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Independence Day

Kristine Hayes  |  March 22, 2018

WHEN I FIRST encountered the acronym FIRE on Bogleheads.org, I had no idea what it stood for. It didn’t take me long to decipher the wordplay. More problematic: Figuring out what FIRE—Financial Independence/Retire Early—is all about.

Studies show over two-thirds of Americans have left behind fulltime work by the time they’re age 66. But many retirees continue to work part-time because they don’t have the financial resources to avoid working altogether. A 2015 GAO study found that 52% of households age 65 to 74 had no retirement savings—and, for the other 48%, the median amount was just $148,000.

So who exactly are these folks claiming to be financially independent early retirees? From the information I’ve seen, FIRE devotees generally live frugally. They invested a high percentage of their salary during their working years. Many seem to put in at least two decades of fulltime work, often in high-paying technology jobs, before accumulating an investment portfolio large enough to sustain them for the rest of their lives. There’s even an “early retirement extreme” group who aim to quit work after as few as five years of fulltime employment.

There are numerous books dedicated to the concept of FIRE. Your Money or Your Life is frequently referenced in the financial independence movement. It’s a comprehensive guide on the subject, encouraging readers to be more mindful about all aspects of their lives. While significant portions of the book are devoted to financial topics, it’s also filled with exercises designed to get readers to think about how to make their personal lives more fulfilling.

The age and net worth at which folks reach financial independence varies widely. Many FIRE devotees suggest accumulating wealth equal to 25 times annual expenses. MrMoneyMustache.com, one of the most widely read websites devoted to financial independence, suggests a broader rule of thumb: “Take your annual spending, and multiply it by somewhere between 20 and 50. That’s your retirement number.”

But FIRE isn’t just about investing and accumulating large sums of money. Far from it. It’s about fundamentally changing the way people think about money. It’s about achieving a level of financial security that allows a person to choose if he or she wants to work. It’s about having the freedom to pursue a passion, either on a paid or purely voluntary basis. It’s about choosing a life filled with more experiences and fewer material items. It’s about being able to live a second childhood if one so desires.

Kristine Hayes is a departmental manager at a small, liberal arts college in Portland, Oregon. Her previous blogs include Case ClosedMy Younger Self, Bogleheads.org and USAFacts.org.

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