5 ways to retire early (FIRE)
So you’ve heard about the Financially Independent Retire Early (FIRE) movement, but after some research you quickly realized there’s a lot more to it than “make money, save money, retire early”…
Maybe you’re looking for the quickest, most efficient path to FIRE, whatever the short-term costs to your lifestyle may be.
OR…
Perhaps you’ve come here discouraged, looking for other options after reading article after article about the extremely frugal lifestyle you’d have to live in order to achieve FIRE.
Sure, saving money may sound easy, but the amount you’d need to earn and save and the years of strict living you’d have to endure are all starting to add up - making you second guess pursuing FIRE at all.
You may be thinking, “is the only way to FIRE saving 80% of your income, eating beans and rice until you’re 35, and then retiring - only to live that so called freedom frugally? What’s so free about that?”
I’ve asked myself that many times and was relieved to find that there are many different ways to achieve financial independence. While frugal living is often a necessity at one point or another on this journey (unless you’re extremely wealthy), it isn’t a life sentence in every case.
In this article we’ll talk about the 5 different ways you can live out your FIRE dream:
Barista FIRE
Coast FIRE
Fat FIRE
Lean FIRE
Traditional FIRE
Barista FIRE
Barista FIRE is “retiring” early from your full-time job, but continuing to work part-time. You would also be considered to be in the barista FIRE club if you yourself were retired but your partner still worked part or full time to provide benefits and income to the household.
At first, this option confused me - are you really financially independent if you still have to work, even if only part-time? Are you really retired if you’re still working?
Maybe not… but at least if your old full-time job was unfulfilling or stressful, or you felt that reaching a portfolio of a million or even two million dollars for the famed 4% rule was not possible (at least not in the timeframe you wanted), then barista FIRE is still a good option at living a more free life.
As I researched this option, I came across many benefits and very few cons.
Pros:
Faster and easier to achieve
If you wanted to live off $60,000 per year, then according to the 4% rule you’d need to save $1,500,000 before you could retire (if you’re wondering how I got that number, check out this article on calculating your FIRE number). BUT, if you were able to find a part-time job that brought in $20,000 per year, you’d only need to pull $40,000 per year from your portfolio to meet your $60,000 per year living standard. This means you would need to save $1,000,000 before you could retire (allowing you to “retire” half a million dollars early).
Meaning, fulfillment, friends
A lot of people find purpose and meaning in their work and in contributing something to the world. If you aren’t currently finding meaning in your career, you might find happiness in taking on a lower paying job that does matter to you while getting away from your stressful, high-paying job (taking a job at a non-profit, for example). As humans, we also rely heavily on our social connections to make us happy - many of which stem from work. How many people would you know and talk to 5 days per week if it weren’t for work?
Routine & schedule
Sometimes, without work, we’d lack reason to get out of bed in the morning and waste the day. Having a job gives you a place to be at a specific time - a reason to get out of bed, get dressed, and get started with your day.
Employee perks
Employees often get discounts or free products (taking home food at the end of the day that didn’t sell or a free gym membership, for example) from their workplace. If you choose well, this could be an insanely good perk that contributes to lowering your cost of living!
Health insurance, 401K, and other benefits
The cost of health-insurance is incredibly high and something that we often forget about as most of it is covered by our employer. When you retire completely, you lose this money-saving benefit, along with others (401K match, for example). While not all employers extend their benefits to part-time workers, barista FIRE is actually named after the barista job at Starbucks because they do offer health insurance to their part-time workers.
Less risk
Retiring full-time is scary for so many reasons, but with barista FIRE it doesn’t have to be. Because you aren’t withdrawing as much from your portfolio, you’re less likely to run out of money. There’s also no employment gap on your resume should you decide to rejoin the workforce full-time (whether that’s because you’ve had a change of heart about early retirement or if the stock markets have been unkind and you need to re-evaluate where you’re at financially).
Regain more of your time
If working a part-time job is not part of your ideal dream life or is not considered true freedom to you, then consider this: with barista FIRE, you now have several more hours per week to pursue what could become more lucrative side hustles, ultimately achieving traditional FIRE and retiring for real - YouTube channel anyone?
Cons:
Still working
With this method, you are still working and you still depend on that income to live the lifestyle you want. That means you’re not completely time-free and job loss or toxic work environments could still shake you (financially and emotionally) if you aren’t careful.
Less control over your life
If you’re coming down from a cushy tech job with unlimited or very high PTO thinking life will be great as a barista, consider that your PTO could be significantly cut compared to what you’re used to and your scheduled work hours unpredictable - including nights and weekends when you might hope to be out with friends or a partner who are still working on a 9-5 schedule. Of course this isn’t true with a gig job like DoorDash where you set your own hours, but then you give up the health insurance benefits and other perks like taking free food home at the end of the day that no one wanted. With gig jobs like DoorDash, you’re also dependent on the app not crashing, algorithms assigning jobs being favorable to you, and their base pay for drivers not being lowered too much.
Think DoorDash is the perfect side-hustle to achieve FIRE? Read about how much I made on DoorDash during a holiday weekend!
