How to Retire Early
(The FIRE Strategy)
Financial Independence isn't just about pinching pennies. It's about the math of buying back your freedom.
What is FIRE?
FIRE stands for Financial Independence, Retire Early. At its core, it is the point where your investment portfolio generates enough passive income to cover your annual living expenses indefinitely. Once you reach this crossover point, working becomes optional.
The movement has grown from a niche finance subculture to a global phenomenon because the math is accessible to anyone with a consistent savings rate. It shifts the retirement conversation from "age 65" to "whenever you hit your number."
The Math: The 25x Rule
How do you know when you have "enough"? The most common benchmark used in the FIRE community is the 25x Rule. This rule suggests that you need to save 25 times your expected annual spending.
For example, if you spend $50,000 per year to live comfortably, your FIRE number is:
$50,000 (Annual Spend) × 25 = $1,250,000
This is derived from the 4% Rule, based on the famous Trinity Study. The study showed that a portfolio typically invested in 50% stocks and 50% bonds could historically survive a 30-year retirement with a 4% initial withdrawal rate, adjusted annually for inflation.
Do You Know Your Date?
Stop guessing. Use our free calculator to see exactly when you can reach Financial Independence based on your current savings rate.
Calculate Your FIRE DateThe Two Levers: Earning vs. Spending
To reach FIRE faster, you only have two primary levers to pull:
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Increase Income: This lever has no theoretical limit. Side hustles, career advancement, and job hopping are key strategies. Unlike cutting coupons, earning more can drastically accelerate your timeline.
Related: Calculate your "Real" Hourly Wage to see what your time is truly worth. - Decrease Spending: This lever has a "double effect." Every dollar you cut is a dollar you can invest and it lowers your annual expenses, which lowers your FIRE number (the target you need to hit).
Saving 50% of your income can result in retirement in as little as 17 years, regardless of your income level, assuming reasonable market returns.
Risks to Consider
Early retirement requires planning for a much longer time horizon (40-60 years) than standard retirement. Key risks to mitigate include:
- Sequence of Returns Risk: A market crash early in your retirement can deplete your portfolio faster than expected. Visualize this risk here.
- Healthcare Costs: Without employer coverage, you must budget for ACA premiums or private insurance.
- Inflation: Over 40 years, the cost of living will likely triple. Ensure you use "real" (inflation-adjusted) returns in your planning.