Financial Independence Retire Early (FIRE) Movement

Financial Independence Retire Early, or FIRE, is an ideology of aggressive saving and investing with the goal of saving at least 25 times your average annual expenses in order to retire in your 30s or 40s. FIRE followers also tend to be frugal and make small withdrawals during retirement.

Rachel Christian, writer and researcher for RetireGuide
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APA Christian, R. (2022, May 6). Financial Independence Retire Early (FIRE) Movement. RetireGuide.com. Retrieved May 21, 2022, from https://www.retireguide.com/retirement-planning/investing/early/fire/

MLA Christian, Rachel. "Financial Independence Retire Early (FIRE) Movement." RetireGuide.com, 6 May 2022, https://www.retireguide.com/retirement-planning/investing/early/fire/.

Chicago Christian, Rachel. "Financial Independence Retire Early (FIRE) Movement." RetireGuide.com. Last modified May 6, 2022. https://www.retireguide.com/retirement-planning/investing/early/fire/.

Key Takeaways
  • FIRE stands for Financial Independence Retire Early.
  • The FIRE movement’s goal is to achieve financial independence and retire at a young age by saving as much as 70% of your annual income.
  • While the exact start of the FIRE movement is unknown, it may have originated from “Your Money or Your Life,” a 1992 book about financial independence written by Vicki Robin and Joe Dominguez.

What Is the FIRE Movement?

The Financial Independence Retire Early movement can be traced back to “Your Money or Your Life,” a 1992 book written by Vicki Robin and Joe Dominguez. The book emphasized financial independence and included some of the core values that became the basis of the FIRE movement.

The movement has caught on with millennials in the last decade, as some younger adults have embraced the idea of separating their lives from their careers and working towards a point where they have enough money saved that they no longer need to be tethered to a job to support themselves.

Several factions exist within the FIRE community, but two core principles prevail:
  1. Save and invest more
  2. Spend less

By cutting expenses and living cheaply, FIRE followers aim to acquire enough money to exit the workforce well before the traditional retirement planning age of 65. Many strive to achieve financial independence in their 30s or 40s.

The primary goal of FIRE is financial independence, but many followers continue to earn income after quitting their day job.

The idea is you don’t need to work to survive. You only work if you want to.

“FIRE is all about having the work-life balance that you want,” Justin Chidester, CFP®, AFC® and founder of Wealth Mode Financial Planning in Logan, Utah, told RetireGuide.

“The people I’ve met don’t want a life of leisure — they want a life of intention. They don’t plan to retire early and not ever work again. It’s usually more to transition to working at something that doesn’t feel like work.”

How the FIRE Movement Works

Practicing FIRE means working hard when you’re young, saving and investing an average of 50% or more of your income and adopting a strict budget.

Most experts recommend saving about 10% to 15% of your salary to create a suitable retirement nest egg. But FIRE requires much more. The money must be invested aggressively in stocks and index funds to grow as quickly as possible.

Many people who practice FIRE are white-collar, college-educated professionals with high salaries — including corporate executives, lawyers and successful entrepreneurs — who can afford to set aside at least half of their earnings.

Those without six-figure salaries must get creative and live modestly in order to achieve financial independence at an early age.

Common Practices of FIRE Followers
  • Funnel salary bumps, bonuses, commissions, tips and tax refunds into savings and investment accounts.
  • Automate saving and investing through payroll deductions.
  • Eliminate credit card debt and other loans.
  • Maximize retirement account contributions.
  • Reduce housing costs by moving to a cheaper area, renting a room or even living with parents for a few more years.
  • Shop for better quotes on auto insurance, internet and other reoccurring bills.
  • Buy food in bulk, cook at home and eat out less.
  • Purchase used items, such as furniture and clothing.

Most FIRE followers create a goal of saving 25 times their annual expenses. Then, they apply the 4% rule, a standard retirement withdrawal strategy.

Let’s assume your annual income is $80,000, and you manage your annual expenses to about half of this, or $40,000 a year.

You will need to amass about $1 million in retirement assets (25 X $40,000) to reach the 25-times expenses milestone.

FIRE is all about having the work-life balance that you want. It’s usually more to transition to working at something that doesn’t feel like work.
Justin Chidester Wealth Mode Financial Planning

Variations of the FIRE Movement

Over the years, the FIRE movement has divided into several subgroups. Each requires varying levels of discipline and sacrifice.

