The FIRE guide
Financial Independence, Retire Early — what the movement means, the math it stands on, the five rungs of the ladder, and what the tidy formulas leave out.
The idea in one paragraph
FIRE is the observation that retirement isn't an age — it's a number. Once your invested wealth is large enough that a sustainable slice of it covers your living costs, work becomes optional, whether you're 38 or 68. The movement grew from a 1992 book (Your Money or Your Life) and a pair of academic results in the 1990s into one of the internet's most durable personal-finance communities.
The 4% rule, honestly stated
The engine under every FIRE number: in 1994, financial planner William Bengen tested historical US market data and found that a retiree withdrawing 4% of their starting portfolio, adjusted for inflation each year, would have survived every 30-year retirement since 1926. The "Trinity study" (1998) reached a similar conclusion. Invert 4% and you get the rule of thumb:
Your independence number ≈ 25 × your annual spending.
Spend $42,000 a year, and $1.05 million invested is the classic line. It is a rule of thumb from US historical data — not a law of nature. The caveats section below is part of the guide for a reason.
The five rungs
The community has named several waypoints short of (and beyond) the classic number. WorthParty tracks all five as badges, computed from your monthly spending, age band, and expected growth rate. Example figures below assume $3,500/month spending ($42,000/year), age 40, and 7% growth.
🛶 Coast FI
FI number ÷ (1 + growth)^(years until 65)
You've saved enough that compounding alone — no further contributions — reaches your full FI number by traditional retirement age. From here you only need to earn what you spend; the retirement problem is already solved.
Example: $1.05M ÷ 1.07²⁵ ≈ $193,000 at age 40.
☕ Barista FI
12.5 × annual spending (half the classic number)
Your portfolio's 4% covers half your living costs; a relaxed part-time job covers the rest (the name comes from taking a café job for the health insurance). Full-time work becomes optional even though full independence isn't here yet.
Example: 12.5 × $42,000 = $525,000.
🌱 Lean FIRE
25 × a lean budget (WorthParty uses 70% of your spending)
Full independence on a deliberately frugal version of your life. Definitions vary — many in the community peg it at roughly $40,000/year or less for a household; WorthParty computes it as 25× seventy percent of your stated spending so the rung tracks your own life rather than someone else's.
Example: 25 × $29,400 = $735,000.
🔥 FIRE
25 × annual spending
The classic line: the 4% rule covers your actual current lifestyle, indefinitely. This is the number most people mean when they say "my FI number."
Example: 25 × $42,000 = $1,050,000.
👑 Fat FIRE
25 × (1.5 × annual spending)
Independence with headroom — the 4% rule covers a noticeably richer version of your life (community definitions run from ~$100k/year of spending upward; WorthParty uses 1.5× your stated budget). The margin doubles as a safety buffer against every caveat below.
Example: 25 × $63,000 = $1,575,000.
What the formulas leave out
- Sequence-of-returns risk. The 4% rule survives average history; a brutal crash in your first retirement years is the scenario that breaks it. Many planners now discuss 3.3–3.8% for very long retirements — which pushes the multiplier from 25× toward 30×.
- It's US historical data. Bengen and Trinity tested the strongest stock market of the 20th century. Other countries' histories are less kind.
- Early retirement is longer than 30 years. Retiring at 40 means the portfolio must survive 50+ years, beyond what the original studies tested.
- Health care, taxes, and inflation are all real, lumpy, and personal — a monthly "spending" number hides them. US early retirees in particular need a health-insurance plan, not just a portfolio.
- Spending isn't constant. Real lives have kids, moves, illnesses, and parents. Treat every rung as a milestone on a map, not a finish-line ribbon.
How WorthParty computes your badges
Everything runs in your browser from three numbers you set on the main page: monthly spending, age band (the Coast FI calculation uses your band's midpoint and age 65), and the growth rate from your trajectory settings. Badges are captured by minted notes — the highest mark you've saved to your ledger — and once captured they're never revoked. Change your inputs and the rungs move; that's honest, because they're yours. None of it leaves your device, and none of it is financial advice.
Sources & further reading
- FIRE movement — Wikipedia
- The Trinity study (1998) — Wikipedia
- William Bengen and the original 4% paper (1994)
- Safe withdrawal rates — Bogleheads wiki
- r/financialindependence FAQ
Educational content, not financial advice. The formulas here are community rules of thumb applied to numbers you report yourself. ← Back to WorthParty · Privacy