What Is the FIRE Movement?

The FIRE Movement Explained

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The Financial Independence, Retire Early (FIRE) movement is a growing trend of people working toward one goal: To save enough money that they can retire in their 30s, 40s, or 50s—well before the traditional retirement age.

The movement promises a lifestyle of freedom and flexibility. However, it requires a lot of discipline and determination upfront. Here’s a closer look at how it works.

Definition and Examples of the FIRE Movement

The FIRE movement is the idea that if you aggressively save and invest a large percentage of your income, you can achieve financial independence and enjoy an early retirement (or at least at a financial point at which work is optional).

  • Acronym: FIRE

Suppose Jasmine is 30 years old and wants to retire in her 40s so she can fulfill her lifelong dream of traveling full time and spending more time with family. She has an annual salary of $80,000 and saves 60% of her take-home pay. Assuming annual returns of 8% and steady $4,000 contributions, Jasmine is set to retire in 11 years at age 41 with $827,872. 

The foundation of the FIRE movement may have been laid in 1992 after Vicki Robin and Joe Dominguez published the book “Your Money or Your Life,” about healing your relationship with money so you can live more meaningfully.

How Does the FIRE Movement Work?

At its core, the FIRE movement is all about saving up enough money so the passive income you generate from investments indefinitely covers your annual spending.

Millennials are leading the FIRE movement, with 58% planning to retire before age 65. As you can imagine, amassing this amount of wealth before traditional retirement age requires a lifestyle that’s outside the norm.

Most people in the FIRE movement community pride themselves on:

  • A high savings rate: It’s not uncommon for FIRE movement devotees to save 50% or more of their take-home pay.
  • Frugal living: The more you save, the quicker you reach financial independence. Many people pursuing FIRE adopt a minimalist lifestyle to help increase their savings rate as much as possible.
  • Simple investing: Many FIRE movement enthusiasts follow a strategy of investing in low-cost index funds. Some also buy rental properties for passive income.

The FIRE movement has gained a lot of traction in recent years, in part due to the internet and social media. There are now dozens of blogs and podcasts dedicated to helping people achieve financial independence and retire early—two popular ones are Mr. Money Mustache and Choose FI.

How Much Should You Save for the FIRE Movement?

The amount of money you need to become financially independent is equal to 25 times your annual spending. This is called your “FIRE number.”

So if you currently spend $50,000 a year, your FIRE number would be $1.25 million ($50,000 x 25).

You can use this chart to quickly calculate how much you’d need to reach your FIRE movement number, based on your average annual spending:

Annual spending Potential FIRE movement number
$20,000 $500,000
$40,000 $1 million
$60,000 $1.5 million
$80,000 $2 million
$100,000 $2.5 million
$120,000 $3 million

As you can see, the lower your expenses, the less money you need to achieve FIRE. This is exactly why people in this community are obsessed with minimalism and frugal living.

The FIRE number calculation is based on the 4% Rule, which is considered a “safe withdrawal rate” for retirement. It’s the inverse of the Multiply-by-25 Rule.

Levels of FIRE Movement

There are several different “levels” of FIRE you’ll reach on your journey to financial independence.

Regular FIRE

As the name implies, regular FIRE means you have enough money saved up to cover your current lifestyle and cost of living. If you chose to leave the workforce, nothing would change about your current spending habits.

If you spend $50,000 a year now and want to sustain that same standard of living in retirement, your regular FIRE number would be $1.25 million.

Coast FIRE

Coast FIRE means you’ve saved up enough money to “coast” to traditional retirement. In other words, you could stop saving completely and still enjoy a traditional retirement.

For example, say you’re 40 and have an investment portfolio of $200,000. Assuming an average 8% return, you’d have almost $1.4 million by age 65 due to compounding interest.

Barista FIRE

Barista FIRE means you could retire early, but you’d still need to work a part-time gig to supplement your income and get health insurance.

It’s called “barista FIRE” because Starbucks is one of the few places that offer health insurance to part-time employees. As such, it’s popular among the FIRE community.

For example, say you need $40,000 a year in retirement. You already have $400,000 invested, which will give you a safe withdrawal rate of $16,000 a year ($400,000 x 4% = $16,000). In this case, you could work a part-time job to bring in the remaining $24,000.

Lean FIRE

Lean FIRE means you’re willing to live a frugal or minimalist lifestyle, even into retirement. You’re willing to cut costs and keep spending low if it means getting to retire early.

For instance, say you move to a low cost-of-living area, start growing your own food, and can keep your spending around $25,000 a year. Your lean FIRE number would be $625,000.

"Fat" FIRE is the opposite of lean FIRE: it's for those who want to retire early without adopting a frugal lifestyle. They want to spend freely and have enough money saved to do what they want. For example, say you want to spend $100,000 a year in retirement so you never have to worry about skipping a vacation or enjoying life’s little luxuries. Your Fat FIRE number would be $2.5 million.

FIRE Movement Tips

There is no one-size-fits-all approach to reaching FIRE. It depends on your circumstances and the goals you want to achieve. That said, FIRE movement members swear by the following basic principles.

Define What ‘Retire Early’ Looks Like for You

Retiring early doesn't mean sitting around doing nothing all day. In fact, many FIRE enthusiasts continue to work after retiring, often because they enjoy it and it helps keep them mentally and physically active. Others choose to leave the workforce entirely, often to travel, volunteer, raise a family, or pursue passion projects while they're young (and healthy) enough to enjoy it.

At the end of the day, the FIRE movement is all about gaining the freedom to build a life you love. So decide ahead of time what that looks like for you—and how much it’ll cost.

Save as Much As You Can

Saving a high percentage of your income is the most important factor in achieving FIRE. The more you save, the sooner you can reach financial independence.

A good rule of thumb among the FIRE movement community is to save at least 50% of your income. However, this also depends on your timeline. If you want to retire at age 30, you’ll have to save more aggressively than if you want to retire at age 50.

Rely on Your Investments' Compounding Interest

FIRE movement enthusiasts have to rely heavily on compound interest (and strong stock market returns) to achieve FIRE.

For example, you need $1 million to reach FIRE and you currently save $3,000 a month. If you keep that money in a savings account, earning little to no interest, it will take you 28 years to reach FIRE.

However, if you invest that money, at an 8% annual return on average, you’d reach FIRE in 15 years—almost half the time.

Key Takeaways

  • The FIRE movement is a community of people looking to save and invest as much of their take-home pay as possible so they can retire before traditional retirement age.
  • Many people who join the FIRE movement end up reaching financial independence in their 30s, 40s, or 50s.
  • There are different levels of the FIRE movement, including coast FIRE, lean FIRE, and fat FIRE.

Article Sources

  1. Playing With FIRE. "FIRE Explained."

  2. Vicki Robin, Joe Dominguez, Monique Tilford. "Your Money or Your Life." Penguin Publishing Group, 2008.

  3. TransAmericaCenter. "What Is Retirement?" Page 14.

  4. Ally-Jane Grossan. "FIRE-d Up for Retirement." Journal of Accountancy.

  5. Mr. Money Mustache. "About."