FIRE movement

The FIRE (Financial Independence, Retire Early) movement is a lifestyle movement with the goal of gaining financial independence and retiring early. The model became particularly popular among millennials in the 2010s, gaining traction through online communities via information shared in blogs, podcasts, and online discussion forums.

Those seeking to attain FIRE intentionally maximize their savings rate by growing the gap between their living expenses and their income, and investing the difference. JL Collins, an author who has been called the "godfather" of financial independence, has advocated:

"Spend less than you earn—invest the surplus—avoid debt. Do simply this and you'll wind up rich."

The objective is to accumulate assets until the passive income from these assets provide enough money to cover living expenses. Some proponents of the FIRE movement suggest the 4% rule as a rough withdrawal guideline, thus setting a goal of at least 25 times one's estimated annual living expenses. Others, such as economist Karsten Jeske, suggest planning for a more conservative withdrawal rate such as 3.25% or 3.5% (accumulating around 28 to 30 times one's estimated annual living expenses) when planning to retire very early.

When a person reaches financial independence, paid work becomes optional, allowing them to pursue new activities or retire before reaching a typical retirement age.

Background
FIRE is achieved through aggressive saving, far more than the standard 10–15% typically recommended by financial planners. Assuming expenses are equal to income minus savings, and neglecting investment returns, observe that:


 * At a savings rate of 10%, it takes (1-0.1)/0.1 = 9 years of work to save for 1 year of living expenses.
 * At a savings rate of 25%, it takes (1-0.25)/0.25 = 3 years of work to save for 1 year of living expenses.
 * At a savings rate of 50%, it takes (1-0.5)/0.5 = 1 year of work to save for 1 year of living expenses.
 * At a savings rate of 75%, it takes (1-0.75)/0.75 = 1/3 year = 4 months of work to save for 1 year of living expenses.

From this example, it can be concluded that the time to retirement decreases significantly as savings rate is increased. For this reason, those pursuing FIRE attempt to save 50% or more of their income. At a 75% savings rate, it would take less than 10 years of work to accumulate 25 times the average annual living expenses suggested by 'the 4% safe withdrawal' rule.

There are several ways to pursue FIRE. Some of the best-known are:

LeanFIRE: LeanFIRE is about achieving financial independence earlier by living exceedingly frugally. With very low expenses, a smaller investment portfolio is needed to achieve financial independence.

FatFIRE: FatFIRE is a strategy for achieving financial freedom and early retirement with a larger budget than traditional retirement planning. Unlike other FIRE methods that may focus on minimalism and reducing expenses, Fat FIRE allows for a more luxurious lifestyle in retirement. This approach requires saving and investing a significant portion of income to build a substantial nest egg, enabling individuals to retire earlier than conventional retirement age while maintaining a higher standard of living.

CoastFIRE: CoastFIRE has at least two stages. In the first, an investor aggressively saves and builds their investment portfolio. This continues until the investor is satisfied that their portfolio will grow sufficiently through the power of compound interest alone. In the second stage, the investor can stop or reduce their investing, and enjoy a measure of freedom without being fully financially independent.

BaristaFIRE: BaristaFIRE allows people to partially retire before they are fully financially independent. It involves switching to a less-demanding (usually part-time) job that provides some income, and perhaps benefits such as health insurance. (The term is a reference to part-time jobs at Starbucks, which provide health insurance.) With this approach, a person covers their living expenses with income as well as modest withdrawals from an investment portfolio. During this period, the investment portfolio should continue to grow.

FIRE is viewed as a lifestyle, not simply an investment strategy. A common thread that challenges individuals that subscribe to the FIRE lifestyle is finding partners that share the same fiscal goals. Availability of online resources helps the movement to expand among Millennial high-net-worth individuals.

The emergence of social media has brought more attention to workers discussing their dissatisfaction. "Social media has made lives appear more glorious and expensive, but also allows others to broadly share about their financial freedom." said Zachary A. Bachner, CFP(r) of Summit Financial.

History
The main ideas behind the FIRE movement originate from the 1992 best-selling book Your Money or Your Life written by Vicki Robin and Joe Dominguez, as well as the 2010 book Early Retirement Extreme by Jacob Lund Fisker. These works provide the basic template of combining a lifestyle of simple living with income from investments to achieve financial independence. In particular, the latter book describes the relationship between savings rate and time to retirement, which allows individuals to quickly project their retirement date given an assumed level of income and expenses.

The Mr. Money Mustache blog, which started in 2011, is an influential voice that generated interest in the idea of achieving early retirement through frugality and helped popularize the FIRE movement. Other books, blogs, and podcasts continue to refine and promote the FIRE concept. A notable contributor to this movement includes Financial Freedom author Grant Sabatier, who works closely with Vicki Robin and popularized the idea of side hustling as a path to accelerate financial independence. In 2018, the FIRE movement received significant coverage by traditional mainstream media outlets. According to a survey conducted by the Harris Poll later that year, 11% of wealthier Americans aged 45 and older have heard of the FIRE movement by name while another 26% are aware of the concept.

Criticism
The FIRE movement advocates frugality as a means to saving more for your future; this is therefore an inaccessible scheme for lower-income earners who perhaps have to employ frugality as a means of simply meeting day-to-day living costs.

It could also be argued that the level of frugality required in order to make the FIRE movement effective would depend on your income status, making the process more attainable the wealthier you already are, and potentially having a greater impact on your quality of life for those who are less wealthy.

Critics of the FIRE movement have alleged that it is "only for the rich", citing the challenges of attaining high savings rates on a modest income. Conversely, Justin McCurry wrote in CNN:

"Financial independence is well within reach of an average college graduate... If you're only making double the minimum wage, it is a lot harder. But for the vast majority of college grads it is in within reach, even for people who earn less than $100,000.”"

Critics have also suggested that early retirees may not be setting aside enough funds for safe withdrawals during retirement. Tanja Hester and economist Karsten Jeske have advocated for considering a conservative safe withdrawal rate of 3.5% or less, rather than the 4% rate mentioned in many retirement articles. This adjustment requires accumulating approximately 30 or more times one's annual expenses, rather than the conventional 25 times.