Fueling Your Future: Exploring the FIRE Movement’s Road to Early Retirement

Main Takeaways

  • An acronym for “Financial Independence, Retire Early,” the FIRE movement, a new personal financial paradigm, is gaining momentum among millennials.

  • The desire for early happiness, combined with worries about the retirement crisis and prolonged working years, inspires some to adopt the FIRE lifestyle.

  • The FIRE approach hinges on three pillars: prudent saving, mindful spending, and strategic investment.

  • While early retirement may not suit everyone, financial independence remains universally relevant.

What is FIRE?

Does retiring at age 40 sound like an alluring yet distant fantasy to you? The FIRE movement, an acronym for “Financial Independence, Retire Early,” has been gaining popularity in the past decade, especially among millennials. As the name of the movement suggests, adherents of FIRE place an unparalleled emphasis on achieving financial independence and hope to bid farewell to the traditional nine-to-five grind decades ahead of their typical retirement age.

Followers of this personal financial paradigm are often known for their aggressive saving strategy. Yet, the FIRE movement encompasses more than radical saving. It represents a growing social perspective on the connection between money and happiness and offers a unique perspective on personal finances. For those intrigued by early retirement, the FIRE movement provides strategies to initiate this path, while for those committed to a lifelong career, it offers valuable insights into personal budgeting and investment planning.


Practitioners of the FIRE movement are usually driven by a fundamental question: what role does money play in achieving happiness? More often than not, they perceive money not as a goal but as a tool — a safety net for peace of mind, a means to pursue aspirations, and a cornerstone for family well-being. Nonetheless, they acknowledge that money isn’t the sole ingredient in the recipe for happiness. Factors like quality time with loved ones, the freedom to pursue passions, and maintaining physical and mental well-being are equally important. Hence, striking a balance among these essential ingredients and plotting a timeline to acquire them becomes significant. FIRE believers aim to swiftly accumulate wealth, prioritizing it early on their path to happiness.

Figure 1: Motivations for Achieving Financial Independence

Source: The Harris Poll

Figure 2: Motivations for Realizing Early Retirement

Source: The Harris Poll

Their planning can be better understood in light of the Life-Cycle Hypothesis (LCH). According to LCH, individuals strive to maintain a consistent level of consumption across their lifespan. However, the income trajectory for an individual typically follows an inverse-U shape: earnings increase upon transitioning from student to employee, continue to rise with the accumulation of work experience, peak around the age of 50, and eventually decline, becoming more pronounced with retirement. Consequently, the graph depicting an individual’s spending and saving over time exhibits a hump-shaped pattern, characterized by low wealth accumulation during youth and old age and a peak during middle age. Therefore, for FIRE practitioners anticipating an extended retirement they aim for a savings plan that is substantially higher during their working years compared to conventional retirement planning.

Figure 3: Life-Cycle Consumption Theory Visualized

Source: Investopedia

Additionally, millennials are grappling with a looming retirement crisis, compounding the movement’s appeal. As of a May 2023 report, the reality is that in 2022, 28% of non-retirees in the US found themselves without any retirement savings, a distressing increase from 25% recorded in 2021. While the majority of non-retired adults did possess some form of retirement savings, a mere 31% believed that their retirement savings were on track, a significant drop from 40% reported in 2021.

Source: Board of Governors of the Federal Reserve System

Source: Board of Governors of the Federal Reserve System

As for Europe, according to the Pension Adequacy Report published by the European Commission in 2021, nearly 18.5% (16.1 million) of individuals aged 65 and above in the EU in 2019 were at risk of poverty, marking a slight increase since 2016. Concurrently, several Member States continue to promote longer working lives, thereby deferring labour market exit ages. To sum up, the allure of attaining happiness earlier in life, coupled with concerns about the retirement crisis and the prospect of an extended working life, motivates some individuals to embrace the FIRE lifestyle.

Source: European Commission

Source: European Commission

How to FIRE?

To achieve their objectives, FIRE practitioners make deliberate financial, lifestyle, and career choices. The FIRE philosophy centers around three principles: prudent saving, mindful spending, and strategic investment: in order to increase the savings rate, cutting spending and raising income through investments become essential.

Prudent Saving

To start a FIRE journey, individuals need to establish a clear timeline by determining (1) the amount of money required to save and (2) the time needed to achieve the target. For the first issue, the two primary benchmarks often embraced in the FIRE community are the 25x Rule and the 4% Rule. The 25x Rule implies that one should accumulate savings equal to 25 times their annual expenses before contemplating early retirement. Meanwhile, the 4% Rule suggests that retirees can withdraw 4% of their initial retirement portfolio annually without depleting their savings prematurely.

