Happy Independence Day!
I’ve been following the FIRE movement since 2015. Time flies! It’s already been the 8th year since I divulged into the many volumes of books on the topic of FIRE. Today, to celebrate Independence Day, I want to share an overview of different levels of Financial Independence, how to achieve them and my personal favorite flavor of FIRE.
What is the FIRE Movement?
The FIRE (Financial Independence Retire Early) movement is a lifestyle and financial philosophy that has gained significant traction in recent years. The term FIRE was coined by the book “Your Money or Your Life,” written by Joe Dominguez and Vicki Robin. At its core, FIRE aims to break free from the traditional cycle of working until retirement age by achieving financial independence much earlier in life. The key principle is to accumulate enough wealth and passive income streams to cover living expenses, allowing individuals to have the freedom to pursue their passions, interests, and hobbies without being tied to a 9-to-5 job.
Rule of 25 and 4% rule
To achieve FIRE, you need to save up 25X of essential expenses in order to retire. This is based on 4% safe withdrawal rate to preserve the principal of what you saved, so you can withdraw without depleting your retirement savings till the end of time.
FIRE enthusiasts embrace frugality, smart investing, and disciplined savings to accelerate their journey towards financial independence. While early retirement is a common goal within the FIRE movement, achieving financial independence doesn’t necessarily mean leaving the workforce entirely. Some individuals may choose to continue working in a reduced capacity, explore new entrepreneurial ventures, or engage in passion projects that align with their interests.
Net Worth Required to Achieve Each Level of FIRE
The goal of FIRE is to live the same life you were before retirement. In order to calculate the net worth required to achieve each level of FIRE, one way is to look at the distribution of household income.
Based on DQYDJ’s Household Income Percentile Calculator, we can work out the distribution of household income. Then we can back out the net worth required for each level of FIRE based on the Rule of 25. 
Let’s go through each of the categories in the sections below.
CoastFIRE and BaristaFIRE
CoastFIRE refers to the point at which an individual has saved enough for retirement but plans to continue working without increasing their retirement savings. In essence, they are “coasting” to the traditional retirement age while letting their existing investments grow over time. This approach can be particularly appealing to those who enjoy their current job or want to pursue work that may not be financially rewarding but is personally fulfilling.
For example, Jonathan calculated that he needs $50,000 per year to retire. At 4% withdrawal rate, his FIRE number is $1.25mm. Then, if he wanted to retire in 30 years from now, his savings goal is $165,000. That means he can leave that amount invested for the next 30 years, compounding at 7% per year and reach his FIRE goal, without contributing any additional amount in the next 30 years.
Source: Compound Interest Calculator
BaristaFIRE, on the other hand, involves building up a portfolio that will cover your basics and then work part-time (eg, as a barista) to cover the rest. Often, BaristaFIRE leave their full-time career to work part-time, often in a low-stress job, to cover living expenses. It’s the middle ground between traditional retirement and early retirement. BaristaFIRE prioritizes better work-life balance earlier in their life, while maintaining financial sustainability.
LeanFIRE
LeanFIRE is the original version of FIRE. Individuals pursuing LeanFIRE are willing to make significant lifestyle sacrifices to achieve their goal of early retirement. They aim to cover only essential expenses and maintain a frugal lifestyle to stretch their savings and investments as far as possible.
Net Worth Required to Get to Lean FIRE
To reach LeanFIRE, one must be diligent about reducing expenses. That involves cutting out non-essential costs, and embracing a frugal way of life. Assuming a spending level equivalent to 25% percentile household income in the US, LeanFIRE followers spend around $34,000 per year during retirement. At 4% withdrawal rate, it amounts to a net worth of $850,000.
Lean FIRE is the minimalist way of pursuing financial independence. It is the most suitable to those who prioritize leaving the workforce as soon as possible, over material possessions or non-essential spending.
FIRE
FIRE (Financial Independence, Retire Early) is the more balanced and flexible version of financial independence. Even though it allows for a slightly higher level of spending compared to LeanFIRE, FIRE followers often save 50% to 70% of their income. The philosophy is to reach the savings goal for a comfortable retirement by being mindful of expenses.
Net Worth Required to Get to FIRE
Assuming a spending level equivalent to median percentile household income in the US, FIRE followers spend around $70,000 per year during retirement. At 4% withdrawal rate, it amounts to a net worth of $1,750,000.
Both LeanFIRE and FIRE can be achieved FIRE achievers often have a diversified investment portfolio and explore different passive income streams to maintain their financial independence. This approach aims for a retirement that offers stability, essentials to moderate luxury, and the freedom to explore personal interests and hobbies without financial constraints.
ChubbyFIRE – A Step beyond Regular FIRE
ChubbyFIRE is an intermediary level of financial independence that strikes a balance between frugality and indulgence. Those in the ChubbyFIRE category have accumulated substantial wealth and investments, allowing them to retire with greater comfort and fewer financial restrictions.
Net Worth Required to Get to ChubbyFIRE
Assuming a spending level equivalent to 80% percentile household income in the US, ChubbyFIRE individuals spend around $150,000 per year during retirement. At 4% withdrawal rate, it amounts to a net worth of $3,750,000.
According to the ChubbyFIRE subreddit, ChubbyFIRE net worth goal is ranging from around $2.5 million to $5 million.
Income Levels and Professionals of ChubbyFIRE individuals
ChubbyFIRE individuals fall between the upper middle class and high-earner brackets. A household income ranges from $150,000 to $250,000 per year. Many ChubbyFIRE achievers are small business owners or professionals with moderately high-paying jobs.
