FIRE (Financial Independence, Retire Early): Lean, Fat, Coast and Barista FIRE

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FIRE stands for Financial Independence, Retire Early: becoming financially independent and no longer having to work from an early age. The FIRE movement relies on a high savings rate and a portfolio from which you later withdraw your expenses. The FIRE number tells you how much you need; how long it takes depends above all on your savings rate. Here you will find the formulas with worked examples, the variants from Lean to Barista FIRE, why 4% gets tight over 40 or 50 years and why you should plan in today's purchasing power. Not investment, tax or retirement advice.

The idea and its origins

The basic idea is old: if you spend much less than you earn and invest the difference, at some point you can live off your wealth. An early foundational work is the book “Your Money or Your Life” by Dominguez and Robin (1992), whose subtitle already promises to transform your relationship with money and achieve financial independence. Later, the abbreviation FIRE spread, mainly on the internet. What all variants have in common: consciously cutting expenses, keeping the savings rate high, investing broadly and cheaply, and making work a choice rather than an obligation. By “retire early”, many people do not mean full retirement at all, but the freedom to work less or differently.

The FIRE number

The FIRE number is the amount of wealth at which you can withdraw your expenses from your portfolio permanently. It inverts the withdrawal rate:

At 4%, that is 25 times your expenses; at 3.5%, 28.6 times. The 4% comes from US data for 30 years (Bengen 1994). For retiring at 40 or 45, it is rather too optimistic; more on this below.

Your expenses include everything you currently pay on the side or via your employer: health insurance, reserves for your car, home and health, and also the taxes on your withdrawals. After 15 or 20 years of saving, a considerable part of every dollar you sell is gain.

Savings rate and time to independence

What matters is less your income than your savings rate s: the share of your net income that you invest. It works twice over: saving more fills the portfolio faster, and lower expenses reduce the FIRE number. With a real return r, a withdrawal rate w and starting from zero, the number of years n to independence is:

Derivation: if you save the share s of your income, you spend 1 − s and need (1 − s) / w in wealth. With compound interest, the contributions grow to s × ((1 + r)^n − 1) / r. Setting the two equal and solving for n gives the formula. If r = w, it simplifies to n = ln(1 / s) / ln(1 + r).

The calculation simplifies things: incomes usually rise over a working life, returns fluctuate, and expenses in retirement are rarely exactly the same as today's. Sequence risk also applies in the accumulation phase: a crash shortly before the goal hits the largest portfolio and can push the date back by years. Whether you would rather invest regularly or all at once is covered in savings plan or lump sum.

Lean, Fat, Barista, Coast and Slow FIRE

There are no fixed boundaries between the variants; the amounts below are examples, not definitions.

• Lean FIRE: independence on a tight budget, e.g. $20,000 of expenses a year (at 4%, $500,000 is enough). Little buffer for surprises.
• Fat FIRE: a generous lifestyle, e.g. $80,000 a year (at 3.5%, that is $2,285,714). Usually only achievable with a high income.
• Barista FIRE: a part-time job covers some of the expenses, and the portfolio only the gap (Barista FIRE). The name alludes to a part-time job in a café.
• Coast FIRE: the portfolio is already large enough to grow to the FIRE number by the planned exit without further contributions (Coast FIRE). Until then, you only need to earn your ongoing expenses.
• Slow FIRE: a slower path with a moderate savings rate, often with part-time work or breaks along the way. This brings freedom while you are still saving, instead of betting everything on an early end date.

For Coast FIRE, you discount the FIRE number back to today:

Withdrawal rates for 40 or 50 years

The 4% rule is calculated for 30 years: using US data since 1926, Bengen (1994) tested which inflation-adjusted initial withdrawal would have survived every historical period. The frequently cited Trinity study of 1998 reached similar values with US data. But if you stop at 40, you need 45 or 50 years, and the sustainable rate falls as the period lengthens. Even the simplest calculation without fluctuations shows this: with a constant real return, the highest withdrawal that exactly uses up the wealth is an annuity.

Broader data make the number smaller. Anarkulova et al. (2025) analyzed asset class returns in 38 developed countries: according to their results, a 65-year-old couple willing to accept a 5% probability of ruin can only withdraw 2.31% a year, considerably less than the 4% rule. For retirement from 40 with an even longer horizon, the rate would, by this logic, probably be lower still; that is our assessment, not a figure from the study. Cooley et al. (2003) also show that overlapping historical periods and Monte Carlo simulations give similar results under some conditions and very different ones under others. The method itself is an assumption.

What helps is flexibility: withdrawing less in bad years, covering part of your needs with side income, or keeping the equity allocation low at the start of retirement and then letting it rise, which according to Pfau and Kitces (2013) can reduce the risk of early losses. The probability of ruin also depends on your unknown lifespan (Milevsky and Robinson 2000). Details on fixed and flexible rules are in the article withdrawal rate.

Sequence risk: the first years count

With an early exit, sequence risk weighs particularly heavily: if the market falls in the first years, you sell cheap units that are then missing in the recovery, and you still have decades ahead of you. At the same time, getting back into work after a few years' break is often harder. Typical remedies are a buffer of one to two years of expenses in the money market, flexible withdrawals and side income in the first years. This is exactly what Barista FIRE builds in.

Inflation: plan in today's dollars

• Purchasing power: at 2% inflation, what costs $30,000 today will cost $44,578 in 20 years and $66,241 in 40 years. So calculate in today's purchasing power and with real returns.

Criticism and limitations

• Life planning: a goal that requires 15 to 20 years of going without can cost you years in which travel, family or health matter most. Some people realize after leaving that work gave them structure and social contacts.
• Lifestyle creep: when income rises, expenses often rise unnoticed, and the FIRE number with them. Every permanent extra expense of $100 a month raises it by $30,000 at 4%.
• Health and care: costs for health insurance, dental work or long-term care rise with age and are hard to estimate from today's budget.
• Return assumptions: the 4% real return in the examples is no guarantee; Monte Carlo simulations show how wide the range of outcomes is.
• Giving up human capital: if you stop early, you forgo income, pension entitlements and career opportunities. This is an asset that does not appear in any portfolio overview (human capital).
• US origins: many rules of thumb rest on US data, and with them on one of the best stock markets of the 20th century.

How Portfolio Lab calculates it

For a FIRE plan, Financial goals is the right tool. You set up a payment plan: a contribution until the year you exit, optionally with annual growth; an ongoing withdrawal from the exit onwards in today's purchasing power; and, as income, part-time pay (Barista FIRE) or later Social Security, each net. Income covers expenses in the same month directly; only the rest comes from the portfolio. Priorities separate essentials from extras: expenses with Medium or Low priority, such as a round-the-world trip, are only paid if the important expenses remain secured.

The calculation runs on 2,000 return paths, by default using a block bootstrap with annual blocks from the history of the chosen portfolio. The results are the success rate for each goal and a wealth fan chart. The success rate is the share of paths in which the payment was made in full in every month it was due. The contribution calculator finds the additional contribution needed to reach a target success rate, 90% by default. For a simple withdrawal over up to 60 years, there is Monte Carlo, and the Backtest shows the safe and the perpetual withdrawal rate in the chosen historical period. More in the financial goals methodology and the Monte Carlo methodology.

This article explains a method; it is not investment or tax advice. Worked examples are simplified and rounded. All terms in the glossary.