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Is FIRE a Realistic Way to Retire?

Is FIRE a Realistic Way to Retire?

August 03, 2023

Unlike their parents, many younger Americans aren’t willing to wait until their 60s to retire.

According to research from NerdWallet, 25% of working Americans want to retire before age 50 and 18% would like to leave the workforce in their mid to late 50s.

This desire to retire early has led many younger workers to embrace the so-called Financial Independence Retire Early (FIRE) philosophy of retirement planning.

First mentioned in the book Your Money or Your Life by Joe Dominguez and Vicki Robin, FIRE practitioners strive to either pare expenses to the bone or save and invest as much of their income as possible (or a combination of both) to amass a nest egg that will allow them to live the way they want to when they retire a decade or more before they’re eligible for Social Security and Medicare.

Their chances of achieving their early-retirement objectives largely depend on several factors:

  • How old they are when they adopt this action plan (the younger they are, the more time they’ll have to put aside money).
  • How much they’re able to save each year (obviously, this is easier with higher earners).
  • How much they’ll need to withdraw from their savings to live on before Social Security and Medicare benefits kick in.

One wild-card factor that isn’t easy to plan for is the possible impact of inflation, recessions, and bear markets during this accumulation phase, any of which could derail even most well-conceived FIRE strategy.

The flavors of FIRE

While there are many ways to implement a FIRE action plan, they generally fall into three categories.


This strategy is often adopted by those who don’t earn high incomes. They live frugally during their working years and plan to continue to do so when they retire.

Since they’re used to a lower standard of living, it’s not crucial for them to put aside most of their income to build a multi-million-dollar nest egg. Indeed, because they tend to earn less than the typical FIRE saver, they often can’t afford to. 


Advocates of this approach tend to be higher-income earners who can afford to divert a significant portion of their paychecks into their retirement savings portfolio. 

Their goal: To retire early—and comfortably.   

During their golden years they don’t want to pare expenses to the bone or give up vacations, hobbies or activities they enjoy to make sure their nest egg doesn’t run out.

That’s why, during their working years, they’ll save and invest as much of their income as possible. While Dominguez and Robin suggest that the typical FIRE saver should aim for building a retirement portfolio that’s worth 25 times their projected annual retirement expenses, a Fat FIRE practitioner may use a multiple of 30 or more.

For example, if they want to spend $100,000 a year during retirement, they may strive to build a nest egg of at least $3 million through aggressive saving and investing.

Those who can’t save as much as they would need to might choose to retire in their early 60s rather than their 50s to give their portfolio more time to grow.

Barista FIRE

Some would-be early retirees realize that they’ll never be to able save enough to fully leave the workforce.

So, they’ll compromise. They’ll quit their full-time job but take on flexible part-time work or side gigs to provide some income to supplement their savings during their retirement years. This will give them plenty of time during the week to enjoy their “off-the-clock” retirement activities. 

Why are they called “Barista FIRE” savers?

Because many of these early retirees end up working behind the counter at Starbucks, which offers healthcare insurance to many part-timers.

Before you build your FIRE

If you’re at a stage in life where you can seriously consider adopting a FIRE strategy, there are a number of issues you’ll want to consider first. 

  • Do you plan on having children? According to the USDA, the average annual cost of raising a child between birth to age 17 is around $17,000. Double this amount if you plan on paying for some or all of their college expenses.
  • Will you always be able to live as frugally as you want? For example, if a new job takes you to a more expensive city, will its higher cost of living force you to spend more than your FIRE expense budget originally anticipated?
  • Are you willing to sacrifice a certain quality of life during your working years by minimizing spending so you can put aside as much as possible for an early retirement?
  • Have you considered how certain unanticipated events could derail your plan? A long-term layoff, a medical crisis, or an extended bear market could make years of scrimping and saving all for naught.
  • Have your early retirement expenses accounted for taxes? If you withdraw money from IRAs or 401(k) accounts before age 59½ you’ll have to pay early withdrawal penalties in addition to income taxes on the distribution itself. If you sell appreciated securities in your taxable brokerage accounts to provide additional cash, you’ll have to pay capital gains taxes.

Adopting a FIRE strategy isn’t a trivial matter. It will require you to think about the way you plan on living now and how you’d like to live when you retire, and what you’ll need to do in terms of saving and investing to realistically achieve your goals. That’s why you may want to consider meeting with a financial planning professional before you begin lighting your FIRE.  




This article was authored by David Jaeger and Jeffrey Briskin. David is a financial advisor at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or´╗┐.  Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.



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