Get expert advice delivered straight to your inbox.

Skip to Main Content

What Is the FIRE Movement?

Guess what? There’s no law that says you have to work until you hit 65 before you can retire (seriously, we did some research). And a growing number of Americans are ditching the workforce early and getting a head start on retirement.

But there’s a new wave of young people who are trying to take early retirement to a whole new level. We’re talking retiring in their 40s or even their 30s! And they even have a catchy acronym for their movement. It’s called FIRE, which stands for financial independence, retire early.

People in the FIRE movement believe it’s possible to retire decades before they can get a senior discount at Denny’s. But how? Is it actually realistic to retire at age 45? Or even 35? Let’s take a closer look at the FIRE movement to find out if it’s right for you.

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

In a nutshell, the goal of the FIRE movement (sometimes written as fi/re) is to save and invest aggressively—somewhere between 50–75% of your income—so you can retire sometime in your 30s or 40s.

You need to save at least half of your income just to have a chance to make this happen. (Or live in a 1990s sitcom world where no one seems to have to work for a living.)

So, how do people who are part of the FIRE movement save that much money? They’re always looking to do two things: keep their expenses extremely low and find ways to raise their income.

The basic idea is that the higher your income and the lower your expenses, the faster you can reach financial independence. Think gazelle intensity—except the gazelle is on fire.

For those in the FIRE movement, financial independence doesn’t just mean sitting on some tropical beach or playing golf all the time. It means reaching the point where you don’t have to work a full-time job if you don’t want to. You can scale back to a part-time job or stop working altogether. The choice is yours . . . imagine that!

What We Can Learn From the FIRE Movement

We have mixed feelings about the FIRE movement, but the one thing we can get behind 100% is the focus and intensity these people have toward reaching their retirement dreams. And no matter where you are on your money journey, you can learn some stuff from the FIRE movement:

1. Start dreaming and planning for retirement.

The best thing about the FIRE movement is that it’s getting younger workers to start thinking about retirement—especially since only 59% of Americans aged 35–54 (and only 43% aged 18–34) have any type of retirement account.1 Don’t be afraid to dream. Write down what you want your retirement to look like and make a plan to get there. If you’re married, sit down and dream with your spouse. When you write down your retirement dreams and give them a timeline, those dreams become attainable goals.

2. Find ways to keep your expenses low.

FIRE followers take the time to look at where their money is going. That means they have a budget and stick to it! They know the difference between wants and needs, keep track of their monthly expenses, and cut out any spending that doesn’t make sense for them.

Saving a few dollars here and there really adds up over time. If you have the discipline to slash unnecessary expenses out of your budget, that extra money will help you make serious progress toward your retirement goals. Because let’s be real, that Mediterranean cruise you and your spouse have been dreaming about isn’t going to pay for itself.

3. Look for ways to boost your income.

Your income is your most powerful wealth-building tool. And if you want to retire early—or really early—you have to get creative with making extra cash. There’s no way around it. But you can increase your income in lots of ways! Maybe you’re on a career path that’ll lead to that six-figure salary. Or maybe you’ve got a side hustle that you’re turning into a small business on nights and weekends. It could mean driving for Uber for a while or saving up to buy a rental property.

chart

How much will you need for retirement? Find out with this free tool!

Whatever that looks like for you, additional income will play a huge role in helping you retire early. You might have to work a whole lot now to work a lot less later.

4. Make saving and investing a priority.

If you want to retire (early or otherwise), you have to save and invest—no ifs, no buts, no coconuts. That’s why folks in the FIRE movement are radical about throwing huge chunks of their income toward their retirement.

But the good news is, you don’t have to save half your income (or more) to reach your retirement goals! You should start by investing 15% of your income into tax-advantaged retirement savings accounts like 401(k)s and Roth IRAs.

The key is to get into a regular habit of saving and investing every single month. When you do that, time and compound growth will work for you. And that’s a great thing.

After you knock out some of your other money goals, like paying off your mortgage early (which you can do if you’re investing 15% instead of 50% of your income), you can start investing more. We’ll talk about that later.

Make an Investment Plan With a Pro

SmartVestor shows you up to five investing professionals in your area for free. No commitments, no hidden fees.

Find Your Pros

Ramsey Solutions is a paid, non-client promoter of participating pros. 

