The FIRE (Financial Independence, Retire Early) movement is a lifestyle movement whose goal is financial independence and retiring early.

  • Those seeking to attain FIRE intentionally maximize their savings rate by finding ways to increase income or decrease expenses. 

  • The objective is to accumulate assets until the resulting passive income provides enough money for living expenses in perpetuity. 

  • Many proponents of the FIRE movement suggest the 4% rule as a guide, thus setting a goal of at least 25 times estimated annual living expenses. 

  • Upon reaching financial independence, paid work becomes optional, allowing for retirement from traditional work decades earlier than the standard retirement age.

FI/RE or FI/RE movement is about aggressive saving, far more than the standard 10–15% typically recommended by financial planners. Assuming constant income and expenses, and neglecting investment returns, observe that:  

  • At a savings rate of 10%, it takes (1-0.1)/0.1 = 9 years of work to save for 1 year of living expenses.

  • At a savings rate of 25%, it takes (1-0.25)/0.25 = 3 years of work to save for 1 year of living expenses.

  • At a savings rate of 50%, it takes (1-0.5)/0.5 = 1 year of work to save for 1 year of living expenses.

  • At a savings rate of 75%, it takes (1-0.75)/0.75 = 0.33 years of work to save for 1 year of living expenses.  

From this example, it can be concluded that the time to retirement decreases significantly as savings rate is increased. For this reason, those pursuing FIRE attempt to save 50% or more of their income. At a 75% savings rate, it would take less than 10 years of work to accumulate 25 times the average annual living expenses suggested by 'the 4% safe withdrawal' rule.

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