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Retire Early with the FIRE Movement: How Does it Work and is it for You?

It doesn’t just mean sitting around and doing nothing for the rest of your life!

  • The Financial Independence Retire Early movement is a strategy for early retirement, often decades before the traditional retirement age. FIRE followers save extreme amounts of their take-home income and cut their expenses to save and invest as much for retirement as possible.
  • Ideally, the amount of money saved and invested towards retirement should generate enough passive income to cover expenditures after retirement.
  • The sum needed to be financially independent (i.e. your FIRE number) is estimated to be 25 times your annual expenditure. 
How to Get Financial Independence Early Retirement

There is no official retirement age; We do not hit X years old and then find ourselves financially taken care of and retired! Although this would be great for those economically unprepared for retirement, some of us do prepare ourselves appropriately and can ignore the official national retirement age.

The Financial Independence Retire Early (FIRE) movement lies at the far end of the spectrum, increasing in popularity in recent years. Retiring at 65? Forget it. These people are aiming to be retired in their thirties and forties. 

But how does one retire at such a young age? And is it desirable for all? Let’s explore further!

How Does the FIRE Movement Work?

In essence, FIRE movement followers aim to save up enough money to generate enough passive income to cover their annual spending.

But the desire to retire early is not enough. To reap the perceived benefits of retiring early, you have to make sacrifices in the years beforehand.

FIRE movement followers will typically save half or more of their take-home pay. Our budgeting rule recommends that you aim to save 20% (or more) of your take-home pay, so clearly, there is a notable difference between FIRE and more traditional budgeting methods. Would you be in a position to save half of your take-home pay today? 

Because the FIRE community save so heavily, they spend far less on essential needs and discretionary spending. If you’re not willing to be frugal and adopt an extreme minimalist approach, then FIRE may not be for you. 

As mentioned above, the ability to retire early requires generating significant passive income. Most of the FIRE community chooses to invest in low-cost passive investments such as index funds. Other popular investments include property to generate rental income.

It should be noted that achieving financial independence does not necessarily mean packing your bags, moving to Thailand and sitting on a beach for the remaining 50 years of your life. Achieving financial freedom means having the ability to choose how and when you work. Whilst ‘retired’, you could scale back your hours, pursue a job in something lower-paid but more enjoyable, or station yourself on a beach in Thailand. The choice is yours!

A monkey sitting on the beach
Photo from Pixabay

Calculating Your FIRE Number

The sum needed to be financially independent (i.e. your FIRE number) is estimated to be 25 times your annual expenditure. 

For example, if you spend $25,000 annually, your FIRE number would be $625,000 ($25,000 X 25). Therefore, lower expenditure means a lower FIRE number, hence why minimalism and frugality are key components of the FIRE movement.

Why Multiply Annual Expenditure by 25?

Multiplying by 25 is based on "The 4% Rule", which many consider a safe withdrawal rate for retirement. Withdrawing 4% annually is the inverse of multiplying by 25. However, we should approach this method with caution. The 4% rule derives from historical investment returns plus is based on a 30-year retirement period. Those planning to be retired for longer than thirty years should arguably aim to have more than 25 times their annual expenditure. That said, it's quite a handy rule of thumb!

Variations of FIRE Movement

There are numerous variations of the FIRE movement, depending on an individual’s retirement goals. We’ll focus on the three main approaches:


Retiring without altering your current standard of living prior to starting the FIRE journey. Achieving this will require aggressive saving and investment strategies.


The opposite of fat FIRE. Here, your retirement funds are not as great, meaning that you have to live a minimalist life before and during retirement.

Barista FIRE

This variation is the middle ground between the two styles mentioned above. It means being retired but not having enough funds to cover expenses, so continuing to work part-time. One of the perks of doing this method is keeping benefits from employment, such as social connections, mental stimuli, and health insurance in some countries. 



  1. Header photo by Unsplash
Content is intended to be used and must be used for informational purposes only and should not be relied upon as financial or other professional advice.