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The Financial Independence, Retire Early Movement Explained

image for Goran Bogicevic/Shutterstock
Goran Bogicevic/Shutterstock
  • FIRE is an acronym for the Financial Independence, Retire Early movement. 
  • The goal of the FIRE movement is to work hard, live below your means and then retire in your 30s (or whenever you hit your FIRE number) while still maintaining a reasonable lifestyle.
  • The amount you need to have saved by your FIRE number will vary based on your annual salary, geographic location and your faith in the stock market.
  • The FIRE lifestyle isn't for everyone. 

After graduating with a master's in computer science at 24 years old, Jeremy Schneider turned down a job offer from Microsoft to work on his own company, Rentlinx. Surviving on nothing but a credit card, he reached $12,000 in debt.

But after a few years of bootstrapping it, by age 30, Schneider's company was turning a profit, and he was paying himself a $36,000 salary – the lowest at the company – and investing $5,000 of that salary in a Roth IRA, enough to retire at age 52. 

Instead, by 34, he sold the company for seven figures, and by 36, retired with $3 million in the bank, only 12 years into his career. "Today I flip houses, coach beach volleyball, work on Personal Finance Club, do photography and travel," Schneider wrote in a blog post about his retirement. [Are you looking for the best retirement plan options for small business owners? Check out our reviews and our best picks.]

Schneider is an adherent of the FIRE (Financial Independence, Retire Early) movement – a practice that has existed for years under the radar in Reddit forums and personal finance blogs like Mr. Money Mustache but only recently hit mainstream consciousness in a New York Times article last year.  

To "FIRE" is to believe in delayed gratification – the goal is to work hard and live below your means until you hit your "FIRE number," or the dollar figure that will enable you to retire while maintaining a reasonable lifestyle. To put it one way, you can either live nearly paycheck to paycheck, putting away very little in savings until you retire in your 70s, or you can concentrate all your hard work and sacrifice early on, only to live off interest the rest of your life.

The miracle is that not everyone has to be a software engineer to make it work. With a combination of early-and-often investment and extreme penny-pinching, some successful adherents retire by their 30s on a five-figure salary.

For those with tastes for the finer things in life, however, not everyone takes so zealous an approach. Different spinoff movements cater to varying levels of commitment, including fatFIRE, for those who want a larger nest egg in retirement; Barista FIRE, for those who plan on maintaining a part-time job for the healthcare benefits; and leanFIRE, "for those that want to approach the problem of financial independence from a minimalist, stoic, frugal, or anti-consumerist trajectory."

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If you peruse Reddit's financial independence forums, you'll see a lot of references to the 4% rule. This refers to the "safe withdrawal rate" from one's FIRE number, an amount large enough to live on but small enough that it's safe to assume the portfolio will continue to grow based on historical stock market returns.

For the oft-cited retirement goal of $1 million, this means annual expenses amounting to $40,000 for the household – not exactly a lavish lifestyle but, for FIRE proponents, well worth the leisure time.  

Of course, a sudden windfall or massive return on investment can speed things up, making it easy to discount a story such as Schneider's. Still, with a $36,000 salary and the same spending habits, Schneider estimates he would've hit millionaire status in his early 50s even without the sale of his company.

"I chose the entrepreneur track, but if I wanted to FIRE on that day-job salary, I probably would have picked up a side hustle of some sort, thrown all of that income at investing and retired in my 40s," Schneider said.

That's not to say it's easy.

"I fully acknowledge I had a huge amount of privilege and unfair advantages," Schneider said. "Graduating from college debt-free, thanks mostly to my parents, is something that was simply gifted to me ... living below my means and buying and holding index funds didn't get me here alone."

In addition to the FIRE movement's occasional tendency to come across as tone-deaf and privileged, critics are also skeptical of the subculture's disparaging attitude toward work.

"Work very hard at something you hate, for the money, and save a tremendous amount, giving up most pleasures so that you can live modestly and do what you want later in life," one reader commented in the New York Times article. "Why don't you just live modestly and do what you want, from the beginning?"

Others point out that you're wasting your best years – and who's to say you won't die early, having postponed all your life's pleasures in vain? There are also plenty of things to poke fun at – see The New Yorker's tongue-in-cheek profile of Peter Adeney of Mr. Money Mustache as a parsimonious control freak, which drew a lot of ire from his FIRE followers. To be fair, when Adeney announced his divorce this year, he did so in a blog post bragging about how he only spent $265 in the process.  

FIRE adherents explain themselves, however, by saying that they don't hate work; they just don't let it define their lives, preferring to focus on family, hobbies or other nonfinancial ambitions.

Others practice the FIRE philosophy with an emphasis on financial independence over the "retire early" part. For them, the goal isn't to sit around and play golf for over half of their life but to do work they actually enjoy, whether or not that's paid.

"I like my co-workers, and I like what I do," read another New York Times comment, "but I can't wait to hit my FIRE number and say farewell. Life is short. Give me one minute, and I can give you 20 things I'd rather be doing than working."

While some consider the movement a form of masochism, Schneider describes FIRE not as a life of denial but a way of optimizing happiness. By that logic, the only real thing setting FIRE proponents apart from those following a traditional career route is that they get more pleasure from not having to work than from excess consumption.

"Personally, the thing that makes me happy is freedom," Schneider said. "I can do what I want with my time. Travel when I want. Help people. Work on what I want. Do something that makes a difference. If owning a home is what would really make me happy, then I might choose differently."

Siri Hedreen

Siri Hedreen is a graduate of King’s College London, where she wrote for Roar News, London Student and Edinburgh Festivals Magazine. Find her on Twitter @sirihedreen.