The FIRE movement: What it is & why it matters

The FIRE movement—short for Financial Independence, Retire Early—is a personal finance strategy that helps individuals achieve early retirement by prioritizing intentional spending, aggressive saving and long-term investing.

FIRE aims to reimagine what the road to financial freedom looks like if you wanted to retire well before the traditional age of 65. People with the FIRE mindset focus on identifying and sticking to their priorities, then building wealth as a tool to gain more control over their time and lifestyle.

While FIRE often resonates with Gen Z and millennials seeking alternatives to traditional career paths, its principles are adaptable for anyone aiming to gain financial freedom and redefine their relationship with work.

The FIRE movement is a retirement strategy that reshapes the traditional retirement timeline by adjusting how you spend, save and invest. Instead of working into their 60s or 70s, FIRE followers prioritize early financial independence by saving and investing aggressively and keeping living expenses low.

The approach goes beyond tightening your budget to save more here and there. It involves diligently and swiftly working toward being financially stable enough to live on your own terms. Reaching the point where you work only because you want to, not because you have to, typically requires a major mindset shift. You'll need to sharply define your priorities and commit to a lifestyle that helps support them.

FIRE followers think the payoff is worth it. Many aim to leave full-time work by their 50s while others use the underlying principles to create financial flexibility, whether to prepare for a potential layoff, scale back to part-time or switch careers. The goal is to have enough saved and invested to cover the essentials without taking on debt.

The FIRE framework centers on three core financial behaviors: intentional spending, high savings rates and disciplined long-term investing. It's the same basic approach that anyone who prioritizes having enough in retirement would take—just more extreme in the commitment needed to retire earlier.

You'll need to live below your means so that you can save more money faster. That doesn't have to mean extreme frugality, however. While FIRE broadly aligns with a minimalist lifestyle, the goal is to make financial decisions based on your values. That could involve living in a smaller space and owning less, but it could also mean focusing your spending on only what matters most to you, whether it's travel, family time, creative pursuits or charitable giving.

The FIRE movement relies heavily on managing your saving and spending, so following a budget that works for you is critical.

Retiring early means saving a significant portion of your salary to reach your FIRE number. Typical guidelines for retirement savings suggest having eight times your salary saved for retirement by your 60s. FIRE requires you to move much faster—and typically saving more since you'll be planning on more years without a full-time income.

It also helps to start saving heavily as early as possible so you can maximize the advantages of investment compounding over time.

The FIRE approach still generally starts by leveraging tax-advantaged retirement accounts such as 401(k)s and IRAs. But there are two considerations: These accounts have annual contribution limits, and accessing them before age 59½ can mean tax penalties.

FIRE savers have to consider how else to build wealth besides retirement accounts—with accounts that aren't capped and can be accessed at any time. Everyday savings options may help, but many FIRE followers turn to brokerage accounts and focus on long-term investment strategies like diversified index funds.

The ultimate goal is to build a multifaceted portfolio that can support the estimated cost of your retirement lifestyle through passive income or systematic withdrawals for the long run.

Your FIRE number represents the total savings required to sustain your lifestyle throughout early retirement, typically calculated by multiplying your annual expenses by 25. It's smart to be as exact and realistic as possible with your estimations, starting with retirement planning questions that put your FIRE financial goals clearly in mind.

But generalizing also can help you get started with the FIRE movement. Think about what you expect your annual spending to be per year in retirement, and then multiply it by 25.

For example, say you anticipate needing $50,000 per year for your essential expenses and discretionary spending (like travel, entertainment and dining out).

Your FIRE number would be $50,000 x 25 = $1.25 million.

When you have an idea about how much money you will need, you can use a retirement income planning calculator to help you figure out how much you need to save.

Let's say you're 24 and are earning the top of the average annual wage of around $41,000 per year and expect that to go up modestly at roughly 2% per year over your career. You have some money put away, about $10,000. You're thinking you'd like to retire at 55 and that you'll need about 80% of your current annual salary to live on (essential costs plus discretionary spending) in retirement. You're banking on investments averaging a 6% rate of return and the inflation rate being 3%.

Our calculator projects that if you start saving 30% of your salary now, you could accumulate $1.27 million by age 55 and have enough to last you until age 90.

The example shows that it's possible—but you have to explore the figures that fit you.

It may be too demanding for you to save 30% of your salary solely for retirement if you also have goals of homeownership, paying down debt, helping kids with college, living generously or leaving a legacy. Or it may not be enough cushion if the market doesn't perform as you hoped, inflation spikes or you live longer than expected. You might decide to be more frugal with your retirement expenses or plan on taking on some work for supplemental income.

It all depends on setting your sights on what's most important to you.

The FIRE lifestyle involves viewing financial independence as more than just having a lot of money. It's having more control of your time and lifestyle choices so you can live your values. Common motivations include:

• Avoiding burnout. Tight deadlines, long hours and corporate stress can drive some to seek an alternative path. For them, FIRE offers a way to build financial security for later and aim for a more flexible lifestyle.
• Achieving time-freedom. Some want to quit traditional work while others want more flexibility in their lives to travel, raise a family, volunteer or explore passion projects without financial pressure.
• Resisting consumerism. FIRE can appeal to those who want off the "earn more, spend more" treadmill. They want to build a life that's aligned with their priorities and values instead of the pressure to keep up with others.

One of the key characteristics of the FIRE movement is its focus on personalizing a path to fit your own desires and lifestyle. Not everyone pursuing FIRE has the same vision. These types of FIRE retirement options highlight what's available for different goals, incomes and lifestyles.

Here are some common myths about the FIRE movement:

• You need a high income. FIRE is about your financial goals and your savings rate, not your salary. Even moderate earners can make progress with consistent savings and thoughtful planning.
• It means depriving yourself. FIRE without extreme frugality is possible. You can spend money on what you value and cut back elsewhere.
• It's all about never working again. It's actually about financial independence, which gives you options. People who use the FIRE principles still may work—just on their own terms.
• It's all or nothing. FIRE is flexible in how it aligns with your needs and values. You could follow CoastFIRE or BaristaFIRE or simply adopt a mindset of saving more so you don't have to rely on a full-time job to maintain the lifestyle you're comfortable with.

The FIRE strategy isn't for everyone. Here are some ways to evaluate whether this strategy aligns with your personality, values and long-term goals.

• Reflect on your values. Do you prioritize time over possessions? Are you motivated by autonomy and flexibility more than career status?
• Assess your financial habits. Are you disciplined with saving? Do you feel comfortable and confident with tracking expenses, living on a budget and potentially delaying gratification?
• Check your comfort with risk and uncertainty. Early retirement may involve navigating market fluctuations without a traditional income stream. Do you feel prepared to plan for that?
• Consider your social influences. Are you OK going against the grain of a consumer-focused culture? Can you skip luxury upgrades or lifestyle inflation?
• Think long term. What does freedom look like to you? FIRE doesn't have to mean never working again; it's about creating more choices for your future.

Keep in mind that you can adopt the FIRE principles that work for your life and build a custom path toward financial independence.

Ultimately, balance is generally best—for today and in the future. The FIRE movement is just one approach to reach financial and personal goals. It can offer a flexible strategy for those looking to build financial freedom and rethink their relationship with work. Whether you want to pursue early retirement or save more intentionally, FIRE is one lens that can help you clarify your priorities and long-term goals.

If you're curious about how FIRE could fit into your financial picture, a Thrivent financial advisor can help you explore your options and build a plan.