Question 1

What is FIRE (Financial Independence, Retire Early)?

Accepted Answer

FIRE is a financial movement focused on aggressive saving and investing to achieve financial independence and the option to retire much earlier than traditional retirement age. The core idea is to save a large portion of your income, invest it wisely, and build a portfolio large enough to sustain your living expenses indefinitely through investment returns.

Question 2

What is the 4% rule?

Accepted Answer

The 4% rule is a guideline from the Trinity Study that suggests you can safely withdraw 4% of your investment portfolio in the first year of retirement, then adjust that amount for inflation each year, and your money should last at least 30 years. Your FIRE Number is calculated as your annual expenses divided by 0.04 (or your chosen withdrawal rate).

Question 3

What is the difference between Lean FIRE, Fat FIRE, and Coast FIRE?

Accepted Answer

Lean FIRE means retiring with a minimal budget, typically covering only essential expenses. Fat FIRE means accumulating enough wealth to maintain a more comfortable or luxurious lifestyle in retirement. Coast FIRE is the point where your existing investments will grow to your FIRE number by traditional retirement age without any additional contributions, meaning you only need to cover current expenses.

Question 4

Why is the savings rate so important for FIRE?

Accepted Answer

Your savings rate is the most powerful lever in reaching FIRE. A higher savings rate both increases the amount you invest each year and simultaneously lowers the annual expenses you need to cover in retirement, which reduces your FIRE number. For example, someone saving 50% of their income will reach FIRE dramatically faster than someone saving 20%, even with the same income.

Question 5

How does this FIRE calculator account for inflation?

Accepted Answer

The calculator adjusts your expenses and FIRE number for inflation over time. This means your FIRE number reflects the actual purchasing power you will need in the future, not just today's dollars. The real rate of return used is your expected return rate minus the inflation rate.

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Understanding the 4% Rule

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