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 →