| 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.
note
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 a portfolio investment 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.
note
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.
note
“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 achieving 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 achieve 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 joined the FIRE movement ended up achieving financial independence in their 30s, 40s, or 50s.
- There are different levels of the FIRE movement, including coastal FIRE, lean FIRE, and fat FIRE.