Financial Independence, Retire Early (FIRE) Definition - Deepstash
Financial Independence, Retire Early (FIRE) Definition

Financial Independence, Retire Early (FIRE) Definition

Curated from: investopedia.com

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Financial Independence, Retire Early (FIRE)

Financial Independence, Retire Early (FIRE)

FIRE is a financial movement of extreme savings and investment that allows proponents to retire far earlier than traditional budgets and retirement plans would allow.

  • By dedicating up to 70% of income to savings, followers of the FIRE movement may eventually be able to quit their jobs and live solely off small withdrawals from their portfolios decades before the conventional retirement age of 65.
  • To cover their living expenses after retiring at a young age, FIRE devotees make small withdrawals from their savings, typically around 3% to 4% yearly.

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How Financial Independence, Retire Early (FIRE) Started

Borne out of the 1992 best-selling book "Your Money or Your Life" by Vicki Robin and Joe Dominguez, FIRE came to embody a core premise of the book: juxtaposing expenses and time spent at work against hours of your life. Every expense is compared to the time spent at work in order to earn the purchase.

In more recent years, Millennials, in particular, have embraced the FIRE movement with the aim of retiring well before the traditional retirement age of 65.

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Variations on FIRE

  • Fat FIRE: an individual with a more traditional lifestyle who saves more than the average retirement investor
  • Lean FIRE: refers to stringent adherence to minimalist living and extreme savings, necessitating a far more restricted lifestyle.
  • Barista FIRE: refers to followers who have quit their traditional 9-to-5 job but still employ some form of part-time work to cover current expenses that would otherwise erode their retirement fund
  • Coast FIRE: also applies to followers with a part-time job, but these proponents do have enough saved to fund their retirement and current living expenses.

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