What Is the FIRE Movement? How to Find Your FIRE Number

What is the FIRE movement? How to find your FIRE number

Embracing the FIRE movement is the answer to retiring with money.

According to the Natixis Global Retirement Index 2021, 36% of Americans think they will never have enough money to retire, pointing to a major need to increase their savings at the start of their professional career in order to be able to retire easily. . And that’s where FIRE comes in.

Financial Independence Retire Early, FIRE for short, is a term that originated in the personal finance book “Your Money or Your Life” by Viki Robin and Joe Dominguez. FIRE is a movement that promotes extreme financial savings and investments so that a person can retire earlier than they traditionally would. If the idea of ​​early retirement has piqued your interest, here’s a full analysis of the FIRE movement.

How does FIRE work?

FIRE is a movement that encourages people to save 50-75% of their income when they have a full-time job to retire once that amount of savings reaches 25-30 times their annual expenses. So let’s say you earn $1,000 per month (which then becomes $12,000 per year). If you’re following FIRE, you’ll need to set aside at least $500 every month in your savings until you’ve saved $300,000.

FIRE focuses on postponing gratification, which means enjoying less slats, expensive clothes and new phones, to live comfortably after retirement.

If you follow the FIRE bandwagon, you’re supposed to live on 4% of said savings in the first year and adjust for inflation in subsequent years when you retire. Your FIRE number (the amount you need to save before retirement) is your annual expenses multiplied by 25 at a withdrawal rate of 4%. However, this number varies depending on the type of FIRE you practice. Let’s take a closer look at the FIRE variants so you can find the one that’s right for you.

Types of FIRE

There are four different variations of FIRE depending on how you want to live after retirement—

lean FIRE

This variant of FIRE is for those who wish to live a more frugal or minimalist life after retirement. Participants in the lean FIRE variant focus on building a strong investment portfolio and the life of the returns it provides. On average, participants in the Lean FIRE variant are those who intend to live on $40,000 or less per year after retirement.

To determine your lean FIRE number, you need to calculate your annual expenses and divide it by the withdrawal limit (which is usually 4%, as we mentioned above). The lean FIRE variant only allows for essential expenses, such as food, transportation, housing, and personal insurance, to name a few.


This variant is for those who wish to live a more bourgeois lifestyle after retirement. Those who fall under this variant tend to be in a higher income bracket and intend to live on $100,000 per year after retirement. The formula for determining Fat FIRE would be the same as the standard FIRE number, except you would factor in higher expenses. Those who follow Fat FIRE typically expect to achieve a FIRE figure of US$2.5 million or more.

FIRE Barista

Barista FIRE is for those who intend to work after retirement to take advantage of the health care benefits provided by the workforce. It basically means quitting your full-time job for a part-time job. This variant of FIRE was named “Barista” because coffee conglomerate Starbucks is one of the largest employers in the United States that provides health insurance to part-time workers.

Your Barista FIRE number would be your standard FIRE number (25 x annual spend at 4% withdrawal rate). You then need to estimate how much you would earn in your potential part-time job and subtract your annual expenses from your potential salary, then multiply the difference by 25.

FIRE Coast

Coast FIRE is a variation where you make all pension contributions over 10-20 years, which you would typically make over 40 years of your working life. People who follow this variant work into their 60s but stop putting money into retirement funds in their 30s and 40s. It works on the idea of ​​compound interest, which helps you earn interest on your interest.

The first thing you need to do to arrive at your coastal FIRE number is find your standard FIRE number, then divide that number by (1 + annual rate of return) ^ (hour). Here, the annual rate of return is the rate at which you expect your investments to grow, and time is the number of years you want that interest to accrue.

The limits of FIRE

When considering the FIRE movement, it’s important to note that for those living paycheck to paycheck, saving that much money for retirement is not financially feasible. This limits the number of people who can practically use FIRE as a retirement strategy. Then there are others who think life is short and the idea of ​​dragging out your youth to live modestly later in life just doesn’t make sense.

Also, the FIRE number you calculate today will not necessarily remain accurate over the years. You never know how social programs, interest rates and taxes would change over the years. There are also other variables, such as serious illnesses and accidents, which the FIRE number does not necessarily take into account. You could also end up miscalculating your FIRE number by underestimating how much money you would need in an emergency. For example, when a 25-year-old calculates a FIRE number, they will think about it in terms of their current salaries and current responsibilities and not in terms of how their life would look like over time.

In my opinion, the FIRE number should only be a hypothetical goal that you can aspire to instead of being a strict financial milestone. Ultimately, we want to have fun and spend money on things that bring us joy. Strive for financial independence, but at the same time, don’t worry so much that you forget to live your life.

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