Financial Independence Retire Early (FIRE) Movement

The Financial Independence Retire Early movement can be traced back to “Your Money or Your Life,” a 1992 book written by Vicki Robin and Joe Dominguez. The book emphasized financial independence and included some of the core values that became the basis of the FIRE movement.

The movement has caught on with millennials in the last decade, as some younger adults have embraced the idea of separating their lives from their careers and working towards a point where they have enough money saved that they no longer need to be tethered to a job to support themselves.

By cutting expenses and living cheaply, FIRE followers aim to acquire enough money to exit the workforce well before the traditional retirement planning age of 65. Many strive to achieve financial independence in their 30s or 40s.

The primary goal of FIRE is financial independence, but many followers continue to earn income after quitting their day job.

The idea is you don’t need to work to survive. You only work if you want to.

“FIRE is all about having the work-life balance that you want,” Justin Chidester, CFP®, AFC® and founder of Wealth Mode Financial Planning in Logan, Utah, told RetireGuide.

“The people I’ve met don’t want a life of leisure — they want a life of intention. They don’t plan to retire early and not ever work again. It’s usually more to transition to working at something that doesn’t feel like work.”

Practicing FIRE means working hard when you’re young, saving and investing an average of 50% or more of your income and adopting a strict budget.

Most experts recommend saving about 10% to 15% of your salary to create a suitable retirement nest egg. But FIRE requires much more. The money must be invested aggressively in stocks and index funds to grow as quickly as possible.

Many people who practice FIRE are white-collar, college-educated professionals with high salaries — including corporate executives, lawyers and successful entrepreneurs — who can afford to set aside at least half of their earnings.

Those without six-figure salaries must get creative and live modestly in order to achieve financial independence at an early age.

Most FIRE followers create a goal of saving 25 times their annual expenses. Then, they apply the 4% rule, a standard retirement withdrawal strategy.

Let’s assume your annual income is $80,000, and you manage your annual expenses to about half of this, or $40,000 a year.

You will need to amass about $1 million in retirement assets (25 X $40,000) to reach the 25-times expenses milestone.

Over the years, the FIRE movement has divided into several subgroups. Each requires varying levels of discipline and sacrifice.

One of the key factors that keeps the FIRE movement from being an available strategy to all is the sheer amount of saving it takes to retire decades early. It is often only achievable with a big salary, typically as high as in the mid six figures. This is outside the salary range of most Americans.

And even Americans who do make the high salaries that are often necessary to participate in the FIRE movement must still live extremely frugal lives.

“You have to make a lot of sacrifices on how you spend,” Chidester said. “People who do it really aggressively make six-figure incomes, but they live like paupers.”

People who make less than that will struggle to live on just 30% or so of their salaries and may also find that the money they do save simply won’t go far enough to afford an early retirement any time soon.

Some FIRE followers also neglect to mention sizeable inheritances, inherited property or other family hand-me-downs that accelerate their path to financial independence. Most working-class Americans don’t enjoy this luxury.

Beyond the high salary demands that are necessary for the FIRE movement, the risk you take on by participating is another major drawback. Adding decades on to your retirement, at a time when people are living longer than ever before, means a higher risk for an economic crisis or unexpected life event derailing your plans.

This was financial expert Suze Orman’s biggest gripe with FIRE when she appeared on a 2018 episode of the Afford Anything podcast.

“If a catastrophe happens, if something happens, what are you going to do? You are going to burn up alive.”