FIRE movement

The Financial Independence, Retire Early (FIRE) movement is a personal finance philosophy that emphasizes high savings rates (more than the standard 10–15% typically recommended by financial planners)^[1] and investment with the goal of achieving financial independence and retiring early. The movement gained popularity among millennials during the 2010s through blogs, podcasts, and discussion forums.^{[2][3][4][5][6]}

FIRE adherents try to reduce expenses and increase savings, investing surplus assets to eventually cover living costs through passive income. Some FIRE writers promote a simplified framework: spend less than one earns, invest the surplus, and avoid excessive debt.^[7] A commonly-cited savings target is the 4% rule, introduced by William Bengen. The rule suggests that a retirement portfolio should equal at least 25 times estimated annual expenses to support long-term withdrawals.

Other proponents, like economist Karsten Jeske, argue for more conservative withdrawal rates of 3.25–3.5% for those retiring decades before the traditional retirement age.^[8]

Applying FIRE typically involves structured budgeting, consistent investing, and careful planning around long-term withdrawal rates.

Writings on FIRE often illustrate the effect of different savings rates on the time required to accumulate savings that cover living expenses. Assuming expenses equal income minus savings, and setting aside investment returns, the relationship can be expressed as:

${\displaystyle {\text{Years of work}}={\frac {1-{\tfrac {\text{savings}}{\text{income}}}}{\tfrac {\text{savings}}{\text{income}}}}}$

For example:

• At a savings rate of 10%, it takes (1-0.1)/0.1 = 9 years of work to save for 1 year of living expenses.
• At a savings rate of 25%, it takes (1-0.25)/0.25 = 3 years of work to save for 1 year of living expenses.
• At a savings rate of 50%, it takes (1-0.5)/0.5 = 1 year of work to save for 1 year of living expenses.
• At a savings rate of 75%, it takes (1-0.75)/0.75 = 1/3 year = 4 months of work to save for 1 year of living expenses.

This framework is used within the FIRE community to highlight how higher savings rates can reduce the time needed to reach financial independence. Based on this reasoning, advocates often aim for savings rates of 50% or more of income.^[9] At a 75% savings rate, ignoring investment growth, it would take fewer than 10 years to accumulate 25 times annual living expenses. This savings rate is sometimes associated with the 4% rule for sustainable withdrawals.

Some commentators caution that investment returns, inflation, taxes, and lifestyle changes make actual timelines more variable.^[10]

Commentators and participants in the FIRE movement have described several commonly discussed variations:

• LeanFIRE: emphasizes achieving financial independence by maintaining very low living expenses, allowing a smaller investment portfolio to be sufficient.^[11]
• FatFIRE: refers to pursuing early retirement while maintaining or exceeding a middle-class standard of living, requiring a larger savings target than LeanFIRE.^[11]
• CoastFIRE: involves saving and investing aggressively in the early years until the portfolio is projected to grow to a sufficient level through compound interest alone, after which further contributions may be reduced or stopped.^[12]
• BaristaFIRE: describes semi-retirement supported by part-time or lower-stress work, which may also provide benefits such as health insurance.^[13][14] Day-to-day expenses are covered through a mix of employment income and modest portfolio withdrawals.^[15] The investment portfolio is meant to grow with this approach.

The emergence of social media has brought more attention to workers discussing their dissatisfaction. "Social media has made lives appear more glorious and expensive, but also allows others to broadly share about their financial freedom." said Zachary A. Bachner, CFP(r) of Summit Financial.^[16] There are numerous online forums and Reddit communities centered around discussion of subsets of the FIRE movement.

The main ideas behind the FIRE movement originate from the 1992 best-selling book Your Money or Your Life written by Vicki Robin and Joe Dominguez,^[17][18] as well as the 2010 book Early Retirement Extreme by Jacob Lund Fisker.^[19] These works provide a basic template for a lifestyle of simple living with investment income to achieve financial independence. The latter book describes the relationship between savings rate and time to retirement. This allows individuals to quickly project their retirement date, given an assumed level of income and expenses.

The Mr. Money Mustache blog, started by Peter Adeney in 2011, generated interest in achieving early retirement through frugality and helped popularize the FIRE movement.^[20][21] Other books, blogs, and podcasts continue to refine and promote the FIRE concept.

In 2018, traditional mainstream media outlets gave significant coverage to the FIRE movement.^{[9][17][18][20]} According to a 2018 survey conducted by the Harris Poll later that year, 11% of wealthier Americans aged 45 and older have heard of the FIRE movement by name. Another 26% are aware of the concept.^[22]

Grant Sabatier, author of the 2019 book Financial Freedom, popularized the idea of side hustling as a path to accelerate financial independence.^[23][24][25]

The FIRE movement promotes frugality as a means to save for the future. Saving may be impossible for lower-income workers who must be frugal just to meet expenses. Critics cite the challenges of attaining high savings rates on a modest income,^[26] and note that some FIRE enthusiasts, such as Peter Adeney of Mr. Money Mustache, had high-paying jobs in fields like software engineering.^[27]

Critics suggest early retirees may not be setting aside enough funds for safe withdrawals during retirement.^[28] Tanja Hester and economist Karsten Jeske advocate for a conservative safe withdrawal rate of 3.5% or less, rather than the 4% rate cited in some retirement articles.^[8][29]

This adjustment requires accumulating approximately 30 or more times one's annual expenses, rather than the commonly-cited 25 times.^[30]

• Asset/liability modeling
• Do-it-yourself investing
• Downshifting (lifestyle)
• Pension
• Retirement spend down
• Simple living

• Wang, Amy X. (2024-05-07). "Your Neighbors Are Retiring in Their 30s. Why Can't You?". The New York Times. Retrieved 2024-05-08.
• Coast FIRE, Coast FIRE Calculator. (2024-12-04). "What is Coast FIRE and Coast FIRE Calculator?". Coast FIRE Calc.