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The Financial Independence, Retire Early (FIRE) Movement Explained

Siri Hedreen

Here's what the FIRE movement can teach us about financial freedom and happiness.

  • 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 retire in your 30s (or whenever you hit your FIRE number) while maintaining a reasonable lifestyle. This lifestyle isn't for everyone.
  • The amount you need to save to hit your FIRE number depends on your annual salary, geographic location and faith in the stock market.
  • This article is for those who are exploring the benefits and drawbacks of the FIRE movement.

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 was turning a profit with his company, 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.]

What is the Financial Independence, Retire Early movement?

Schneider is an adherent of the FIRE (Financial Independence, Retire Early) movement, which preaches aggressive saving and investing with the goal of retiring years or even decades earlier than the average retirement age.

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 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 to live off interest the rest of your life.

This practice has been discussed for years under the radar, such as in Reddit forums and personal finance blogs like Mr. Money Mustache, but didn't hit mainstream consciousness until a New York Times article in 2018. Since then, many who dream of early retirement have researched its tenets, with plenty of books and internet resources to explore on the topic.

The miracle is that not everyone has to be a software engineer like Schneider 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.

Key takeaway: "FIRE" stands for "Financial Independence, Retire Early," a movement that prioritizes funding retirement years or even decades before the standard retirement age.

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Who started the FIRE movement?

The roots of the FIRE movement can be traced back to Vicki Robin and Joe Dominguez, who published the book Your Money or Your Life in 1992. In its pages, Robin and Dominguez advocate for spending your retirement years enjoying your time on hobbies, family, and friends, instead of working well into your 60s to continue earning money.

While the idea originated in the early '90s, it took more than two decades for the idea to spread to others looking for alternatives to working as they got older.

Key takeaway: The FIRE movement started in the early 1990s with the book Your Money or Your Life by Vicki Robin and Joe Dominguez.

How does the FIRE movement work?

The FIRE movement focuses on financial independence first and foremost. With enough money, you no longer have to work; you can have the life you want to lead. To achieve this, FIRE movement adherents cut down on their expenses while finding ways to increase their current income, whether that's with smart investing or starting new ventures that generate extra cash.

At the core of FIRE is aggressive saving and investing. Many looking to achieve FIRE put away around 50% of their income, but up to 75% may be necessary, depending on your goals. The ultimate goal is to save enough money to draw 4% of the funds each year. When you reach that number, you have achieved financial independence and can retire early.

Key takeaway: FIRE prioritizes aggressive saving and investing to fund a work-free life. Once you can live off 4% of your savings for the rest of your life, you are considered financially independent and can safely retire.

What are the variations of the FIRE movement?

Not everyone takes so zealous an approach to the FIRE movement. Some adherents like the general idea but still have a taste for the finer things in life. Some spinoff movements cater to varying levels of commitment.

Fat FIRE

Fat FIRE focuses on building a larger nest egg for retirement. Its adherents wish to live an upper-middle-class lifestyle upon retirement and therefore save more aggressively.

Lean FIRE

Lean FIRE is for those who want to tackle financial independence from a frugal lens, choosing minimalist or anti-consumer lifestyles to achieve their goal.

Barista FIRE

This approach to the FIRE movement is for those who plan to maintain a part-time job in retirement solely for healthcare benefits.

Coast FIRE

Coast FIRE is when you invest enough money early enough to generate the income necessary to retire. This involves saving money that continues to collect interest or returns, therefore growing on its own without you needing to work.

Key takeaway: There are several ways to achieve financial independence and retire early, each suiting different lifestyles and goals.

What amount of savings do you need to retire early?

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 you can safely assume your 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."

Key takeaway: FIRE proponents typically say that saving $1 million is enough to retire early and spend approximately $40,000 per year.

FIRE opponents point out its flaws

In addition to the FIRE movement's tendency to come across as tone-deaf and privileged, critics are 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 on 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 in 2018, he did so in a blog post bragging about how he only spent $265 in the process.  

FIRE adherents, however, say 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.

Key takeaway: Opponents of the FIRE movement are concerned that it is inaccessible to those who live paycheck to paycheck and that it fuels a negative attitude toward work.

FIRE proponents see frugality as optimizing happiness

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 it's paid.

"I like my co-workers, and I like what I do," said 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 as 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."

Key takeaway: While FIRE requires short-term sacrifices, many find it worthwhile for the life of happiness it supports. In other words, hard work pays off.

Stella Morrison contributed to the writing and reporting in this article. Some source interviews were conducted for a previous version of this article.

Image Credit: Goran Bogicevic / Shutterstock
Siri Hedreen
Business News Daily Contributing Writer
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.