What Is Financial Independence, Retire Early (FIRE)?

Financial Independence, Retire Early (FIRE) is a movement of people devoted to a program of extreme savings and investment that aims to allow them to retire far earlier than traditional budgets and retirement plans would permit.

Borne out of the 1992 best-selling book Your Money or Your Life by Vicki Robin and Joe Dominguez, FIRE came to embody a core premise of the book: that people should evaluate every expense in terms of the number of working hours it took to pay for it.

Key Takeaways

  • Financial Independence, Retire Early (FIRE) is a financial movement defined by frugality and extreme savings and investment.
  • By saving up to 70% of annual income, FIRE proponents aim to retire early and live off small withdrawals from their accumulated funds.
  • The FIRE movement was born from a 1992 book Your Money or Your Life, written by two financial gurus.
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Understanding FIRE

The FIRE movement takes direct aim at the conventional retirement age of 65 and the industry that has grown up to encourage people to plan for it.

By dedicating up to 70% of their income to savings, 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 65.

In recent years, millennials in particular have embraced the FIRE movement. Proponents of the extreme-saving lifestyle remain in the workforce for several years, saving up to 70% of their yearly income. Once their savings reach approximately 30 times their yearly expenses, or roughly $1 million, they may quit their day jobs or retire from work altogether.

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

Several variations have evolved within the FIRE movement that dictates the lifestyle its devotees are willing and able to maintain:

  • Fat FIRE: This is for the individual with a traditional lifestyle who aims to save substantially more than the average worker but isn't willing to, say, dumpster-dive for fun and profit.
  • Lean FIRE: Requires stringent adherence to minimalist living and extreme savings, necessitating a far more restricted lifestyle.
  • Barista FIRE: This is for people who have quit their traditional 9-to-5 jobs but use part-time work to obtain health coverage and put off dipping into their retirement funds.

What Does FIRE Really Mean, Briefly?

The acronym "FIRE" means Financial Independence, Retire Early and is a term from the book Your Money or Your Life by Vicki Robin and Joe Dominguez was first published in 1992. A revised and updated version was released in 2008 and again in 2018.


The real aim of the book, according to comments by Vicki Robin, is not to convey a master plan for early retirement. 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, what you have is never enough."


How Does FIRE Work?

Followers of FIRE (Financial Independence, Retire Early) plan to retire much earlier than the traditional retirement age of 65 by dedicating up to 70% of income to savings while they are still in the workforce full-time.


Once their savings reach approximately 30 times their yearly expenses, or roughly $1 million, they may quit their day jobs or completely retire from any form of employment.


To cover their living expenses after retiring at a young age, FIRE devotees make small withdrawals from their savings, typically around 3% to 4% yearly.


Both during their working years and in retirement, FIRE followers aim to reject over-consumption and enjoy a simpler lifestyle.


What Are Some FIRE Variations?

Within the FIRE movement are several variations. Fat FIRE is a more easy-going attempt to save more while giving up less. Lean FIRE requires true devotion to minimalist living. Barista FIRE is for those who want to quit the 9-to-5 rat race and are willing to cut back their spending to do so.


Naturally, more traditional financial advisers have been willing to jump in with their own variations on a FIRE goal and how to achieve it. One strategy requires a FIRE investor to include both U.S. and international stocks and bonds in their portfolio, potentially increasing their success rate by 20%.