WHAT IS FI/RE MOVEMENT?

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.  

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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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