(, Retire Early) is a movement focused on saving aggressively to make work optional. It's not for everyone, but the principles are valuable for anyone.
What Is FIRE?
Financial Independence: Having enough invested that investment returns cover your expenses forever.
The Simple Formula: Annual expenses × 25 = Your FIRE number
- Expenses: $40,000/year → Need $1,000,000
- Expenses: $60,000/year → Need $1,500,000
- Expenses: $100,000/year → Need $2,500,000
This is based on the "4% rule"—withdrawing 4% annually has historically been sustainable.
The 4% Rule
Based on the Trinity Study, a 4% withdrawal rate has survived most 30-year historical periods.
$1,000,000 portfolio:
- 4% withdrawal = $40,000/year
- Portfolio continues growing (on average)
- Money lasts 30+ years
Watch Out
The 4% rule isn't guaranteed. Consider 3.5% for longer retirements or more conservative planning.
Types of FIRE
| Type | Approach | Lifestyle |
|---|---|---|
| LeanFIRE | Extreme frugality | Minimalist, $30-40k/year |
| Regular FIRE | High savings rate | Comfortable, $40-70k/year |
| FatFIRE | High income, high savings | Luxurious, $100k+/year |
| BaristaFIRE | Partial FI + part-time work | Work optional, some income |
| CoastFIRE | Front-load savings, then coast | Save hard early, relax later |
The Math of FIRE
Your savings rate determines your timeline:
| Savings Rate | Years to FI |
|---|---|
| 10% | 51 years |
| 20% | 37 years |
| 30% | 28 years |
| 40% | 22 years |
| 50% | 17 years |
| 60% | 12 years |
| 70% | 8 years |
At 50% savings rate, you can reach FI in under 20 years regardless of income.
Pro Tip
The math works because a high savings rate does double duty: more money invested AND less needed in retirement.
How to Increase Savings Rate
The Big Three
- Housing (25-35% of budget) - House hack, rent cheaper, relocate
- Transportation (15-20%) - Used cars, one car, bike/transit
- Food (10-15%) - Cook at home, meal prep
Targeting the big three has more impact than cutting lattes.
Increase Income
- Salary negotiation
- Job hopping
- Side income
- Skill development
The Retirement Account Challenge
FIRE has a problem: retirement accounts have age restrictions.
Solutions:
- Roth conversion ladder - Convert Traditional to Roth over 5 years
- 72(t) distributions - Early access with restrictions
- Taxable accounts - Bridge the gap to 59.5
- - Tax-free medical expenses at any age
Do This
Build three buckets:
- Taxable investments (accessible anytime)
- Roth contributions (accessible anytime, earnings at 59.5)
- Traditional accounts (accessible at 59.5)
The Case Against Extreme FIRE
Watch Out
Honest downsides to consider:
- Burnout from extreme frugality
- Identity loss after leaving work
- Healthcare costs before Medicare (huge!)
- Sequence of returns risk
- Life changes that increase expenses
- Giving up earning years and career growth
What FIRE Gets Right
Even if you don't retire at 35, FIRE principles work:
- High savings rate builds options
- Investing in works
- Lifestyle is the enemy
- Time freedom matters more than stuff
- Financial security reduces stress
Quick Win
Calculate your current savings rate. Then calculate your FIRE number. How many years away are you? Even if you never fully "retire," knowing this number is powerful.