What Is The FIRE Movement?

Followers of the movement typically save around 50% to 75% of their annual income until they’ve amassed enough money to let them retire early.

Knowing how much money you need to have saved before you can stop working isn’t an exact science, but the “25 rule” helps many hopeful early retirees set a goal they can work toward. Simply put, this rule states you need to have saved 25 times what you spend in a year before you can seriously consider retirement.  

Jeff Rose, certified financial planner and blogger behind Good Financial Cents, advises people to save more money than they think they will need during retirement. This is especially true for FIRE, where your retirement might last 50 years or longer compared to a more traditional retirement. 

“Things are going to come up where you’re going to need to spend more, or the markets aren’t going to return what you hope they’re going to,” he says. “And the thing most people don’t realize is if something were to come up, like a major medical expense, in a season where the stock market is in a bad bear market… this 4% calculation all goes out the window.” 

To help you reach these ambitious savings and investment goals, you’ll need to seize any opportunity to make your savings grow. High-yield savings accounts like Marcus by Goldman Sachs High Yield Online Savings can help make the most of your emergency savings, but you’ll likely need to keep much of your money in investments where it has a chance to earn a much higher return. Betterment and Wealthfront both offer robo-advisors to help you invest in a retirement portfolio that aligns with your needs. 

Now, let’s put this FIRE strategy into perspective with an example of someone satisfied living on a small budget during their retirement.

Based on the 4% withdrawal rule, that means this person could withdraw $32,500 each year. That means during retirement, they would have to live off $2,708 every month. 

Note that this example does not take into account different scenarios like an increase in savings contributions or expenses, or various return rates of savings and retirement accounts. 

Reaching financial independence can be tough but it’s not impossible. However, the FIRE movement has often drawn criticism as having unrealistic requirements that aren’t achievable for many workers.   

“I want to acknowledge that and say that already gave us a footstep up,” she said. “And then both my husband and I just learned from our parents to be very mindful of our money.”  

On the other hand, without this type of support, it can require more work for others to achieve financial independence. Rose finds that reaching FIRE can be difficult without earning an income that gives you room to save and invest, while still taking care of your expenses.   

“I think the reality is that you have to have some sort of career or some sort of skill that allows you to make a decent wage when you’re saving 40%, 50%, 60% or 70% of your savings,” Rose said. “If you’re making $30,000 a year and can barely make ends meet, then it’s going to be really hard to achieve FIRE.”  

However, if you do find that you can comfortably save and invest to potentially reach FIRE at your desired time frame, there’s one thing Saavedra and Rose have emphasized that people typically neglect along the way — mental health.  

While Saavedra managed to become work-optional, the process also caused her to feel slightly insecure about her financial decisions, especially while living in New York City.   

“The pressure of ‘keeping up with the Joneses’ was definitely there,” she said. “Even though mentally I knew I had a lot of money in the bank, I felt poor compared to my friends who were living up their lives.”