FIRE Explained
Financial Independence, Retire Early. A movement built on a simple idea: save and invest aggressively so your money works for you instead of the other way around.
What is FIRE?
Financial Independence means your investment portfolio generates enough income to cover your living expenses — indefinitely. You no longer need to work for money.
Retire Early is the optional second part. Many FIRE practitioners keep working — they just do it on their own terms. They switch careers, start businesses, freelance, or volunteer. The point isn't to stop doing things. It's to stop doing things you have to do.
The real goal of FIRE is freedom. Freedom to choose how you spend your time, who you work with, and what problems you want to solve — without a paycheck dictating those decisions.
The 4% Rule
The foundation of FIRE math comes from the Trinity Study (1998). Researchers found that withdrawing 4% of your portfolio in year one (adjusting for inflation each year after) gave you a high probability of your money lasting at least 30 years.
Your FIRE Number
Annual Expenses x 25
Example: $40,000/yr x 25 = $1,000,000 needed
Caveats
- Based on US historical stock/bond market data — other countries may differ
- Designed for a 30-year retirement — early retirees may need 50+ years
- Not a guarantee — it's a probability based on historical scenarios
- Many FIRE planners use 3.5% or 3% for extra safety margin
FIRE Variants
Lean FIRE
Target: $500K - $1M
Minimalist lifestyle with low expenses. Requires $500K-$1M invested. Works best in low cost-of-living areas or for those who genuinely enjoy simple living. Not about deprivation — about knowing what actually makes you happy.
Regular FIRE
Target: $1M - $1.75M
Comfortable middle-class lifestyle without extravagance. Requires $1M-$1.75M invested. The most common FIRE target. Covers housing, food, healthcare, travel, and hobbies without constant penny-pinching.
Fat FIRE
Target: $2.5M+
Premium lifestyle with no real spending constraints. Requires $2.5M+ invested. Travel, dining, luxury hobbies — all covered. Harder to achieve but removes the "will I have enough?" anxiety entirely.
Barista FIRE
Target: Varies
Enough invested to cover most expenses, with a low-stress part-time job filling the gap. Named after working at a coffee shop for health insurance (a US-specific concern). Great middle ground between full FIRE and traditional work.
Coast FIRE
Target: Varies by age
You've invested enough that compound growth alone will fund your traditional retirement. You still work, but only to cover current expenses — no more saving needed. Reduces pressure dramatically and lets you take lower-paying but more meaningful work.
The Math: Savings Rate is Everything
Your savings rate — not your income — determines how fast you reach FIRE. Someone earning $60K and saving 50% will get there faster than someone earning $200K and saving 10%.
| Savings Rate | Years to FIRE | Note |
|---|---|---|
| 10% | ~50 years | Standard retirement timeline |
| 25% | ~30 years | Retire around 55 if starting at 25 |
| 50% | ~17 years | Aggressive but achievable with dual income |
| 75% | ~7 years | Extreme — requires high income or very low expenses |
Assumes 5% real (inflation-adjusted) investment returns, starting from zero savings.
A Balanced Take
What FIRE gets right
Freedom & optionality
Work becomes a choice, not a requirement. You can pursue passion projects, take risks, or simply say no to things you don't want to do.
Intentional living
FIRE forces you to examine what you actually value. Most people find they're happier spending less on stuff and more on experiences.
Financial security
Even if you never "retire early," having years of expenses saved provides a safety net that reduces stress and opens doors.
What to watch out for
Extreme frugality can backfire
Saving 70% of your income in your 20s and 30s means missing experiences that are harder to have later. Balance matters.
Healthcare gaps
Especially in the US, health insurance outside of employer plans is expensive and unreliable. A major consideration for early retirees.
Sequence of returns risk
A market crash in your first few years of retirement can devastate your portfolio. The 4% rule assumes historical averages, not guaranteed outcomes.
Identity after "retiring"
Many early retirees struggle with purpose and identity. Work provides structure, social connection, and meaning that's hard to replace.
The middle ground
Financial independence is powerful even if you never "retire." Having enough invested to walk away from a bad job, take a sabbatical, or weather an economic downturn is life-changing. You don't have to go all-in on extreme frugality to benefit from FIRE principles. Aim for financial independence. Let "retire early" be optional.
FIRE Curious
Start by tracking your expenses for a month. Calculate your savings rate. Run the numbers on our FIRE calculator. You don't need to commit to anything — just see where you stand and what's possible.
Pursuing FIRE
Focus on increasing your savings rate — through earning more, spending less, or both. Automate your investments. Pick a FIRE variant that fits your lifestyle. Check in quarterly, not daily. This is a marathon, not a sprint.
Already FI
Congratulations — you've built something most people only dream of. The next challenge is equally important: building a life you don't want to retire from. Purpose, community, and health matter more than ever now.