There's no denying that the Financial Independence, Retire Early (FIRE) movement's message is alluring, especially when you find yourself repeatedly counting down the minutes to 5 p.m. Its adherents work hard and save aggressively for a few years so they can retire well ahead of their peers.
But even within the movement, there are many different ideas about the best way to achieve this goal. Here's a brief overview of the four most popular FIRE subsets to help you decide where to start.
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1. Traditional FIRE
Traditional FIRE involves saving aggressively -- often at least 50% of your salary -- to retire well in advance of the typical retirement age. It often assumes an average retirement income of $40,000 to $80,000 per year. This could be a good middle ground if you want to retire comfortably while also leaving the workforce as soon as is reasonable.
2. Fat FIRE
Fat FIRE is the most extreme version of FIRE. While there is no formal definition, it's often considered to involve annual retirement spending of $100,000 or more. This can require well over $2 million in savings and often involves the most aggressive savings rate throughout your career, sometimes as high as 75%.
It might be a pathway for you if you're comfortable making significant sacrifices now and have a lot of disposable income. If not, you may prefer some of the other FIRE options listed here.
3. Lean FIRE
The opposite of fat FIRE, lean FIRE involves living off a very modest retirement salary, often around $40,000 per year. This understandably limits what you can do in retirement. Things like frequent travel might be off limits, for example. And you might struggle if you encounter a large expense that wasn't in your original budget.
The upside to this approach is that the savings goal is often much easier to achieve. Lean FIRE could be the right choice if you want to quit working as quickly as possible.
4. Barista FIRE
Barista FIRE involves saving aggressively until you have enough to cover a large portion of your retirement expenses. But it assumes you'll work a flexible, part-time job, like being a barista, for the rest of your life.
This could help you reach your savings goal even faster than lean FIRE. But it may not give you a retirement in the true sense of the word.
You can start with one and switch to a different type of FIRE down the road if it makes more sense for you. It's also fine if FIRE isn't the right fit for you. Even if you fall short of your FIRE savings target, you're still likely setting yourself up for a great retirement. It just might take you a little longer to get there.
