting as early as possible—will allow you to grow your retirement savings to the point where they can provide you with financial security in your later years.

What Exactly Does FIRE Mean?

The acronym FIRE stands for Financial Independence, Retire Early and is a term from the 1992 book Your Money or Your Life by Vicki Robin and Joe Dominguez. A revised and updated version was released in 2008, followed by another in 2018.

According to Robin’s comments, the goal of the book is not to provide a master plan for early retirement; rather, it is to show people how to live well while consuming less in order to have a more rewarding life while wasting less of the world’s resources. Or, as Robin put it, “if you live for having it all, you’ll never have enough.” 3

How Does FIRE Function?

FIRE advocates intend to retire much sooner than the traditional retirement age of 65 by devoting up to 70% of their income to savings while still working full-time. When their savings reach roughly 30 times their annual expenses, or approximately $1 million, they may quit their day jobs or completely retire from all forms of employment.

FIRE devotees make small withdrawals from their savings to cover their living expenses after retiring at a young age, typically around 3% to 4% yearly. FIRE supporters seek to avoid excessive consumption and live a simpler lifestyle both during and after retirement.

How to Determine Your FIRE Number

As soon as I realized that retirement could occur at any age, I set out to calculate our personal FIRE number: the total amount of assets we would need to accumulate in order to live off passive investment income. I came across the Trinity Study, the source of the well-known 4 percent rule, and this simple formula for calculating your FIRE number while researching the best way to calculate this number: Annual Expenses multiplied by 25 = FIRE number

So, if your monthly living expenses are $4,000, your annual expenses are $48,000, and your FIRE number is $48,000 multiplied by 25, or $1.2 million.

However, after further investigation, I felt more at ease with a different withdrawal rate and chose to calculate my FIRE number using the following formula:

Expenses per year x 0.03 = FIRE number

In this case, $4,000 in monthly expenses equals $48,000 divided by.03, or $1.6 million in FIRE. (If you need help keeping track of your expenses, use this Google spreadsheet.) It can assist you in calculating your monthly and annual spending.)

This second formula is based on a more recent Trinity University study. Professors studied sustainable withdrawal rates based on various stock and bond allocations for different retirement horizons using historical market data. The researchers discovered that someone with at least 50% of their investments in stocks could safely withdraw 3% of their investments for 40 years without depleting their investments, which is why we divide by 0.03.

I calculated our expected annual expenses at retirement by listing our current monthly expenses once I had a FIRE number formula. I examined how much my family was currently spending on household expenses, meals, personal care, healthcare, transportation, and community service.

This included the following:

Mortgage/rent, utilities, cable, internet, general maintenance, household supplies, property tax and insurance, credit card payments are all examples of household expenses.

Meals include groceries, beverages, and dining out.

Clothing, products, hobbies, subscriptions, childcare, and pet care are all examples of personal care.

Health insurance, out-of-pocket payments, dental, glasses/contact lenses, and life insurance are all examples of healthcare expenses.

Transportation costs include auto insurance, maintenance, gas, and registration.

Gifts, charitable donations, remittances, and other forms of community service

I multiplied our monthly expenses by 12 to calculate our annual expenses.

I decided to calculate a FIRE number range to help me feel less overwhelmed by such a large number. On the low end, if my husband and I relocate to a less expensive area with annual expenses of $60k, our FIRE figure is $1.5 million. On the high end, if my husband and I continue to live in a high-cost area with $120,000 in annual expenses, our FIRE figure is $3 million.

This money is being invested for early retirement in both tax-advantaged accounts and taxable brokerage accounts. We contribute the maximum amount to our 401(k) and Individual Retirement Accounts in order to reduce our current tax liability. However, because we will need access to our money before the age of 59 12 and want to avoid paying early withdrawal penalties, we are also investing in low-cost index funds through a taxable brokerage account.

What Are Some Examples of FIRE Variations?

There are several variations within the FIRE movement. Fat FIRE is a more relaxed approach to saving more while giving up less. Lean FIRE necessitates a commitment to minimalist living. Barista FIRE is for those who want to leave the 9-to-5 grind and are willing to reduce their spending while only working part-time to do so. Naturally, more traditional financial advisors have jumped in with their own take on a FIRE retirement goal and how to achieve it. One strategy calls for a FIRE investor’s portfolio to include both domestic and international stocks and bonds, potentially


You can retire at any age as long as you have the necessary income. Calculate your FIRE number and devise a strategy for generating various passive income streams that can subsidise a work-free lifestyle. If you’re feeling overwhelmed, consider making a FIRE number range. Make certain that your goal reflects your values and lifestyle preferences. Finally, even if you do not retire at a young age, calculating your FIRE number is an excellent way to begin planning for retirement.


Q. What is the FIRE movement?
The acronym F.I.R.E. stands for ‘Financial Independence, Retire Early.’ The movement’s goal is to invest aggressively when you’re young in order to retire in your 30s or 40s (before the traditional retirement age).

Q. How does the FIRE movement function?

Ans. F.I.R.E. (Financial Independence, Retire Early) is a movement that focuses on investing aggressively in your twenties, thirties, and forties (50-75 percent of your income) to retire early (in your 40s or 50s).

There are four common types of F.I.R.E. movements, each with a different level of investment and end goal:

F.I.R.E. lean


Barista F.I.R.E

F.I.R.E. Coast

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