FIRE Glossary
Key terms and definitions from the FIRE movement.
FIRE Number
Your FIRE number is the total amount of invested assets you need to retire early and live off investment returns indefinitely. It is calculated by dividing your expected annual retirement expenses by your chosen safe withdrawal rate. The most common formula uses the 4% rule: FIRE Number = Annual Expenses × 25.
4% Rule
The 4% rule is a retirement planning guideline that states you can safely withdraw 4% of your portfolio in the first year of retirement, then adjust that amount annually for inflation, and your portfolio is likely to last at least 30 years.
Financial Independence
Financial independence (FI) is the state of having sufficient personal wealth and passive income to live without having to work for money. A financially independent person's assets generate income that is greater than or equal to their expenses, making employment optional rather than necessary.
Safe Withdrawal Rate (SWR)
The safe withdrawal rate (SWR) is the percentage of a retirement portfolio that can be withdrawn annually without depleting the portfolio over a given time period. It represents the balance between taking enough income to live on while preserving enough capital to sustain withdrawals for decades.
Lean FIRE
Lean FIRE is a variant of the FIRE movement where individuals retire early on a minimal, frugal budget — typically defined as annual retirement spending below $40,000 (for a single person in the US) or below $60,000 for a couple. The FIRE number for Lean FIRE is generally under $1,000,000.
Fat FIRE
Fat FIRE is a variant of the FIRE movement where individuals retire early while maintaining a generous, comfortable, or even affluent lifestyle — typically defined as annual retirement spending above $100,000 per year. The FIRE number for Fat FIRE is typically $2,500,000 or higher.
Barista FIRE
Barista FIRE is a semi-retirement strategy within the FIRE movement where someone leaves their primary high-stress, high-paying career and takes a lower-stress part-time or full-time job that covers current living expenses, while their existing investments continue to grow toward a full FIRE number.
Coast FIRE
Coast FIRE is the point at which you have invested enough money that, even without making any additional contributions, your portfolio will grow to your full FIRE number by traditional retirement age through compound returns alone. At Coast FIRE, you only need to earn enough to cover current living expenses — you no longer need to save for retirement.
Sequence of Returns Risk
Sequence of returns risk is the danger that the timing of investment returns can permanently damage a retirement portfolio, even if the long-term average return is acceptable. Specifically, experiencing poor returns in the early years of retirement — while simultaneously making withdrawals — can deplete a portfolio much faster than poor returns later in retirement.
Savings Rate
Savings rate is the percentage of your income that you save and invest, calculated as: (Income - Expenses) / Income × 100. It is widely considered the single most important metric in FIRE planning because it simultaneously determines how fast your portfolio grows AND how much you need to retire.
Nest Egg
A nest egg refers to the total accumulation of invested assets set aside for retirement. In FIRE planning, the term is often used interchangeably with 'portfolio' or 'retirement portfolio.' Your nest egg is the sum of all your investment accounts: 401k, IRA, Roth IRA, taxable brokerage, and other investment vehicles.
Trinity Study
The Trinity Study is a landmark 1998 academic paper titled 'Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable' by three finance professors at Trinity University (Philip Cooley, Carl Hubbard, and Daniel Walz). It is the empirical foundation of the 4% rule used in FIRE planning.