FIRE stands for Financial Independence/retire early. The goal of retiring early is to accumulate enough cash for yourself as soon as possible so that you are financially independent and free of financial troubles. When you reach FIRE, your wealth is sufficient to provide you with an inflation-adjusted income for the rest of your life.
The FIRE retirement movement directly targets the traditional retirement age of 65, as well as the business that has developed to urge people to plan for it. Followers of the FIRE movement expect to be able to quit their jobs and live solely off tiny withdrawals from their portfolios decades before they reach the age of 65 by devoting the majority of their income to savings.
Several FIRE retirement variations have emerged, dictating the lifestyle that FIRE adherents are willing and able to maintain:
- Fat FIRE– This is for the traditionalist who wants to save far more than the average worker but does not want to lower their existing standard of living. It usually requires a high salary as well as active savings and investment techniques to make it work.
- Lean FIRE– A tight dedication to minimalist living and excessive savings is required, necessitating a considerably more constrained lifestyle. Many followers of Lean FIRE live on $25,000 or less per year.
- Barista FIRE– For those who desire to reside between the two options above. They abandoned their typical 9-to-5 occupations but maintained a less-than-minimalist existence through a combination of part-time work and savings. The former allows individuals to receive health insurance, while the latter stops them from withdrawing funds from their retirement accounts.
Most people believe that FIRE is only for persons with a high salary, typically in the six figures. And, if you want to retire in your 30s or 40s, that is most likely the case. However, there is much for everyone to learn from the movement’s teachings, which can help people save for their own retirement and potentially accomplish one as early as 40.
Remember that the first half of FIRE stands for financial independence, which, if accomplished, can allow you to work at something you enjoy rather than something you have to do.
There are various varieties within the FIRE movement. Fat FIRE is a more relaxed approach to saving more while giving up less. Lean FIRE necessitates a commitment to simple living. Barista FIRE is for people who want to leave the 9-to-5 grind and are willing to reduce their expenses while only working part-time to do so.
Naturally, more traditional financial consultants have jumped in with their own take on a FIRE retirement goal and how to attain it. One technique calls for a FIRE investor’s portfolio to incorporate both domestic and international equities and bonds, potentially raising their success rate by 20%.
FIRE advocates intend to retire far sooner than the typical retirement age of 65 by devoting up to 70% of their income to savings while still working full-time. When their savings reach nearly 30 times their annual expenses, or approximately $1 million, they may quit their day occupations or entirely retire from all forms of employment.
FIRE enthusiasts make minor withdrawals from their resources to support their living expenses after retiring at a young age, often around 3% to 4% yearly. FIRE supporters seek to avoid excessive consumption and live a simpler lifestyle both during and after retirement.