The FIRE movement, which stands for “Financial Independence, Retire Early,” has been somewhat of a revolution in career and retirement planning.
The 1992 book by Vicki Robin and Joe Dominguez, Your Money or Your Life, sparked the movement making financial independence and early retirement more attainable. It explained that everyone trades time at work for money. The book outlines strategies that average people can use to retire much earlier than the traditional age.
What is the FIRE movement?
The FIRE movement is based on rejecting the status quo of traditional career paths ending in retirement at age 65 or later.
Many content creators (bloggers, podcasters, and YouTubers) have been sharing their journeys along the road to FIRE for years. They aim to show that through diligently high savings rates and simple investments, it’s possible to retire early in your 50s, 40s, or even your 30s.
Key FIRE movement principles
A cornerstone of FIRE is to save a high percentage of your annual income, even 50 percent or more. The more you can save (and the higher your income), the faster you can reach your FIRE number, which is often estimated at 25–30 times your annual expenses.
You can estimate your retirement needs based on expected expenses. Traditional retirement calculators usually estimate that retirement income should be 80 percent of your pre-retirement income, while in reality, you might spend much less.
You can live off reasonable portfolio withdrawals. Withdrawing between 3 percent and 4 percent per year is a typical guideline that many people can use to safely retire early. When you have enough money in investments to live off withdrawals indefinitely, you are ready for FIRE.
Pros of the FIRE movement
#2: Pursuing FIRE often leads to greater contentment. As Liz from The Frugalwoods said, “Frugality is not deprivation.” Instead of being tempted by expensive possessions, like the latest iPhone or flashy cars, you can live happily and spend less money.
#3: Many people in the FIRE movement have diversified investments and multiple income streams. Even if your stock portfolio drops in value, your real estate investments may flourish. You don't rely only on Social Security or a single pension for your living expenses.
#4: Retiring early may mean more healthy years to do things you enjoy like traveling. Waiting until you’re older could mean that you won’t be able to take part in those activities anymore.
Cons of the FIRE movement
#1: Retiring early means that obviously, your retirement money has to last much longer. Also, you have less time to accumulate that money. If you take Social Security as early as possible, you will receive reduced benefits.
#2: It isn't possible to prepare for every situation. No matter how carefully you calculate your retirement spending, there can always be unexpected expenses. Suze Orman famously blasted the FIRE movement in a 2018 interview largely because it can’t prepare you for every catastrophe.
#3: Some people who retire early find themselves losing their sense of identity or they get bored after a few years of having total freedom over their time. Sam Dogen wrote Financial Samurai, which talks about the downside of boredom in early retirement.