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What is FIRE Retirement and Should You Consider It?

If the idea of retiring in your early 50’s, 40’s, 30’s, or even late 20’s appeals to you, you may be interested in joining the FIRE retirement movement. Designed for those who have both the discipline and cash flow to save diligently, FIRE can be an effective path toward living a work-optional lifestyle.

What Is FIRE?

FIRE stands for “Financial Independence, Retire Early.” This program, inspired by Vicki Robin’s book “Your Money or Your Life,” is built on the premise of saving more money month-to-month than is traditional in retirement planning and utilizing low-fee investment options to be able to afford retirement earlier than the traditional age of 65.

According to FIRE, reaching financial independence requires you to save at least 25 times your yearly expenses. For example:

Estimated Annual Expenses in Retirement: $50,000/year
$50,000 x 25 = $1.25 million

So in this example, you would need $1.25 million in savings to be considered financially independent.

Once you’ve reached your calculated goal, you’d be able to retire and enjoy a life of financial freedom, withdrawing about four percent from your nest egg each year. Depending on the amount of risk you are willing to take on, the age you plan to retire, and the lifestyle changes you want to make in retirement, you may need to adjust these numbers.

Top Considerations Before Joining the FIRE Movement

Retiring in your 30’s may sound unrealistic to many, and the whole FIRE movement can appear more like a daydream than reality. But while it’s a challenging commitment, those who can embrace the frugal lifestyle can retire far earlier than most. Here are a few essential features to consider before deciding if the FIRE program is right for you.

Consideration #1: You likely need a savings rate of 50%-75%

The three primary factors of the FIRE program are income, expenses, and time; the more significant the gap between your income and expenses, the quicker you will reach financial independence. You are not likely to be able to retire early by saving the standard 15% per year. Even if you start the FIRE approach in your 20s, retiring in your 30’s or 40’s requires you to save more than half of your income. The amount you actually need to save must be calculated individually, as it is based on your income level and current expenses, and additional expenses you may need in the future (including things like healthcare and paying for your kids’ education). However, living a frugal lifestyle now is almost always a requirement of any program for those pursuing a FIRE retirement.

Depending on how much you earn, the steep savings rate may not be possible, or it may require you to cut out more than you’re willing to. You need to weigh the sacrifices you would make to your lifestyle (including possibly working additional hours in your 20s and 30s) against the ideal of retiring young.

Consideration #2: FIRE Followers Don’t Embrace Traditional Retirement

For those looking to retire early using the FIRE method, retirement doesn’t mean sitting around and doing nothing. FIRE followers are typically more focused on the first part of the acronym, financial independence. They’re likely to still work part-time in retirement or pursue a passion project they were previously unable to due to the demands of a full-time job. Some early retirees continue to work full time at a lower-paying, less stressful job.

Consideration #3: You’ll Want a “Why”

Like other financial goals, it can be hard to find the motivation to skip a dinner out or a splurge on a new outfit. With only a vague idea of retiring early, it can be challenging to resist today’s joys for the possibility of an early retirement a decade down the line.

Instead, those who have embraced the FIRE method often put a “why” to their savings programs, and it’s vital to be as specific as possible. Merely wanting to quit a job you dislike doesn’t bring much motivation or a promise for future fulfillment. If that’s the case, you may be better off exploring a new career path instead of early retirement. For your “why,” look instead to ideas like your travel bucket list, pursuing music or art full time, or starting your own business. Whatever it is, define your “why” and let it guide you in making positive progress toward your financial independence.

Of course, FIRE isn’t all or nothing. If saving half of your income is too steep, perhaps you can save 30% and aim to retire in your mid-50’s. Or, you can work in a higher cost-of-living area during your career and then retire early to a part of the country (or the world) that is comparatively cheap. This strategy does not require you to save as large a portion of your income but will require you to change your life significantly when you retire.


The FIRE program is an appealing method of retiring early on in life and allows its followers to find the flexibility to do more of what they love. But it does take rigorous self-discipline to spend less today so that you can save for tomorrow. If you’re considering the FIRE method, seek out a financial professional who can help you understand your current spending habits and what you’ll need to find financial independence for early retirement.


This content is developed from sources believed to be providing accurate information and is provided at least in part by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Original content of Practical Financial Planning, Inc. only is copyright © 2020 by Practical Financial Planning, Inc.