Financial Independence, Retire Early (FIRE)

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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. Born 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: 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 their annual income, FIRE retirement proponents aim to retire early and live off small withdrawals from their accumulated funds.
  • The FIRE movement was inspired by the 1992 book Your Money or Your Life, written by two financial gurus.
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Understanding FIRE

The FIRE retirement 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 a majority 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.

As reported by Vox, in recent years, millennials in particular have embraced pursuing a FIRE retirement. Proponents of the extreme-saving lifestyle remain in the workforce for several years, saving up to 70% of their yearly income. When 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 FIRE retirement variations that dictate the lifestyle the FIRE movement's devotees are willing and able to maintain have evolved within it, as reported by Forbes Advisor.

  • Fat FIRE—This is for the individual with a traditional lifestyle who aims to save substantially more than the average worker but doesn’t want to reduce their current standard of living. It generally takes a high salary and aggressive savings and investment strategies for it to work.
  • Lean FIRE—This requires stringent adherence to minimalist living and extreme savings, necessitating a far more restricted lifestyle. Many Lean FIRE adherents live on $25,000 or less per year.
  • Barista FIRE—This is for people who want to exist between the two choices above. They quit their traditional 9-to-5 jobs, but use a combination of part-time work and savings to live a less-than-minimalist lifestyle. The former lets them obtain health coverage, while the latter prevents them from dipping into their retirement funds.

For Whom Is FIRE Really?

Most people think that FIRE is meant for people who can pull in a substantial income, generally in the six figures. And indeed, if your goal is to retire in your 30s or 40s, that probably is the case. However, there is plenty for everyone to learn from the principles of the movement that can help people save for their own retirement and even achieve an early one, if not quite as early as 40.

And remember, the first part of FIRE stands for financial independence, something that, if achieved, can allow you to—instead of retiring—work at something you love rather than something you have to do. Author Robin says in the book that FIRE is not just about retiring early; rather, it teaches you how to consume less while living better.

Detailed planning

It is important for everyone to plan for their retirement, and yet, according to a May 2021 report from the Federal Reserve System Board of Governors, in 2020, one in four Americans had no retirement savings whatsoever, while 36% who did have savings felt that their retirement plans were not on track. The FIRE movement stresses the importance of having a detailed plan and sticking to it, principles that will aid anyone in saving for retirement and maintaining a decent emergency fund.

Economic discipline

In order to achieve a FIRE retirement, you have to maximize your income while minimizing your expenses. Retiring by 40 requires you to go to extremes to succeed, but everyone can benefit from making and sticking to a budget while doing all they can to earn as much money as possible, whether it's by getting a better job, adding a second one, or creating additional revenue streams through sideline businesses or owning rental property.

Wise investment

No one can achieve a secure retirement without investing in their retirement savings. FIRE adherents invest larger portions of their income than the average person will want to. But the principle of setting aside a set percentage of your income every month for investment—and starting to do that as early as possible—will allow you to grow your retirement savings to a point where they can assure you financial stability in your later years.

What Does FIRE Really Mean?

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, which was first published in 1992. A revised and updated version was released in 2008 and again in 2018.


The aim of the book, according to comments by 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 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. When 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 excessive consumption and enjoy a simpler lifestyle.


What Are Some FIRE Variations?

Within the FIRE movement are several variations. Fat FIRE is a more easygoing attempt to save more while giving up less. Lean FIRE requires 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 while working only part time to do so.


Naturally, more traditional financial advisors have been willing to jump in with their own variations on a FIRE retirement 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%.

Article Sources

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  1. Vicki Robin and Joe Dominguez. “Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence.” Pages 58 to 68. Penguin Books, 2018. Accessed Nov. 1, 2021.

  2. Vicki Robin and Joe Dominguez. “Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence,” Pages 249 to 256. Penguin Books, 2018. Accessed Nov. 1, 2021.

  3. Vicki Robin and Joe Dominguez. “Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence.” Page 15. Penguin Books, 2018. Accessed Nov. 1, 2021.

  4. Board of Governors of the Federal Reserve System. "Report on the Economic Well-Being of U.S. Households in 2020 - May 2021." Accessed Nov. 3, 2021.

  5. Vanguard. "Fueling the FIRE Movement: Updating the 4% Rule for Early Retirees." Accessed Nov. 22, 2021.