As for the second issue, the answer is rooted in the savings rate. The following formula computes the number of years needed to save an amount equal to one year of expenses:

Years = (1 - Savings Rate) / Savings Rate

For example, for a 50% savings rate:

(1 - 0.5) / 0.5 = 1 year to save for one year of expenses

Therefore, the savings rate significantly influences the timeline of FIRE. Using the 25x Rule as an example, at a 50% savings rate, it will take 25 years to save for 25 years of expenses. Lowering the savings rate to 20% would require (1 - 0.2) / 0.2 = 4 years to save for one year of expenses, resulting in 100 years to save for 25 years of expenses. In contrast, a 75% savings rate translates to just (1-0.75) / 0.75 = 1/3 year = 4 months of work to save for one year of living expenses, reducing the timeline to slightly over eight years. This calculation disregards the impact of inflation and investment returns, which could complicate the financial assessment.

Mindful Spending

Many FIRE enthusiasts use budgeting and expense tracking apps (Mint, YNAB, MoneyWiz) to gain insights into their habits and to identify areas where they can cut costs. Additionally, within the FIRE community, individuals employ diverse spending strategies, giving rise to three prominent approaches tailored to varying lifestyles and goals: Fat FIRE, Lean FIRE, and Coast FIRE.

Fat FIRE embodies affluence and comfort, requiring a substantial financial cushion to facilitate a luxurious lifestyle during both working years and retirement. Conversely, Lean FIRE adopts a minimalist and frugal lifestyle, emphasizing strict budgeting to swiftly exit traditional employment. Coast FIRE, or Barista FIRE, strikes a middle ground, allowing practitioners to transition to part-time work, such as a barista.

Figure 4: Wealth Targets to Hit for Different FIRE Approaches

Source: The Harris Poll

Strategic Investing

Apart from mindful spending, FIRE adherents demonstrate distinctive investment behaviours in contrast to their non-FIRE counterparts. They explore diverse income sources apart from employment earnings, exhibit a proactive approach in financial market investments (94% vs. 68%), and often commence their investments at an earlier stage in life (49% vs. 34% by age 30). Moreover, compared with their non-FIRE peers, they exhibit a broader presence across multiple investment vehicles, including stocks, bonds, mutual funds, ETFs, and real estate. They lean towards passive investments with lower management fees and favour no or low-fee ETFs and brokerage accounts.

Figure 5: Comparison of the Starting Age for Investing Between FIRE and Non-FIRE Followers

Source: The Harris Poll

Figure 6: Comparison of Investment Portfolio Between FIRE and Non-FIRE Followers
Source: The Harris Poll

Is FIRE for You?

Despite the undeniable allure of early retirement that FIRE presents, it is crucial to recognize that this path may not suit everyone. There are potential pitfalls that you should be wary of.

First of all, there remains a degree of financial risk associated with FIRE. Unexpected healthcare expenses, underperformance of financial markets leading to lower-than-anticipated investment returns, and unforeseen inflation are all potential curveballs that can challenge the well-laid FIRE foundation. Therefore, it is always advisable to consider strategies in preparation for rainy days. These include (1) establishing an emergency fund to cover at least six months’ worth of living expenses,  (2) obtaining health insurance to offset unexpected medical costs,  (3) diversifying investment portfolios across multiple asset classes (such as stocks, bonds, and real estate), (4) and regularly reviewing and adjusting financial plans to ensure resilience.

In addition, the psychological dimension of FIRE must not be underestimated. As researchers have aptly noted, “Attaining financial freedom doesn’t automatically equate to a fulfilled life.” In a culture where work is intimately tied to our self-identity and sense of life’s purpose, crafting a meaningful existence post-early retirement can be challenging as well. Before retirement, it is important to envision how you will spend your time, foster social connections, and discover purpose beyond work.

Ultimately, irrespective of whether one aspires to early retirement, the “FI” aspect of the FIRE philosophy holds universal relevance. Financial independence, with its core principles of prudent saving, mindful spending, and strategic investment, can serve as a guide for attaining financial security and aligning with personal goals. Practising financial responsibility is a lifelong lesson that benefits oneself and one’s family.

Further Reading and Listening

If you are interested in the FIRE movement and wish to learn more, you can check out the following books and one podcast episode.



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