FIRE movement

What It Means

The FIRE movement, short for financial independenceFinancial independenceHaving enough savings, investments or other income to cover your living costs without needing a paycheck from a job. See more, retire early, is an approach to money built around a very high savings rateSavings rateThe share of your income you save, found by dividing what you saved in a period by what you earned in that same period. See more. People following it put a large share of each paycheck into savings and investments, keep their spending low and stay clear of high-interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more debt, aiming to reach financial independence well before the usual retirement age. Some then leave work, while others keep working by choice once the money no longer depends on it. It has several styles, from lean FIRE on a small budgetBudgetA plan for a set period, usually a month, that lists the money you expect to receive and how you'll spend or save it. See more to fat FIRE on a larger one.

How It Sounds at Home

• "We're doing FIRE, so we save half of every paycheck."
• "She hit her FIRE number at 42 and still works part time."
• "FIRE sounds great until you price health insurance."

The Breakdown

Worked example. Two savers each take home $60,000 a year.

What the result means. A high savings rate works from both ends. Saver B puts away more each year and also needs a smaller pile, because the target is built from what she spends. The 15% that Saver A manages is in line with Fidelity's standard retirement guideline, which assumes saving from age 25 and retiring at 67; FIRE asks for far more. None of this counts investment growth, which could shorten or lengthen the path depending on markets.

The main styles, as Charles Schwab describes them

Good to Know

Charles Schwab's FIRE guide flags the risks of leaving work early: market downturns, rising costs, taxes, burnout from years of tight saving, and paying for health insuranceHealth insuranceA plan you pay a premium for that covers part of your medical costs, while you pay your own share through a deductible, copays and coinsurance. See more until Medicare begins. Money in a 401(k)401(k)A retirement plan run through an employer that lets you put part of each paycheck into investments, before tax or as Roth, up to a yearly IRS limit. See more or IRA also has rules. According to the IRS, withdrawals before age 59½ generally owe a 10% additional tax on the taxable part unless an exception applies, such as a series of substantially equal periodic payments, so early retirees plan which accounts they'll live on first. No savings rate guarantees a retirement date, and a financial planner can pressure-test a plan before anyone gives notice.

Related Terms and Categories

• Financial independence

  Having enough savings, investments or other income to cover your living costs without needing a paycheck from a job.

• Coast FIRE

  A FIRE style where you save enough early that, left to grow, your investments could reach a retirement goal later without large new contributions.

• Barista FIRE

  A FIRE style where you leave full-time work once savings cover part of your costs, and part-time work or a side business pays for the rest.

• Savings rate

  The share of your income you save, found by dividing what you saved in a period by what you earned in that same period.

Household money and budgeting