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 flush with cash.

According to Natixis Global Retirement Index 2021, 36% of Americans believe that they will never have enough money to retire, pointing to a major need to increase your savings early on in your professional career so that you can retire easily. And that’s where FIRE comes in.

Financial Independence Retire Early, FIRE for short, is a term that has its origins 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 retiring early piqued your interest, here is a complete breakdown of the FIRE movement. 

How does FIRE work?

FIRE is a movement that encourages people to put away 50 to 75% of their earnings into savings while they have full-time jobs to retire once this saving amount reaches 25 to 30 times their yearly expenditure. So let’s say you make US$1000 a month (which then becomes US$12,000 a year). If you follow FIRE, you would have to put away at least US$500 each month into your savings till you have saved US$300,000.

FIRE is focused on delaying gratification, which entails enjoying fewer lattes, expensive clothes and brand-new phones, to live at ease post-retirement. 

If you follow the FIRE movement, you are 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 expenditure times 25 at a withdrawal rate of 4%. However, this figure varies depending on the type of FIRE you practice. Let’s take a closer look at the FIRE variants so that you can find one that fits you the best. 

Types of FIRE 

There are four different variations of FIRE depending upon how you want to live post-retirement— 


This variant of FIRE is for those who want to live a more frugal or minimalist life post-retirement. Participants of the lean FIRE variant focus on building a strong investment portfolio and living off the returns that it gives. On average, participants of the Lean FIRE variation are those who intend to live on US$40,000 or less per year post retirement. 

To figure out your lean FIRE number, you need to calculate your yearly expenditure and divide it by the withdrawal limit (which is typically 4% as we discussed 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 upper-class lifestyle post-retirement. Those who fall under this variant tend to be in a higher income bracket and intend to live on US$100,000 per year post-retirement.  The formula for figuring out Fat FIRE would be the same as that for the standard FIRE number except that you would account for greater expenditure. Those who follow fat FIRE typically hope to reach a FIRE number of US$2.5 million or more

Barista FIRE

Barista FIRE is for those who intend to work after retirement to enjoy the healthcare benefits provided by the workforce. It essentially means leaving your full-time job for a part-time job. This variant of FIRE has been named “Barista” because the coffee conglomerate Starbucks is one of the largest American employers that provide health insurance to part-timers. 

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

Coast FIRE

Coast FIRE is a variant wherein you make all retirement contributions in 10-20 years which you would typically make over 40 years of your professional 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 coast FIRE number is to find your standard FIRE number and then divide this number by (1 + Annual Rate of Return)^(Time). Here, the annual rate of return is the rate at which you expect your investments to grow, and time is the number of years for which you want this interest to compound. 

The limitations of FIRE 

When considering the FIRE movement, it is important to note that for those who live paycheck to paycheck, saving so much money for retirement isn’t financially feasible. This limits the scope of people who can practically use FIRE as a retirement strategy. Then, there are others who think that life is short and the idea of slogging away your youth to live modestly later in life simply doesn’t make sense. 

Besides, the FIRE number you calculate today might not necessarily stay accurate over the years. You never know how social programs, rates of interest and taxes would change over the years. There are also other variables, like major illnesses and accidents, that the FIRE number doesn’t necessarily account for. You could also just end up miscalculating your FIRE figure by underestimating how much money you would need in case of emergencies. For instance, when a 25-year-old calculates a FIRE number, they will be thinking of it based on their current salaries and current responsibilities and not based on how their life would look like over time.

In my opinion, the FIRE number should just be a hypothetical goal you can aspire towards instead of being a strict financial milestone. At the end of the day, we want to enjoy ourselves and spend money on things that give us joy. Strive for financial independence, but at the same time, don’t stress about it so much that you forget to live your life. 

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Header image courtesy of Unsplash


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