Different Factions Within the FIRE Movement
Lean FIRE
This is the most frugal FIRE follower. They often adopt a minimalist lifestyle and aim to survive on roughly $25,000 a year or less in order to maximize savings before and after retirement.
Fat FIRE
This FIRE type applies a more traditional lifestyle while saving more than the average retirement investor.
Barista
This option falls between the two extremes of Fat and Lean FIRE. Here, a person quits their traditional 9-to-5 job but still works some part-time job or side hustle to cover current expenses. They maintain more than a minimalist lifestyle while withdrawing from savings and investments.
Coast FIRE
This is similar to Barista, where someone maintains a part-time job to supplement income. However, Coast FIRE followers typically don’t tap into their investments or retirement accounts.

The FIRE Movement May Not Be for Everyone

One of the key factors that keeps the FIRE movement from being an available strategy to all is the sheer amount of saving it takes to retire decades early. It is often only achievable with a big salary, typically as high as in the mid six figures. This is outside the salary range of most Americans.

And even Americans who do make the high salaries that are often necessary to participate in the FIRE movement must still live extremely frugal lives.

“You have to make a lot of sacrifices on how you spend,” Chidester said. “People who do it really aggressively make six-figure incomes, but they live like paupers.”

People who make less than that will struggle to live on just 30% or so of their salaries and may also find that the money they do save simply won’t go far enough to afford an early retirement any time soon.

Some FIRE followers also neglect to mention sizeable inheritances, inherited property or other family hand-me-downs that accelerate their path to financial independence. Most working-class Americans don’t enjoy this luxury.

Beyond the high salary demands that are necessary for the FIRE movement, the risk you take on by participating is another major drawback. Adding decades on to your retirement, at a time when people are living longer than ever before, means a higher risk for an economic crisis or unexpected life event derailing your plans.

This was financial expert Suze Orman’s biggest gripe with FIRE when she appeared on a 2018 episode of the Afford Anything podcast.

“If a catastrophe happens, if something happens, what are you going to do? You are going to burn up alive.”

Frequently Asked Questions About the FIRE Movement

What does FIRE stand for?
FIRE stands for Financial Independence Retire Early. It reflects the goal of the movement, which is to get your finances to the point where you can achieve a very young retirement age and leave the workforce as early as when you are in your 30s or 40s.
How does Financial Independence Retire Early (FIRE) work?
To use the FIRE movement for a successful early retirement, you typically need to be committed to saving at least half of your pay. On top of that, you often must be earning a high salary to make those savings worthwhile. The idea is that, after years of saving and investing, you will have enough money put away to be able to leave the workforce early and live off of those savings the rest of your life.
How much do you need to make to retire early?
The income requirements to make FIRE work for you and retire early can be demanding, especially if you are not inheriting any major assets or forms of wealth. You typically need to be making in the six figures for years in order to achieve early retirement. Even then, you will likely need to spend quite frugally to make sure that money lasts the rest of your life.
What is the 4% rule?
The 4% rule, which is similar to the Rule of 25, is a common retirement rule of thumb that states that you can safely withdraw 4% of your retirement savings in your first year of retirement and then withdraw a similar amount adjusted for inflation each year after that. The belief is that your savings can last 30 years if you follow this strategy. However, the rule may not be well-adapted to modern retirement and a truly safe amount to withdraw could be much lower.
Last Modified: May 6, 2022

5 Cited Research Articles

  1. Smith, K. A. (2021, December 7). How To Retire Early with FIRE. Retrieved from https://www.forbes.com/advisor/retirement/the-forbes-guide-to-fire/
  2. Derousseau, R. (2020, April 22). Here’s How a Deep Recession Could Alter The FIRE Movement. Retrieved from https://www.forbes.com/sites/ryanderousseau/2020/04/22/how-downturn-could-alter-fire-movement/#1fb71b935fa4
  3. Grob Plante, S. (2020, March 25). Inside FIRE, the Implausible Millennial Movement to Save, Invest, and Quit the American Workplace. Retrieved from https://www.vox.com/the-highlight/2020/3/18/21182018/financial-independence-retire-early-fire-early-retirement-mr-money-mustache-pete-adeney
  4. Frugal Friends Podcast. (2019, September 13). Episode 73: Financial Independence Through Frugality | The Frugal FIRE Movement. Retrieved from https://www.frugalfriendspodcast.com/episode-73-financial-independence-through-frugality-the-frugal-fire-movement/
  5. Loudenback, T. (2020, November 12). There Are 3 Main Types of Early Retirement, and the Only Difference Is How Much You Spend. Retrieved from https://www.businessinsider.com/personal-finance/what-is-fatfire-vs-leanfire-early-retirement-fire