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What is the Financial Independence, Retire Early (FIRE) Movement?

This is a financial movement defined by extreme savings and investment. The FIRE movement allows you to retire early by saving up to 70% of your annual income. This accumulated fund is used for living post-retirement through small withdrawals. 

Typically, the FIRE followers withdraw up to 3% to 4% of their savings annually for their expenses during retirement. 
The main components to achieve FIRE retirement are comprehensive planning, economic discipline and a wise investment. Therefore, this movement provides you flexibility and freedom during your retirement. However, you must be disciplined and determined at an early age. 

The origin of this term FIRE was first coined in the year 1992 in the book “Your Money or Your Life” by Vicky Robin and Joe Dominguez. The book centres around reducing your expenses and learning to be happy with less – these are keys to financial happiness and wealth creation

What is the Purpose of FIRE Movement?

The conventional age of retirement in India is 60, and people are encouraged to plan for it. The FIRE movement aims to dictate that people save most of their income. Thus, the followers of this movement are hopeful that they will be able to quit their job and live solely with small withdrawals from their portfolios decades before they reach age 60. 

Many people, especially millionaires, have embraced pursuing the FIRE movement in recent years. It believes in having an extreme saving lifestyle during work life for several years and saving up to 70% of annual income. When the savings reach approximately 30 times the yearly expenses, then they may quit their jobs or retire from work. 

Post-retirement expenses can be covered even after retiring at a young age, where you can make small withdrawals from the accumulated wealth. Typically, 3% to 4% of the balance annually. Depending on the size of savings and desired lifestyle, it requires diligence to monitor expenses and dedication to maintain and reallocate the investment. 

How Does the FIRE Movement Work?

The participants in this movement make a goal to build enough assets and passive income that can help them retire early than the traditional retirement age of 60. They make drastic life changes to reach the FIRE number by dedicating up to 70% of their annual income towards savings. When their savings reach approximately 30 times their annual expenses, they may prefer to quit their job and completely retire from any form of employment. Also, from their accumulated savings, they can withdraw 3% to 4% of funds every year. Therefore, aggressive saving and investing are the core of the FIRE movement that helps to achieve financial independence early. 

What are the Variations of the FIRE Movement?

There are different variations that emerged in the FIRE movement where the approach is based on income, family situation and other factors. 


Goal – To retire early and live a lavish lifestyle

Approach – it requires aggressive savings and building a passive income on a large portfolio. Also, those individuals who do not want to reduce their standard of living. They will work more than an average worker. Simply put, a high salary and aggressive savings and investment strategy will work for this approach. 


Goal – To retire early and live modestly

Approach – it focuses on frugality and low cost of living. Also, it requires extreme savings and a restricted lifestyle. Thus, individuals have to keep costs low and live on less. 


Goal – To retire early and work part-time during retirement

Approach – individuals who want to be between the two choices above. They can quit their traditional 9 to 5 job and retire early. It involves getting a part-time job to fund the post-retirement expenses and live a minimum lifestyle. The job helps to maintain health coverage, and accumulated savings helps to meet the other expenses if the income is insufficient. Moreover, the FIRE number for this approach will be less than the Fat or Lean versions. 


Goal – To achieve financial independence early 

Approach – individuals have saved enough money which can generate sufficient income to retire. In other words, it involves saving money that continues to generate interest or returns without working and can cover the living expenses post-retirement. 

How to Calculate Your FIRE Number?

The FIRE number can be calculated by determining the corpus amount required at retirement. To arrive at this number, you need to identify your current annual expenses and multiply them by 25. For instance, if your yearly expenses are INR 60,000, then you need to save up to INR 15 lakhs to live comfortably and meet your goals. 

Also, the FIRE number calculation is based on the 4% rule of retirement. According to this rule, if you withdraw roughly 4% from your savings which is inflation adjusted, the probability that your savings may last for several decades. Furthermore, the FIRE number may change as you realise that your expenses could be higher or lower for various reasons.  

However, not every participant may use the 4% rule or the 25X calculation as a hard and fast rule. Many participants assume that they may supplement their portfolio with passive income or with some type of meaningful work after they retire. 

Advantages and Disadvantages of FIRE Movement


  • These strategies can benefit anyone, even if early retirement is not the goal.
  • It helps to eliminate the stress associated with regularly working 9 to 5. 
  • By retiring early, you have more time to pursue what makes you happier and enjoy freedom and flexibility. 
  • This lifestyle focuses on aggressive savings and investments, which inculcates lifelong habits and maintains discipline. 


  • Having too much free time during your retirement can adversely impact your mental health if the time is not used constructively.
  • The future is uncertain, and some unforeseen circumstances may not be accounted for in the FIRE budget. 
  • The 4% rule is based on the projected 30 years of retirement. If your corpus is depleting and you try to re-enter work life late, your skill set and resume could be rusty. 

Frequently Asked Questions

Who started the FIRE movement?

The origin of this term FIRE was first coined in the year 1992 in the book “Your Money or Your Life” by Vicky Robin and Joe Dominguez.

What is financial independence?

Financial independence means having enough income or wealth to cover all your living expenses without depending on income from other employment.

How to become financially independent?

To become financially independent, you must first save aggressively and invest your income. Try to increase your income or build passive income strategies. Also, cutting down on unnecessary expenses to save more. Lastly, keep a budget for your goals that helps to maintain a stable financial lifestyle.

How much do you need to retire early?

To identify the corpus amount required to retire early, multiply your annual expenses by 25. For instance, if your yearly expenses are INR 60,000, then you need to save up to INR 15 lakhs to live comfortably and meet your goals.