What is a FIRE number?

One of the big discussions in the FIRE community (I read a lot of Reddit…) is what a person’s FIRE number is. This refers to the savings amount someone needs to achieve in order to be Financially Independent/Retire Early. The cool part about a FIRE number is that it’s personal and that these numbers can reflect different financial scenarios and different interpretations of what FIRE is about.

Are there different versions of FIRE?

There are definitely different versions of FIRE, and how I interpret and apply FIRE principles can be very different than how someone else does. As I mentioned above, everyone has a different FIRE number based on their living expenses and goals. Beyond the amount of money someone is trying to save and build up, there are also different lifestyles people are trying to achieve when they ‘achieve’ FIRE. One common assumption and stereotypes is that people trying to achieve FIRE are very frugal (this might go back to Mr. Money Mustache (read his introduction here), and while there’s certainly a correlation between spending less/saving more and being able to achieve early retirement, there’s a lot of variation in how FIRE is taken up.

While FIRE is the umbrella under which different ways to achieve Financial Independence/Early Retirement lives, there are also some specific terms used to describe different forms of FIRE. Some common FIRE lifestyle terms I’ve seen used are coastFIRE, baristaFIRE, fatFIRE, and leanFIRE, and each of these corresponds to a certain point in the FIRE journey or version of being FIRE. Sam from Financial Samurai has an interesting discussion on a lot of these terms, although his take differs in a few places than mine (read it here).

For example, coastFIRE is a dollar amount that reflects enough savings for a person to stop accumulating savings and to just let their savings naturally compound until it reaches their full FIRE number. A cool statistic I read is that if a person can save $90,000 by the time they are 30, they could stop adding more money to their savings and that money would compound to over a $1,000,000 by the time they were ready to retire at 65. This is with the assumption of a 4% SWR (safe withdrawal rate), and yearly spending of $50,000. Also, there is currently a lot of discussion about the 4% ‘rule’ and withdrawal rate, and it’s definitely something Mr. 4kFIRE and I are talking about and will revisit in a future post.

Mr. 4kFIRE and I talked about how we wish the power of compound interest and usefulness of saving early was something we knew when we were younger, as our money was more likely to come and go without too much of a budget. While we don’t regret the things we did when we were younger, like travel a bit, go on vacations, and eat out, we do wish we had the knowledge we do now so that we could’ve had more ambitious and specific financial goals. We are going to take this lesson and talk about it with our kids in hopes that they can benefit early on from the financial lessons we’ve learned. (More on what we’re going to tell our kids about finances in a future post.)

Another term I’ve frequently seen on Reddit and in some blogs is baristaFIRE. This is an idea that after you’ve grown your savings to a high enough amount, you can withdraw some of it every year to pay your expenses, but that the amount you draw will not be enough to cover all your expenses so you plan to supplement your savings withdrawals with (a small) income every month. Basically, your savings can not sustain your entire budget long-term but they can reduce the amount you need to earn each year. An example of this would be if you needed $60,000/year for your living expenses and you had a nest egg of $500,000, using the 4% SWR (safe withdrawal rate), you could take out $40,000 from your savings every year and then would need to find a job that would pay you $20,000/year to make up the difference. Basically, you could work a minimum wage job (i.e. barista) or do something lower-stress that you’re passionate about and have enough money to live on.

The other terms, leanFIRE and fatFIRE, are more about the level of spending and lifestyle that someone is aiming to create (i.e. basic vs lavish).

What does coastFIRE mean to us?

Given all those different versions of FIRE, Mr. 4kFIRE and I have mainly focused on setting a full FIRE goal for ourselves. Because we have four kids, we want to know that all of our expenses are covered when we pull the trigger and retire and that we’ll have enough to comfortably live for the foreseeable future. While this was our original plan, we’ve been exploring the idea of me going into elementary teaching, something I’m passionate about that also has some inherent flexibility, and with that comes the potential for me to continue working after he retires. This new career idea has changed our mindset a bit in that we have now evaluated what our coastFIRE number is (i.e. the amount we need to save up and then compound until it reaches our full FIRE number) and how long we would need to let it compound to reach our collective FIRE goal.

So, what are our FIRE numbers?

Our current budget sets our spending/saving at about $8,400/month. We’ve also created a revised retirement budget that has our childcare removed, health care expenses added in (we wouldn’t have insurance), a bit more money for big renovations and travel, and a lower savings rate. The retirement budget is set at $6,700/month. Given this, with a 4% SWR we want our retirement fund to be at $1,675,000 before we both stop fully working.

Given the above assumptions, we’ve set our coastFIRE number at $500,000 with the knowledge that once we hit that, we can stop adding money to this account if we can leave it about 18 years to grow. After the 18 years, it would then be $1,675,000 and enough for us to fully draw our monthly expenses from.

What is our timeline like?

With the full FIRE goal of $1,675,000, we are 14 years away from achieving that if we are able to save $3,300/month. For us, that’s achievable with 1 full-time out-of-home salary, government benefits, and rental income, so once both of us are full-time working out-of-home, that amount of time should decrease quite drastically.

I’d love to hear about your own FIRE goals and where you stand on the spectrum of forms of FIRE! Do you hope to fully FIRE? Would you be satisfied working the rest of your life doing something low-key that you love? What are your timelines looking like?