Also called: Financial independence, retire early.
The core idea is that a retirement date is a function of savings rate rather than income. Someone saving 50% of take-home pay reaches the point where investments cover spending far sooner than someone saving 10%, largely irrespective of the absolute numbers, because a high savings rate simultaneously builds the portfolio and lowers the spending it has to support.
FIRE has splintered into variants worth knowing: lean FIRE aims at a modest spending level, fat FIRE at a comfortable one, barista FIRE assumes part-time work continues to cover some costs, and Coast FIRE stops retirement saving once compounding can finish the job.
The hard part is rarely the accumulation arithmetic; it is that a 45-year retirement is a genuinely different problem from a 25-year one. Horizon risk, sequence risk and the possibility of returning to work all loom much larger, and the standard rules of thumb were not built for it.
This is where simulation earns its keep. A 4% rule tested over 30-year windows says nothing reliable about a 50-year horizon, and the sensible move is to test the actual horizon rather than borrow a number designed for a shorter one.
Research on this
See also
- Coast FIRE — The point at which existing invested savings, left to compound with no further contributions, would grow to a target retirement number by a chosen age.
- Safe withdrawal rate — The share of a portfolio’s starting value you can withdraw in year one of retirement, then raise with inflation each year, without running out over your horizon.
- Sequence of returns risk — The risk that the order in which investment returns arrive damages a plan, even when the average return is unchanged. It matters most when money is being withdrawn.