ChubbyFIRE individuals have more flexibility in their spending habits. They can enjoy a higher standard of living, occasional travel, and engage in leisure activities without worrying about the financial repercussions.
Retirement for ChubbyFIRE individuals involves a comfortable lifestyle with a focus on striking a balance between financial security and personal enjoyment. They have the freedom to pursue their interests without significant financial limitations, making it an attractive goal for those seeking a more relaxed yet financially secure retirement.
FatFIRE – Holy Grail of FIRE
FatFIRE represents a higher level of financial independence where individuals amass a significant net worth, typically exceeding $5 million. This level of wealth allows for a more luxurious lifestyle, with abundant resources for leisure, travel, and indulgence.
Net Worth Required to Get to FatFIRE
Assuming a spending level equivalent to 90% percentile household income in the US, FatFIRE individuals spend around $210,000 per year during retirement. At 4% withdrawal rate, it amounts to a net worth of $5,250,000. For simplicity sake, I like to think of FatFIRE net worth as $5mm to $10mm.
Income Levels and Professionals of FIRE individuals
FatFIRE achievers are often in high-paying professions such as finance, law, big tech, executive roles, or successful business owners of small to medium-sized enterprises. Their annual income range from $300,000 to $2mm dollars.
Retirement for those in the FatFIRE category involves enjoying a lavish lifestyle without worrying about financial constraints. They have the means to travel to exotic destinations, dine at upscale restaurants, and pursue expensive hobbies. For many, FatFIRE is the pinnacle of financial independence, providing the freedom to live life to the fullest without financial worries.
ObeseFIRE
ObeseFIRE, a term humorously coined by some within the FIRE community, extends the concept even further.
Net Worth Required to Get to ObeseFIRE
Achieving an “ObeseFIRE” level of financial independence requires a net worth of $10 million or more.
Income Levels and Professionals of ObeseFIRE individuals
These individuals generate annual income of $2 million or higher. Most of these are either business owners of medium to large sized companies (profits of >$2mm per year). Other individuals reaching ObeseFIRE usually hold extremely well-paid positions, such as C-suite executives, senior investment professionals at Hedge Funds, Private Equity or Real Estate investment funds, entertainers, or sports figures.
Retirement at the “ObeseFIRE” level means living in the realm of ultra luxury, with nearly limitless financial freedom and the ability to pursue extravagant dreams and ambitions.
FIRE in High Cost of Living Cities
For individuals living in high-cost-of-living areas like in the San Francisco Bay Area, New York, Seattle etc, achieving financial independence can be particularly challenging. The high cost of housing, education, and other essentials can significantly impact one’s ability to save and invest.
For high-cost-of-living professionals, ChubbyFIRE or FatFIRE often becomes the more pragmatic goal. Transitioning from a high-income city to a lower-cost-of-living area may be an option, but it also involves significant lifestyle adjustments. Personally, I enjoy living in a coastal metropolitan city for the diversity, abundance of entertainment and community of interesting people I get to surround myself with. While I’m open to the idea of moving to the suburbs eventually to raise a family, I’d like to stay within 30 to 45 minutes near a sizable city.
In order to retire comfortably in a high cost of living city, reaching net worth and/or income targets of ChubbyFIRE and FatFIRE is a safer bet. That allows individuals to strike a balance between achieving financial independence and enjoying the benefits of urban living or pursuing fulfilling careers in competitive industries. It acknowledges the importance of maintaining financial stability while optimizing one’s quality of life.
Otter FIRE – Creativity and Flexibility
While the FIRE movement has its traditional milestones, there’s also room for personalization and customization. I have evolved FIRE into my own flavor and preference.
My personal flavor of financial independence is to be able to do as much of what I love as possible, as early as possible in my career. My definition of “retirement” is to be able to work on something creative (vs. work purely for money), and have maximum location and time freedom while doing so. The best type of work to me, is a form of creative outlet, continuous learning and collaboration with other like minded individuals. It also allows me to keep engaged outside of the home when I do have children down the line.
“Otter FIRE” involves maximizing income in early stages of the career (early twenties to mid thirties), saving and investing aggressively, and reaching the ChubbyFIRE or FatFIRE stage as early as possible.
Once I reach a level of net worth (somewhere between ChubbyFIRE to FatFIRE), I aim to shift my emphasis on higher location and time freedom. This could mean taking on a less demanding W2 job, running a consulting business or a small business. The goal is to make time for creative pursuits, taking care of young children by maximizing location and time flexibility.
“Otter FIRE” allows for a more fluid and adaptable approach to retirement. It allows me to focus on what truly brings them joy and fulfillment, whether it’s creative pursuits, community involvement, or simply having more time for family and friends.
Start with the End in Mind
Whatever type of FIRE you choose to pursue, the key to success lies in setting clear goals early on and diligently working towards them. As soon as you graduate or start your career, make financial independence a priority.
Design your career with the end in mind, actively seeking opportunities for career growth and increased income. Create a realistic savings goal and stick to a disciplined saving and investing strategy. Embrace frugality when necessary, but remember to find a balance that aligns with your values and aspirations.
Financial independence is not a one-size-fits-all concept. It’s a journey that varies based on individual circumstances, priorities, and preferences. Define what financial independence means to you, chart your path, and enjoy the journey towards a life of freedom, choice, and fulfillment.
Happy Independence Day, and may your road towards financial independence lead you to a future of abundant opportunities and personal growth!
Readers, what does your ideal FIRE look like? Tell me in the comments below!
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