FIRE

FIRE is both a financial strategy and a broader movement centered on aggressive saving and investing to reach financial independence well before traditional retirement age, often decades earlier. The core mechanics mirror standard retirement planning, a target portfolio size based on expected expenses and a safe withdrawal rate, but the savings rate and timeline are far more aggressive than typical retirement advice suggests.

Someone's "FIRE number" is the portfolio size at which their investments can theoretically sustain their living expenses indefinitely. The most common calculation uses 25 times annual expenses, based on the 4% safe withdrawal rate, though more conservative pursuers use a lower withdrawal rate and a larger multiple.

FIRE Number = Annual Expenses × 25 (at a 4% withdrawal rate)

FIRE Number = Annual Expenses × 28.6 (at a more conservative 3.5% withdrawal rate)

Someone spends $45,000 a year and wants to calculate their FIRE number under both approaches.

• Standard 4% rule: $45,000 × 25 = $1,125,000
• Conservative 3.5% rule: $45,000 × 28.6 ≈ $1,287,000

If this person saves aggressively and invests $30,000 a year at an assumed 7% return, reaching the $1,125,000 target takes roughly 18-20 years from a standing start, far sooner than a traditional retirement timeline, though the exact number depends heavily on starting balance and actual investment returns.

• A much higher savings rate is what compresses the timeline. Many FIRE pursuers save 50% or more of income, versus the 10-15% often recommended for conventional retirement planning, that gap is what enables reaching the target decades early.
• Several FIRE variations exist for different lifestyle goals. Lean FIRE targets minimal expenses and a smaller number, Fat FIRE targets a larger portfolio for a more comfortable lifestyle, Barista FIRE involves partial independence with continued part-time work.
• The FIRE number isn't fixed once calculated. Rising expenses, healthcare costs, or lifestyle changes over a long retirement horizon can shift the actual required portfolio size well beyond the original target.
• "Retire early" doesn't necessarily mean stop working entirely. Many who reach FIRE continue some form of work, just without financial pressure driving the decision.
• Sequence of returns risk matters more with an early, long retirement. A market downturn early in a 40+ year retirement poses more risk than the same downturn in a standard 30-year retirement, worth factoring into how conservative a withdrawal rate to target.