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The FIRE Movement

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Have you heard people mention the FIRE movement but you aren't sure what it is? It stands for Financial Independence, Retire Early and was coined in the 1990's book "Your Money Your Life." It has gained traction in the last decade, especially with millennials. The basics are a very frugal lifestyle and extreme savings. It is a thought process of anti-consumerism; the complete opposite of the "keeping up with the Jones'" mindset. It's definitely not for everyone. It takes a great amount of discipline, sacrifices, and lifestyle adjustment but it also takes enough income to make the concept work, usually 6 figures. You also need a lack of debt like credit cards and student loan payments that eat up a large percentage of your budget. Followers of the movement evaluate every expense in terms of the number of work hours it takes to pay for it and they save 50-75% of their income. The goal is to "retire" in their 40's or maybe even their 30's.


The old school train of thought for retirement was saving over a lifetime career and retiring somewhere around 65. But a lot of people ask the question "how many good years will I have to enjoy life and what I love?" Which leads to the next question, why does retirement have to be defined by an age? After all, most retirement accounts don't let you access your money until you reach a certain age (unless you pay penalties). Why isn't retirement defined by a number? A number unique to everyone. A number that generates the amount of income YOU need to live the lifestyle you want to live and spend your days doing what you WANT to do! The thought process is financial independence and a life of flexibility. Retire early doesn't mean you have to completely stop working but the financial independence allows you to do something part time or that pays less but you really enjoy and you still have the income you need to cover your expenses. If you plan to live an elaborate lifestyle in retirement then you will most likely need to work longer, save more, or a combination of both.


Followers of the FIRE movement greatly focus on two rules: the rule of 25 and the 4% rule. The rule of 25 states that you want your savings to be at least 25 times your annual expenses. If your annual expenses are $80,000 then you need $2,000,000 in savings (plus a standard emergency fund of 6-12 months expenses). The $2,000,000 is your FIRE number. Once you have attained that number then the 4% rule applies. This rule (from the Trinity study) states that if you withdraw 4% a year (adjusted for inflation) then you will have enough to live off of long term. One thing to note here, if your investment account reaches that $2,000,000 number so your 4% is the needed $80,000 but the market crashes and declines 20% for example, you now have $1,600,000 and a 4% withdrawal is only $64,000. For this to work, you have to have assets that can generate enough income to cover your expenses.


These rules have the savings and investments channeled on paper assets. A mix of tax advantaged retirement accounts and regular brokerage accounts. Remember, the retirement accounts can't be accessed until retirement age so if you are retiring early you will need an account that can be accessed at any age. FIRE followers max out their tax advantaged accounts first. If you have a 401k at your job then you want to max it out, especially if your employer has an employee match because that is just free money. The 2023 max contribution to your 401k is $22,500. 2023 max contributions for both Roth and traditional IRA's is $6500 and $15,500 for a SIMPLE. Remember that these contributions may be tax deductible so that's just another win for maxing these accounts out! Once these accounts are maxed out then you save in a traditional brokerage account that is diversified to account for your risk tolerance.


Let's look at an example of how many years you need to get to your number based on income and expenses. If your income is $70,000 and your expenses are $60,000 and you are saving $10,000 per year then you will need 44.3 years to retire. Ouch! But what if you pick up a side hustle and increase that income to $85,000 and you cut out all expenses except necessities and get them down to $50,000 so you are saving $35,000 then you are at 20.6 years. If you are 25 when you start this then retiring in your mid 40's is possible.


The FIRE movement is heavily focused on paper assets such as stocks, bonds, mutual funds, and ETFs. They are relatively easy to purchase, especially on a monthly basis. However, with the volatility in the markets recently there are FIRE followers turning to rental real estate to generate their retire early income. It can be a great way to achieve the goal. If you max out the retirement accounts like the 401k and IRA for the later years but focus on the rental real estate for the immediate cash flow needs, you have a good chance of achieving "retire early" even earlier than if you followed the rule of 25. You can begin buying the properties when you have the savings to fund a down payment, mortgage the balance, and the rental income pays down the mortgage while also generating some monthly cash flow. Plus, rental properties can create some great tax advantages since taxes are paid on the net rental income after expenses and depreciation and rental income is not subjected to self employment tax. If you are looking to retire early or just generate additional income and cash flow, rental real estate can be a great option. Plus, real estate usually appreciates in value so that is another win.


If you are thinking, I can embrace some of this but maybe not all of it, there are some different variations of the FIRE movement.

  1. Lean: this is the person living an almost extreme minimalist and frugal lifestyle and completely focused on how much they can save. This person is not going "to live a little" so to speak.

  2. Fat: this is the person that isn't as focused on retiring early but is focused on saving more so that they can "live it up" in retirement. This person needs $200,000 a year versus the $50,000 of the Lean person.

  3. Barista: this person is focused on working less but not necessarily completely escaping work. They want to live off the "retirement money" and concentrate on more meaningful work that only creates a limited income.

Your desired lifestyle in retirement, regardless of your retirement age, heavily dictates the amount of savings you need and the length of time it will take to achieve financial independence.


The FIRE movement thought process is not for everyone and like most things, there are risks associated with it such as:

  • having to pay for health insurance when you leave a job that has provided it. This could be a big expense making that annual expense number increase drastically. Medicare doesn't kick in until 65 so you may have decades to cover.

  • as mentioned above, your investments may not perform as planned and the market could crash and take years to recover.

  • while you are in the savings period, you have to earn enough to cover your basic needs and still save 50% or more. If you have a family, child care, and other large expenses, saving 50% may not be feasible.

  • also as mentioned above, if your budget is full of debt payments like credit cards and student loans, saving 50% may not be possible even if the rest of your budget is strictly addressed.

All in all, followers of the FIRE movement are people that believe laboring for decades in a job you don't enjoy is not a life well lived. They believe we were not meant to spend 8 hours in an office each day and 2 hours in our car commuting. They are wanting to live a simple life, extravagance is not their style.

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1 Comment


Ann Morris Ipock
Ann Morris Ipock
Mar 01, 2023

Brilliant! I wish I had read this when we married at age 28. I love the "radical" thinking of saving 50%, buying stocks, etc., and/or buying rental properties. Booth, there is no telling how many people you are helping if they just LISTEN and APPLY your advice. Thank you!!!

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