FIRE Glossary

Every financial independence term, defined

Core FIRE Concepts

FIRE (Financial Independence, Retire Early): A personal finance movement focused on saving and investing aggressively (50-70% of income) to achieve financial independence and retire decades before the traditional retirement age of 65.
FIRE Number: The total amount you need invested to be financially independent. Calculated as: Annual Expenses × 25 (based on the 4% rule). Calculate yours →
Financial Independence (FI): The point at which your investment income covers your living expenses, meaning you no longer need to work for money. Does not necessarily mean you stop working, just that you don't have to.
4% Rule: Based on the Trinity Study (1998), the guideline that withdrawing 4% of your portfolio in the first year of retirement, then adjusting for inflation annually, has historically sustained a 30-year retirement. Deep dive →

Lean FIRE: Retiring early on a minimalist budget, typically $20K-40K/year in expenses. Requires a FIRE number of $500K-$1M. Prioritizes freedom over comfort. Calculator →
Fat FIRE: Retiring early with a large portfolio supporting a comfortable or luxurious lifestyle, typically $100K+/year in expenses. Requires $2.5M+. Calculator →
Coast FIRE: Reaching a point where your existing investments will grow to your full FIRE number by traditional retirement age, without any additional contributions. You only need to earn enough to cover current expenses. Calculator →
Barista FIRE: Semi-retiring early by supplementing portfolio withdrawals with part-time or "fun" work. Your portfolio covers most expenses; a side job bridges the gap. Calculator →
Flamingo FIRE: Save half your full FIRE number, then semi-retire while your portfolio doubles through compound interest alone (Rule of 72, ~10 years at 7%). Two-phase path to financial independence. Calculator →

Savings Rate: The percentage of your income you save and invest. The single most important FIRE metric. A 50% savings rate means every year worked buys one year of freedom. Calculator →
Compound Interest: Earning returns on both your original investment and past returns. Albert Einstein reportedly called it the "eighth wonder of the world." Calculator →
Index Fund: A low-cost mutual fund or ETF that tracks a market index like the S&P 500. The preferred investment vehicle of the FIRE movement due to diversification and near-zero fees.
VTI / VTSAX: Vanguard Total Stock Market Index Fund. The most popular single investment in the FIRE community. Covers ~3,700 US stocks with a 0.03% expense ratio.
Asset Allocation: The mix of stocks, bonds, and other assets in your portfolio. Common FIRE allocation: 70-100% stocks during accumulation, shifting toward 60-80% stocks in retirement.

Safe Withdrawal Rate (SWR): The percentage of your portfolio you can withdraw annually without running out of money. The 4% rule is the most famous SWR, but many FIRE retirees target 3.25-3.5% for longer retirements. Calculator →
Sequence of Returns Risk: The risk that poor market returns in the early years of retirement deplete your portfolio before it has time to recover. The biggest threat to FIRE portfolios. Calculator →
Roth Conversion Ladder: A strategy to access retirement accounts before 59½ penalty-free: convert traditional IRA funds to Roth IRA, pay taxes on the conversion, then withdraw the converted amount after 5 years.
72(t) / SEPP: Substantially Equal Periodic Payments, an IRS rule allowing penalty-free IRA withdrawals before 59½, provided you commit to a fixed schedule. Calculator →
Rule of 55: IRS rule allowing penalty-free 401(k) withdrawals if you leave your job in or after the year you turn 55. Applies only to the 401(k) at that employer.

Geo-Arbitrage: Earning income in a high-cost country or city while living in a lower-cost location. A powerful FIRE accelerator: earn USD, spend pesos/baht/euros. Read more →
House Hacking: Buying a multi-unit property, living in one unit, and renting the others to cover or reduce your housing costs.
LCOL / MCOL / HCOL: Low / Medium / High Cost of Living areas. Choosing a LCOL location can cut your FIRE number by 30-50%.

Trinity Study: The 1998 academic paper that established the 4% rule. Studied historical US stock and bond returns from 1926-1995. Deep dive →
Guyton-Klinger Guardrails: Dynamic withdrawal rules (2006): reduce spending after portfolio declines, increase after gains, with guardrails to prevent overspending or unnecessary frugality.
VPW (Variable Percentage Withdrawal): A withdrawal method developed by the Bogleheads community that adjusts annually based on portfolio size, asset allocation, and remaining retirement horizon. Never runs out of money. Compare →