The Financial Independence Retire Early (FIRE) movement is characterized by a commitment to extreme savings and investment strategies, challenging the traditional retirement age.
Originating from concepts popularized in the 1992 best-selling book “Your Money or Your Life” by Vicki Robin and Joe Dominguez, FIRE enthusiasts evaluate expenses regarding the working hours required to cover them.
FIRE followers aim to retire well before the conventional retirement age by saving a significant portion of their income, often up to 70%. The goal is to accumulate a nest egg approximately 30 times their annual expenses, typically around $1 million, allowing them to retire and sustain their lifestyle through modest annual withdrawals ranging from 3% to 4% of their savings.
Achieving FIRE requires meticulous planning, financial discipline, and astute investment decisions. Various FIRE retirement variations have emerged, catering to different lifestyles and levels of frugality:
Fat FIRE: Geared towards individuals seeking to maintain a traditional lifestyle without compromising living standards. This approach demands a high income and aggressive savings and investment strategies.
Lean FIRE: Involves strict adherence to minimalist living and extreme savings, resulting in a more restricted lifestyle. Many Lean FIRE adherents live on $25,000 or less per year.
Barista FIRE: Designed for those who wish to balance the extremes of Fat and Lean FIRE. Individuals opting for Barista FIRE leave their conventional 9-to-5 jobs but combine part-time work with savings to sustain a less minimalist lifestyle. This allows them to secure health coverage through part-time work while avoiding dipping into retirement funds.
Ultimately, the FIRE movement challenges the conventional retirement narrative by promoting diligent savings, early retirement, and strategic financial decision-making.