FIRE (financial independence, retire early)

FIRE stands for financial independence, retire early. Followers aim to save a large share of their income, often half or more, and invest it, typically in low-cost diversified index funds, until the portfolio can cover their annual spending indefinitely. A common target is about 25 times yearly spending, the inverse of the 4% rule. The savings rate matters more than investment returns in determining how long this takes, because saving more both adds capital and lowers the spending the portfolio must support. Variants include lean FIRE (a frugal budget), fat FIRE (a more comfortable one) and Coast FIRE (saving enough early that growth alone can reach the target by a normal retirement age).

FIRE draws attention to useful ideas: spending less than you earn, keeping costs low and letting compound growth work. Its risks lie in the length of retirement and the assumptions behind it. A retirement of 40 years or more is longer than the 30-year periods on which the 4% rule was tested, so many practitioners use a lower withdrawal rate or plan to keep earning some income. Sequence-of-returns risk, health costs, inflation and changes to tax or pension rules can all derail a plan built on a spreadsheet. Early retirees may also be unable to reach tax-advantaged pension savings until a minimum age, so they need bridging money in ordinary accounts.