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What is the FIRE movement?

Sep 6, 2022
in a nutshell
  • FIRE stands for “financial independence, retire early.”
  • It’s a movement that encourages people to live frugally & invest so they can retire & enjoy financial freedom sooner than the average retirement age.
  • FIRE advocates tend to keep their living expenses as low as possible and invest in diversified portfolios to reach their goals.
Image of FIRE stands for financial independence, retire early — here’s what you should know about the movement.
in a nutshell
  • FIRE stands for “financial independence, retire early.”
  • It’s a movement that encourages people to live frugally & invest so they can retire & enjoy financial freedom sooner than the average retirement age.
  • FIRE advocates tend to keep their living expenses as low as possible and invest in diversified portfolios to reach their goals.

Have you thought about how long you’ll have to work before you retire? According to the Center for Retirement Research at Boston College, the average retirement age for men is 65. For women, the average retirement age is 63. 

If the idea of working for another 30 or 40 years before you can retire is daunting, you’re not alone. An increasing number of people are looking for ways to retire sooner, leading them to join the FIRE movement.

“FIRE” stands for “financial independence, retire early.” It’s a concept that encourages people to live frugally and invest so they can retire and enjoy financial freedom sooner. 

Whether you’re a FIRE devotee or new to the idea, here’s what you should know about the FIRE movement. 

How does the FIRE movement work?

The FIRE movement’s roots can be traced back to Vicki Robin and Joe Dominguez. They wrote the book “Your Money or Your Life” in 1992, which advocated retiring earlier to enjoy time with family and participating in hobbies rather than working into your 60s. 

Jacob Lund Fisker furthered the idea with his book Early Retirement Extreme. In his book, Fisker focused on how people could retire sooner by slashing their expenses and investing. 

While the definition of FIRE can vary, the original approach to FIRE is focused on the 4% rule.  This guideline says a retiree with a 30-year time horizon could spend 4% of their portfolio in their first year of retirement. After that, they can withdraw an inflation-adjusted amount in subsequent years. 

Assuming you follow the 4% rule, you can calculate the amount of money you need to achieve FIRE by multiplying your annual expenses by 25. According to the U.S. Bureau of Labor Statistics, the average household spent $61,334 on their expenses in 2021. If your expenses matched that average, you’d need to have approximately $1.5 million invested to achieve FIRE. 

Types of FIRE

Since its inception, the FIRE movement has gained momentum and expanded. There are now different types of FIRE, which are based on the various approaches to financial independence. The five most common types are: 

  • Traditional FIRE: Traditional FIRE follows the 4% rule and advocates reducing spending so you can invest more aggressively. 

  • LeanFIRE: LeanFIRE is a more minimalist approach with an expectation that you’ll have fewer expenses than the average consumer in retirement. With LeanFIRE, the goal is to retire and live on less than $40,000 per year. 

  • FatFIRE: The opposite of LeanFIRE, FatFIRE is for those that want a more luxurious lifestyle in retirement. Perhaps they want to travel or splurge on vehicles or boats. In general, FatFIRE followers plan on living on more than $100,000 per year in retirement. 

  • CoastFIRE: CoastFIRE is a strategy where you invest heavily while you’re young. Once you reach a certain point, you won’t need to make any more contributions to reach your FIRE number; with hopes that the power of compounding will cover your expenses in retirement. 

  • BaristaFIRE: BaristaFIRE is an approach to FIRE where you quit a demanding full-time job, but continue to work on at least a part-time basis. Working as a barista to earn some income — and potentially get health insurance — is a common approach, which is where this form gets its name. But it can involve any type of less-demanding work. 

How to get started with FIRE 

If you're ready to join the FIRE movement, but aren't sure where to start, here's what you should know:

Boost your income

To achieve FIRE, you'll likely need to increase your income so you can free up more cash for investments. You can boost your income by getting a raise, consulting on the side, or by picking up a side gig like gift wrapping during the holidays or delivering groceries. Many FIRE followers also establish passive income streams through investment properties or other businesses. 


To reach your FIRE number, you'll need to save and invest your money.  There are many options to consider, like contributing to a 401(k) or IRA or investing in a taxable brokerage account

How much of your income you need to save is dependent on several factors, including your age, desired retirement age, and current balance. In general, the savings rate for FIRE devotees is between 30% and 70% of their incomes. 

Keep expenses low

To maximize your FIRE potential, keep your living expenses as low as possible. Consider moves that will lower your cost of living, like downsizing your home, switching to a cheaper vehicle, or getting a roommate to split housing expenses. 

You can also reduce costs by cooking at home, cutting cable, and reducing discretionary spending. 

Pay down debt

When it comes to FIRE, debt is your enemy. That's because debt pulls money away from investments and retirement funds, which can set you back in your FIRE journey. To get on track, work on paying down high-interest debt, like credit card debt and student loans

Many FIRE followers will sell unused items and pick up side gigs to get extra cash to put toward their debt so they can eliminate those balances faster. 

7 tips for joining the FIRE movement

If you're motivated to join the FIRE movement, use these tips to accomplish your goals:

  1. Start with your goals: Think about what you want your retirement to look like. Decide what age you want to retire by, what kind of lifestyle you'll lead, and how much money you'll need to achieve that plan.

  2. Think about healthcare expenses and health insurance: If you plan on retiring early, be sure to consider how you'll handle healthcare expenses and health insurance. You aren't eligible for Medicare until you're 65, so if you retire, you'll likely have to pay the entirety of your health insurance costs. Health insurance can cost thousands each year, so it's important to have a plan in place for those expenses.

  3. Automate your savings: Automating your savings and retirement contributions can make reaching FIRE easier. Setting aside a portion of every paycheck, before you can mentally spend the money, can help you achieve your goals.

  4. Track your expenses: Keep track of your spending and regularly review your budget and bank account statements to see if there are areas you can reduce or cut.

  5. Choose a diversified investment portfolio: Investing can be key to FIRE, and a diversified investment portfolio is intended to provide some protection against market fluctuations. Index funds, mutual funds and exchange-traded funds (ETFs) can be excellent choices for FIRE devotees. Check out Acorns Invest to easily invest in a smart, diversified portfolio built by experts.

  6. Work with a financial advisor: It can be a good idea to check with a financial advisor to ensure you're on track to meet your FIRE goals. Be sure to verify your financial advisor is a fiduciary. Fiduciaries have an obligation to put your best interest above their own.

  7. Monitor your progress: Following a FIRE lifestyle can be challenging. To stay motivated, review your progress on a regular basis, such as every Friday or the first of every month. Seeing your investments grow and your debt decrease can be a powerful motivator and help you stay on track.

This material has been presented for informational and educational purposes only. The views expressed in the articles above are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses. Article contributors are not affiliated with Acorns Advisers, LLC. and do not provide investment advice to Acorns’ clients. Acorns is not engaged in rendering tax, legal or accounting advice. Please consult a qualified professional for this type of service.

Kat Tretina

Kat Tretina is a freelance writer and certified financial and student loan counselor. 

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