The FIRE (Financial Independence, Retire Early) movement is a savings and investment pathway for retiring earlier than you normally would with traditional retirement savings methods. If retiring from the office decades before the average retirement age of 66 is something you’re interested in, here’s what you need to know and how to use our FIRE early retirement calculator to find out just how much you need to save to do it.
The amount of money you should have to maintain your current standard of living at retirement.
The age where you can achieve your FIRE goal and retire
Written By: Christina Majaski | Edited By: Becca Stanek
To get started on saving for your early retirement, you’ll need to first calculate your FIRE number. This number is the amount of money you will need to have invested in order to quit working and live off the returns.
To calculate your FIRE number, you will need to enter the following information into our calculator:
Once you’ve entered the data and pressed calculate, you will get your FIRE goal, which is the amount of money you need to maintain your current lifestyle in retirement. You’ll also get your FIRE age, which is the age at which you can likely achieve your FIRE goal and retire.
You can also calculate your FIRE number yourself (though not as specifically as the calculator can) using the rule of 25, which refers to saving 25 times your annual expenses. For example, if your annual expenses are currently $55,000, your FIRE number would be around $1,375,000.
The FIRE — or Financial Independence, Retire Early — movement is a path that many people are pursuing to increase their savings and investments investments so they can retire early and achieve financial independence. The movement was started by two financial professionals in their 1992 bestseller, “Your Money or Your Life”. In the book, Vicki Robin and Joe Dominguez explained the process of comparing your expenses to the amount of time you spend working to earn the purchase.
The overall goal of FIRE is to retire at a younger age, often in your early 40s or 50s as opposed to the traditional retirement age of 65 or even 70. By retiring earlier, you can spend more of your time enjoying life rather than working.
There are four different variations of FIRE to choose from, each with its own features. Thus, you choose the right type of FIRE for your situation.
The goal of FatFIRE is to have enough money invested that you can quit your full-time job and live a comfortable lifestyle, with household annual expenses of around $100,000. This type of FIRE focuses on saving more than the average investor, allowing you to both reach your goals sooner and be able to keep some frills in retirement.
If you’re okay with leading a more minimalist lifestyle and sticking to what might be considered extreme saving, you might consider LeanFIRE. This type of FIRE requires living frugally as opposed to FatFIRE, which is about maintaining your lifestyle. You can retire early with LeanFire, but only with enough to continue maintaining that frugal lifestyle.
CoastFIRE is an option if you start saving and investing as early as your 20s or 30s. This type of FIRE considers time and investment. When you are younger, you have longer for your investments to grow thanks to compound interest so you don’t have to invest as much and can stop contributing sooner — in other words, you can ‘coast’ toward retirement rather than taking up an aggressive savings strategy.
This type of FIRE is for those who have reached their FIRE goal and no longer need to work a regular full-time job. However, you might still keep a part-time job (somewhere like a local coffee shop) to help cover any extra expenses. This type of FIRE is intended to allow you to pay for everyday expenses without dipping into your retirement fund.
If you’re wondering how to actually achieve FIRE, here’s a step-by-step guide that can help:
Following the FIRE movement might seem like a great idea on one hand, but on the other, it could seem a bit complicated. A financial advisor or professional can take a look at your assets and expenses and your retirement goal. Then, they can help you put together a plan for investing, saving and reaching those goals.
If you want to retire early, it’s best to start saving immediately. You don’t have to be a particular age to become part of the FIRE movement. If your goal is to retire early, you’ll need to evaluate your finances and start saving more money as soon as possible.
While most people will be able to fit into one of the types of FIRE, it isn’t a movement that is for everybody. Some people will find it difficult and stressful trying to optimize every dollar they make. Also, many people who make the FIRE movement work and do retire early end up moving to a country with a lower cost of living, which isn’t an option for everyone.
The “4% rule” can help you determine how much you need to withdraw from your retirement account when you retire, and it is not specific to the FIRE movement. This rule of thumb is intended to ensure that, as a retiree, you withdraw enough to live on each year while maintaining an account balance that can sustain you throughout retirement. The 4% accounts for inflation and life expectancy.
Regarding FIRE, this rule means you will typically withdraw up to 4% of your portfolio without lowering the principal amount so you have enough to live through retirement.