Experts: Which FIRE Movement Plan Is Right for You?

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For anyone who hasn’t heard of the FIRE movement, which the millennials brought to fame in the 2010s, Time sums up the concept in nine words: Reduce your expenses, make more money, invest the difference.

FIRE stands for “Financial Independence, Retire Early.” It’s a radical plan that requires you to tap out of consumer culture in your early years in order to retire well ahead of schedule with enough money to last indefinitely. 

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That target amount is called your FIRE number, and you can find it by multiplying your annual expenses by 25. That’s the formula to find the nest egg you would need to survive off a 4% annual withdrawal presuming a 4% yearly rate of return, which will theoretically last forever.

The movement is not for everyone, but several variations have emerged to make the concept more doable for different personality types with different lifestyles. 

Are you ready to work hard to retire early? Consider these FIRE alternatives.  

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Lean FIRE

Lean FIRE puts you on a financial starvation diet during your working years to make those years fewer. It demands spartan living and perpetual wants/needs analysis during your entire life as a young adult. For those who can endure ultra-minimalism and relentless saving, Lean FIRE offers the allure of retiring in early middle age. Time reports that some people with higher incomes have retired in their early 30s by living the Lean FIRE life.

Before you commit, keep in mind that the tradeoff is your youth.

“You’re foregoing today’s enjoyment for a tomorrow that may or may not materialize,” said Marc Arbones, economist, peak performance consultant and founder of Altcoins Mastery. “You must make too many sacrifices for an uncertain future.” 

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Fat FIRE

If you don’t possess the willpower and dedication to meet the exacting standards of Lean FIRE, Fat FIRE can win you early retirement without all the sacrifice. 

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The trick is that it requires you to nail two things that are much easier said than done — earn a high income and invest well over long periods of time. The goal is to quit working early while saving enough to spend $100,000 a year in retirement. According to Time, the magic number is a nest egg of $2.5 million, which yields an income of $100,000 a year at a 4% withdrawal rate.

You’d need a brag-worthy income to save $2.5 million long before the typical retirement age without living like a pauper during your earning years — but even that might not be enough. 

SoFi CFP Kendall Clayborne told GOBankingRates that there will still be the following considerations: 

  • Healthcare expenses: On average, healthcare costs $456 per person. But Fat FIRE leaves a huge gap between your last employer-based healthcare plan and the age of Medicare eligibility, so you’ll have to budget way up.
  • Side hustles: The average person will have to supplement their income with a gig to meet the hefty income requirements of Fat FIRE. But if you have to work all the time to meet the savings requirements, you’re actually closer to Lean FIRE than Fat FIRE.
  • The unexpected: Unforeseen circumstances can easily knock a plan of this scale off the tracks. A few bad investments or a poorly timed market downturn could put $2.5 million out of reach, as could a change in future tax rates, high inflation or anything else you can’t control. 
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Barista FIRE

As Clayborne pointed out, the healthcare abyss between an early retiree’s former employer-based insurance and the onset of Medicare can cost a small fortune. 

Barista FIRE adherents address that reality by working part time once they hit their FIRE number instead of retiring outright. The side job partially liberates them into a state of early semi-retirement while providing them with health insurance and enough income to offset at least some spending. 

According to Time, it’s a realistic alternative that allows for some degree of carefree spending during your working years while providing a safety net of partial income for when you enter early retirement.

Coast FIRE

Coast FIRE requires intense FIRE focus in your early working years. The goal is to quickly build your savings and investments big enough for the forces of compounding, appreciation and dividend reinvestment to do the rest. Once you hit your Coast FIRE number, you can continue working to support yourself without having to worry about contributing to your retirement account. That frees up cash to enjoy your life while your nest egg — now on autopilot — grows toward your FIRE number on its own. 

According to Time, your Coast FIRE number is your FIRE number/(1 + annual rate of return)(time in years). 

So, if your FIRE number is $1.2 million and you anticipate 6% annual returns for 25 years, your Coast FIRE number formula is $1,200,000/(1 + 0.06)25, which equals $279,590.

Bank that much, and you can coast from there. 

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street's investment community in New York City.
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