FIRE is a movement focused on saving 50-70% of income to retire decades early — often in your 30s or 40s. The math is simple: save 25x your annual expenses and withdraw 4% per year. The challenge is that longer retirements amplify sequence-of-returns risk and require more conservative planning.
FIRE — Financial Independence, Retire Early — is a personal finance movement built on the idea that aggressive saving and investing can buy freedom from traditional employment decades before the conventional retirement age. FIRE practitioners typically save 50–70% of their income and target a portfolio large enough to fund their lifestyle indefinitely through investment returns.
How It Works
The core math behind FIRE is the 25x rule, which is the inverse of the 4% safe withdrawal rate:
- Calculate your annual expenses — not your income, your spending
- Multiply by 25 — this is your FIRE number (the portfolio size needed)
- Save aggressively — aim for a 50–70% savings rate to reach the target in 10–15 years
- Invest in low-cost index funds — most FIRE adherents use broad market equity funds
- Withdraw 4% per year (or less) once you hit the number
For example, if you spend $48,000 per year:
- FIRE number: $48,000 × 25 = $1,200,000
- At a 60% savings rate on $120,000 income: ~12 years to reach the target
FIRE Variants
| Variant | Description | Typical Target |
|---|---|---|
| Fat FIRE | Comfortable lifestyle, higher spending | 30–35x expenses |
| Lean FIRE | Extreme frugality, minimal spending | 25x of < $30,000/yr |
| Barista FIRE | Semi-retired with part-time income | Lower portfolio + earned income |
| Coast FIRE | Enough saved to coast to traditional retirement | Cover current expenses only |
Why It Matters for Retirement Planning
FIRE introduces unique planning challenges that traditional retirement models don't fully address:
- Ultra-long time horizons: a 35-year-old retiree may need their portfolio to last 55+ years — nearly double the 30-year period the 4% rule was tested against
- No Social Security bridge: FIRE retirees typically have decades before government benefits kick in, meaning the portfolio must carry the full withdrawal burden during the most vulnerable early years
- Healthcare costs: early retirees in the U.S. must fund their own health insurance before Medicare eligibility at 65
- Sequence-of-returns risk amplified: the longer the drawdown period, the more exposed you are to early-retirement market crashes
Interactive chart: fire-savings-rate
Years to FIRE by savings rate (assuming 7% real returns)
Coming soon
FIRE and Monte Carlo Simulation
Monte Carlo simulation is essential for FIRE planning because it reveals risks that simple calculations hide. A 4% withdrawal rate with a 30-year horizon historically has a ~95% success rate — but extending to 50 years drops it to roughly 80-85% under normal distributions, and even lower with fat-tail modeling.
This is why many FIRE practitioners:
- Target a 3.0–3.5% withdrawal rate instead of 4%
- Use dynamic spending strategies like Guyton-Klinger that adapt to market conditions
- Plan for Barista FIRE — keeping some earned income during the first decade to reduce sequence risk
- Maintain a flexible spending floor — knowing which expenses can be cut in a downturn
The gap between a naive 4% projection and a Monte Carlo simulation with realistic fat tails is where FIRE plans fail. Running the numbers through a simulator is not optional for early retirees — it's the only way to stress-test a plan that must survive half a century of market uncertainty.
Frequently Asked Questions
- How much money do I need to FIRE?
- The standard FIRE target is 25 times your annual expenses — the inverse of the 4% rule. If you spend $48,000 per year, you need $1,200,000. However, early retirees with 40-50 year horizons may want to target 30-33x expenses (a 3-3.3% withdrawal rate) for additional safety margin.
- Is the 4% rule safe for early retirees?
- The 4% rule was designed for a 30-year retirement. FIRE practitioners retiring at 35-45 may need their portfolio to last 50+ years. Monte Carlo simulations with fat-tail distributions show that a 3.25-3.5% withdrawal rate is safer for these longer horizons, or better yet, a dynamic spending strategy that adapts to market conditions.
- What are the different types of FIRE?
- The main variants are: Fat FIRE (retiring with a large portfolio and maintaining a high standard of living), Lean FIRE (extreme frugality with minimal expenses, often under $30,000/year), Barista FIRE (semi-retirement with part-time income covering some expenses), and Coast FIRE (enough saved that compounding alone will fund traditional retirement, so you only need to cover current expenses).