Why the FIRE Movement May Not Be for Everyone

The first big barrier to following the FIRE movement is having a large income (and we mean large). No matter how much you cut down your lifestyle, it’s going to take a big income—probably at least in the six-figure range—to save enough to retire before your 40th birthday.

But that shouldn’t discourage you from building wealth—anyone can do it! According to The National Study of Millionaires, one-third of millionaires never had a six-figure household income in a single year.

No matter what kind of career or salary you have right now, don’t fall for the myth that you need a high-paying job to build the wealth you need to enjoy a worry-free retirement. Anyone can become a millionaire—it just takes time.

If you want to learn more about the proven path that has helped thousands of Americans become millionaires, then Baby Steps Millionaires is for you. Grab a copy today to find out more about this special group of millionaires and how you can become one too!

Don’t Mess With Credit Cards—You’re Going to Get Burned

One of the biggest  problems with the FIRE movement is that many FIRE advocates actually promote the idea of using credit cards for the points and rewards. Um, no.

Don’t mess around with credit cards. You’ll get burned. You may be thinking, But I pay my credit card bill on time every month. That might work for a little while, but you’re not beating the system. All it takes is one missed payment or emergency to cause your credit card debt to spiral out of control.

In total, Americans have over $1 trillion in credit card debt.2 And the average annual interest is over 22%!3 Why would someone open a credit card with that kind of interest? Because they thought they could pay off their balance every month . . . until they couldn’t.

If you’re like most Americans, almost a third of your budget is going toward paying back debt.4 That makes it really hard to save and invest, and it’s not a recipe for financial success.

When you play with fire . . . well, you know what happens.

Don’t Do FIRE Just to Escape a Job You Hate

You might be drawn to the FIRE movement if you hate your job. After all, only 34% of American workers say they’re actively engaged at work.5 It’s no wonder that a growing number of young workers are dreaming about leaving the workplace altogether.

But there’s a deeper problem that lies beneath the surface, and FIRE isn’t going to solve it. If you hate your job, you don’t need FIRE. What you really need is a new career path. Ken Coleman calls it “finding your sweet spot.” That’s the place where your greatest talents and passions intersect. Even FIRE followers can get behind that!

If you want to retire early so you can escape going into work on Monday, you’re going to be very disappointed. Life is too short to waste a few years, or even decades, working a job you hate.

The Roadmap to Early Retirement

Whether your goal is to retire at age 65 or 35, you need a plan. You have to know how much money you’ll need in order to retire when you want—and how much to save each month to get there.

This step-by-step plan will help put you on the path to early retirement:

Step 1: Get out of debt and finish your emergency fund.

Debt is holding back millions of people from saving for retirement. In fact, millennials in their 30s have been piling on debt at a historic rate since the pandemic began.6

That’s why you have to get focused. Cut up those credit cards and kick Sallie Mae out of your life for good—and give it everything you’ve got.

Once you’re debt-free and before you start investing for retirement, it’s time to build up an emergency fund. When you have enough money in a savings account to cover 3–6 months of expenses, you won’t have to worry about a broken air conditioner or a flat tire derailing your investing plan.

Step 2: Invest 15% into tax-advantaged retirement accounts.

Here comes the fun part! Now you’re ready to start saving for retirement. Begin by putting 15% of your gross income every month into retirement plans like a 401(k) and a Roth IRA—and be sure to invest your retirement money in mutual funds with a great track record.

Step 3: Pay off your mortgage early.

While you’re investing, get intense about paying off your home early. This is a huge goal that’ll give you momentum toward early retirement. Think about it: How much more money would you be able to save for retirement if you didn’t have a house payment? What could you do if you were completely debt-free with a paid-for house?

Step 4: Invest beyond 15%—max out your retirement accounts.

With a paid-for house and no debt, you can really start to make some headway on your early retirement goals. This is where investing 50% of your income for retirement could actually be possible. First, go back to your 401(k) and IRA and max out your contributions.

But remember: In most cases, you won’t be able to withdraw money from your 401(k) or IRA without facing an early withdrawal penalty until you hit age 59 1/2. For example, with a traditional 401(k), you’ll not only have to pay income taxes on the money you take out, but Uncle Sam will also take another 10% on top of that. No thanks!

