Financial Independence, Retire Early. The acronym came from a 1992 book, but today there are several methods you can choose that some believe could help you retire before 60.
The original book was called Your Money or Your Life and it proposed a ‘concrete’ plan that anyone could follow to retire from full-time work as early as in their 30s.
It begins with finding your ‘FIRE number’, or the amount of money you may need to have invested in a portfolio before your retirement. Taking advantage of compound interest and asset appreciation, the theory goes that your FIRE number would be your annual expenses at retirement multiplied by 25 (e.g. for $40,000/year, it would be $1m). This assumption was based on calculations using historical stock market returns, where one would be able to withdraw 3-4% of their portfolio and fund a retirement for a time period of up to 30 years.
Although the initial excitement around it died down, FIRE has experienced a resurgence in recent years as people increasingly prioritise flexible working and a healthy work-life balance. Enthusiasts have also developed several variations of the concept to accommodate different goals and lifestyles.
There’s Coast FIRE, where you spend a few years working and investing as much as 80% of your income in order to harness the power of compound interest as early as possible. As soon as you hit a target number, you then leave full-time work to coastthrough life working part-time or doing money-making hobbies. Similar to that is Flamingo FIRE, where you move through different life stages of full-time employment to being semi-retired, before finally reaching full retirement.
For those looking at different levels of comfort in retirement, there are FIRE variations that show how to get there. Lean FIRE, for example, is for the minimalists who aim to spend approximately US$40,000 a year. To do this, you’d have to sacrifice luxuries and live as simply as possible, but as a reward, get to retire earlier. In contrast, Fat FIRE is the term for a lifestyle where you retire to a fat investment portfolio. Attracting those already on high incomes, a common Fat FIRE number is $5m to cover $200,000 in annual expenditures.
All these variations show that you can cherry-pick FIRE methods and teachings as you try and forge your own path to financial independence. The only thing that’s constant in all types of FIRE is the practice of investing, with high-yield but lower-risk securities (such as index funds and large-cap dividend stocks) being common choices.
What would your FIRE number be and how far along are you?