(, 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
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.
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
The Case Against Extreme FIRE
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