But there’s a solution to that problem that most people who want to retire early forget about: a bridge account.

Step 5: Build a bridge account—open a taxable investment account.

If you want to retire early, the bridge account will help you “bridge” the gap between when you want to retire and when you can take the money out of your retirement accounts.

As you plan your retirement dream, set a retirement age target and figure out how much money you’ll need to live on each year. Then multiply that number by how many years you expect to use your bridge account. That’s how much you should have in your bridge account so you can live comfortably until you’re able to access your retirement accounts without penalty.

For example, let’s say you want to retire early at age 55. That means you need to have enough money in your bridge account to last about 4 1/2 years. So if you expect to live off of $50,000 each year in retirement, your goal should be to have at least $225,000 in your bridge account by the time you turn 55.

Once you’ve maxed out your 401(k) and IRA, open up a brokerage account (also known as a taxable investment account) to serve as your bridge account.

Here are some advantages of brokerage accounts:

  • You can take out money anytime you like.
  • There are no contribution limits.
  • You can open an account through a brokerage firm and invest in mutual funds.

The one big drawback to these accounts is that you pay taxes on any money your investments earn. It’s a good idea to sit down with your investment professional to work through the numbers and set a goal for how much you need in your bridge account to hit your retirement goals.

 

Next Steps

  • If you want to give your income a boost so you can save more for retirement, there are plenty of great side hustles that can help you start earning some extra cash.
  • You’ve maxed out your retirement accounts . . . now what? From investing in real estate to opening up that bridge account we talked about, there are lots of ways to keep your investing game going strong!
  • Sit down with an investment professional and come up with a strategy for an early retirement. The SmartVestor program can help you connect with pros in your area today! 
Find an Investment Pro

Frequently Asked Questions

The F.I.R.E. movement may be designed to help people who want to retire extremely early, but anyone—no matter their age or income—can learn from its principles. Do you need to make six figures from the time you turn 18 to invest enough to retire in your 30s? Yeah, most likely. But some of the F.I.R.E. principles—such as increasing income, saving and investing more, and cutting back on expenses—can help anyone retire earlier!

You’re never too young or too old to get started, but you should stop saving for retirement temporarily if you still have consumer debt or haven’t saved up an emergency fund. Pay off those debts smallest to largest first, then build your emergency fund of 3–6 months of expenses. Then you can take all the money that was going to those monthly payments and start investing for retirement!

In 1992, Vicki Robin and Joe Dominguez published the book Your Money or Your Life. It popularized the ideas of saving and investing early to achieve financial independence earlier, and voilà! The F.I.R.E. movement was born.

The principles of the F.I.R.E. movement got another boost from a 2010 book called Early Retirement Extreme. It was written by Jacob Lund Fisker, who said he was able to retire early from his job as a nuclear astrophysicist by saving most of his paycheck every month and reducing his expenses to just $7,000 a year!

Over the years, followers of F.I.R.E. have flexed and molded its principles to better align with their retirement goals and life situations, so here are a few variations you may come across:

  • Fat F.I.R.E.: This version is for anyone who doesn’t want to change their standard of living (aka cut back on expenses) while saving more for retirement than the average worker. And if they don’t cut back on expenses, the only way to save and invest more is to earn more!
     
  • Lean F.I.R.E.: Exactly what it sounds like, this variation emphasizes living lean. The basic idea is to trim all the fat from your budget by cutting back your expenses to the extreme so that you can save and invest as much of your earnings as possible. Think minimalist living so you can retire earlier.
     
  • Barista F.I.R.E.: F.I.R.E. followers who want a mix of the “fat” and “lean” principles we mentioned above fit into this category. Their goal is to save enough to quit their 9-to-5 job so they can live on a combination of working part time (somewhere like Starbucks—hence barista—so they can supplement their income and get health insurance) and pulling a little from their savings each year without dipping into retirement.

This article provides general guidelines about investing topics. Your situation may be unique. If you have questions, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros. 

Did you find this article helpful? Share it!

Ramsey Solutions

About the author

Ramsey

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

Related Articles

how to start investing
Retirement

How to Start Investing in 2024: A Beginner’s Guide

Investing in your future is one of the most important things you can do, but it can also be a little overwhelming. Where do you start? We’ve got all the basics of how to start investing right here!

Ramsey Ramsey