FIRE (Financial Independence, Retire Early)
A movement focused on saving aggressively (50-70% of income) to retire decades earlier than traditional retirement age.
What You Need to Know
FIRE is a lifestyle strategy where you maximize savings, minimize expenses, and invest aggressively to achieve financial independence—typically defined as having 25-30x your annual expenses invested.
The Math: The 4% rule says you can withdraw 4% of your portfolio annually without running out of money. So if you need $40,000/year, you need $1 million invested ($40k = 4% of $1M).
FIRE Variations:
- Lean FIRE: Retire on $30-40k/year with extreme frugality
- Fat FIRE: Retire with $100k+/year, maintaining a high lifestyle
- Barista FIRE: Retire early but work part-time for healthcare/income
The average FIRE timeline is 10-20 years depending on savings rate and income.
Sources & References
This information is sourced from authoritative government and academic institutions:
- investopedia.com
https://www.investopedia.com/terms/f/financial-independence-retire-early-fire.asp
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Related Terms in Retirement Planning
401(k)
An employer-sponsored retirement account where you contribute pre-tax income, often with employer matching.
Backdoor Roth IRA
A legal strategy allowing high earners to contribute to a Roth IRA by converting a Traditional IRA contribution.
Employer Match
Free money from your employer when you contribute to a 401(k) or similar retirement plan, typically matching 3-6% of your salary.
Pre-Tax (Before Tax)
Income or contributions made before taxes are withheld, reducing current taxable income.
QCD (Qualified Charitable Distribution)
A tax-free donation of up to $105,000 per year directly from your IRA to charity, available to those age 70½ and older, that counts toward your RMD.
RMD (Required Minimum Distribution)
The minimum amount you must withdraw from retirement accounts annually starting at age 73, whether you need the money or not.