FIRE movement

The Financial Independence, Retire Early (FIRE) movement is a personal finance approach that emphasizes high savings rates (far more than the standard 10–15% typically recommended by financial planners)^[1] and investment with the aim of achieving financial independence and potentially retiring earlier than the conventional retirement age. The movement gained popularity among millennials during the 2010s, particularly through online communities such as blogs, podcasts, and discussion forums.^{[2][3][4][5][6]}

Individuals pursuing FIRE typically seek to reduce expenses and increase savings, investing the difference with the goal of eventually covering living costs through passive income. Some writers associated with the movement promote a simplified framework: spend less than one earns, invest the surplus, and avoid excessive debt.^[7] A commonly cited target within the FIRE community is the 4% rule suggested by William Bengen, which suggests that a retirement portfolio should equal at least 25 times estimated annual expenses to support long-term withdrawals. Other commentators, like economist Karsten Jeske have argued for more conservative withdrawal rates, such as 3.25–3.5%, particularly for those retiring decades before the traditional retirement age.^[8]

Writings on FIRE often illustrate the effect of different savings rates on the time required to accumulate living expenses. Assuming that 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 — the level sometimes associated with the 4% rule for sustainable withdrawals.

Some commentators caution, however, that in practice investment returns, inflation, taxes, and lifestyle changes make actual timelines more variable. Justin McCurry, an author for The Lancet, The Guardian, and The Observer,^[10] who runs a website focusing on FIRE and its general idea,^[11] told CNN in 2022 that it is "going to take a decade or two to reach FIRE".^[11]

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.^[12]
• FatFIRE: refers to pursuing early retirement while maintaining or exceeding a middle-class standard of living, requiring a larger savings target than LeanFIRE.^[12]
• 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.^[13]
• BaristaFIRE: describes semi-retirement supported by part-time or lower-stress work, which may also provide benefits such as health insurance.^[14][15] Day-to-day expenses are covered through a mix of employment income and modest portfolio withdrawals.^[16] 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.^[17] 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,^[18][19] as well as the 2010 book Early Retirement Extreme by Jacob Lund Fisker.^[20] These works provide the basic template of combining a lifestyle of simple living with income from investments to achieve financial independence. In particular, the latter book describes the relationship between savings rate and time to retirement, which allows individuals to quickly project their retirement date given an assumed level of income and expenses.

The Mr. Money Mustache blog, which was started in 2011 by Peter Adeney, is an influential voice that generated interest in the idea of achieving early retirement through frugality and helped popularize the FIRE movement.^[21][22] Other books, blogs, and podcasts continue to refine and promote the FIRE concept.

In 2018, the FIRE movement received significant coverage by traditional mainstream media outlets.^{[9][18][19][21]} 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, while another 26% are aware of the concept.^[23]

A notable contributor to this movement includes Grant Sabatier, author of the 2019 book Financial Freedom, who works closely with Vicki Robin and popularized the idea of side hustling as a path to accelerate financial independence.^[24][25][26]

Justin McCurry told CNN in 2022 that "financial independence is well within reach of an average college graduate".^[11]

The FIRE movement advocates frugality as a means to saving more for a person's future; this is therefore an inaccessible scheme for lower-income earners who perhaps have to employ frugality as a means of simply meeting day-to-day living costs. Critics cite the challenges of attaining high savings rates on a modest income^[27] and FIRE enthusiasts that already had high-paying jobs, such as Peter Adeney of Mr. Money Mustache, who had worked in the high-paying software engineering field.^[28]

Critics have also suggested that early retirees may not be setting aside enough funds for safe withdrawals during retirement.^[29] Tanja Hester and economist Karsten Jeske have advocated for considering a conservative safe withdrawal rate of 3.5% or less, rather than the 4% rate mentioned in many retirement articles.^[8][30] This adjustment requires accumulating approximately 30 or more times one's annual expenses, rather than the conventional 25 times.^[31]

• 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.