Coast FIRE
Coast FIRE is reaching a nest egg amount early in life that, over time, will grow into your goal retirement amount. An example would be if you saved $200,000 by the age of 30 and invested it at a 6% return without ever adding another penny, it would reach $1,100,000 by a retirement age of 65.
If you invested more in this nest egg at an early age, by the powers of compounding you could coast to an earlier retirement - but that’s not the main focus under this form of FIRE.
The idea is really this: saving a small amount earlier is worth more than saving a large amount later, thanks to compound interest and you should get the task of saving for retirement out of the way as early as possible.
It really is a very efficient way to save for retirement.
By following this path, you have less expenses later in life because at some point you won’t need to allocate any of your income towards retirement. This frees you up to either a) live more extravagantly with the extra money or b) work for less pay at something you enjoy more. We could maybe even throw in c) continue investing and retire earlier than expected…
Pros
Less risky
Coast FIRE doesn’t usually end with you quitting your job before a more typical retirement age - meaning this option comes with none of the risks of the other ways to FIRE, such as employment gaps on your resume or losing your main source of income. It also means that, if at any point you see a downturn in the market, you have time to readjust your plan and start investing again without the difficulty of re-entering the workforce (since under this method, you likely never left).
Frugal living not required (forever)
Once you’re done aggressively saving for retirement, you don’t need to quit your job and cut all expenses, trying to stretch your dollar so that your portfolio will be able to support you forever. Instead, you simply stop investing for retirement, freeing up that money for anything your heart desires. You could even quit your high-paying, stressful job and take a job that pays less but leaves you more fulfilled, as you no longer need that amount that used to go towards retirement.
Cons
Takes longer if not the same amount of time to retire
If freedom from the 9-5 is your thing, this is not going to get you there. Because you, at some point, stop actively saving towards retirement, your retirement date is pushed further back than it would be if you were working towards a different form of FIRE.
Fat FIRE
I have heard fat FIRE most eloquently described by Robert Farrington as the “above average pursuit of financial independence”.
While the numbers vary, fat FIRE assumes you’ll be living off $100,000 or more per year in retirement. In fact some people consider a range of $100,000 - $200,000 to be “chubby” FIRE, while $200,000+ annually is actual fat fire.
I personally think a salary of $200,000 is ridiculous for most people to achieve fast enough for “early” retirement, maybe because I don’t live in an expensive city like New York or San Francisco, so for this article I’m considering any six figure income to be fat FIRE. If you do live in an expensive city or you want the option to live in one of these cities during your retirement, feel free to shoot for the $200,000 goal. After all, if you shoot for the moon and you miss, you’ll still land among the stars. 😉
Pros
Less risk
Let’s face it, with a $100,000+ income, you’re less likely to be financially shaken by unexpected events in life, such as illness or costly house repairs. You’ll be able to weather life’s storms better and avoid running out of money and having to rejoin the workforce.
Better lifestyle
Whatever “better” means to you, I’m confident fat FIRE can provide it. When people think of FIRE, they often think of frugal living before and during retirement. Not so for those who fat FIRE - on the higher end of the income scale, you will be able to take regular, more luxurious vacations, live in whichever city you’d like, drive your preferred vehicle, eat out at restaurants often, etc. (all within reason, of course). You’d even be able to better support having children while not working, which is something a lot of FIRE pursuers say they’ve written off.
Cons
Delayed early retirement
It was hard to come up with a downside to fat FIRE besides this one - it takes a long time to save up the money needed to fat FIRE. In order to live off $100,000 per year, you would need to have a portfolio of $2,500,000. In order to live off $200,000 per year, you would require a portfolio of $5,000,000 (find out how to calculate your FIRE number based off your desired yearly retirement income). This is a LOT of money to save! I recommend combining fat FIRE with barista FIRE if saving up $2,500,000 early in life sounds unrealistic to you (🙋🏻♀️).
Lean FIRE
Lean FIRE is the opposite of fat FIRE and is what often comes into someone’s mind when you tell them you’re going to save up and quit your job at 35. Under lean FIRE, someone who wants to retire early would lower their expenses to the absolute minimum they needed to survive and use that minimum, annual living expense as their FIRE number.
Pros
Fastest path to early retirement
Less expenses mean that your FIRE number (the total amount of cash you need in your portfolio to retire early) is lower and easier to achieve. Someone who wants to live off $85,000 per year would need $2,125,000 to retire early. BUT if you were able to live off an annual income of $30,000 per year, you’d only need $750,000 instead.
Potential clarity and peace in minimalism
Some people find a lot of peace in lowering their expenses and living with less - if you like minimalism, this could be the perfect FIRE path for you.
Cons
Extremely risky
I must admit that I don’t like this version of FIRE because it is SO risky. It assumes your living expenses will always remain low, which is not always true. Yes, you may pay off a mortgage after 30 years which decreases costs, but inflation, increased taxes, and unexpected medical costs for you or a partner as you age are all very real possibilities. If you don’t own your own home, you’ll contend with rising rent prices year after year. If you do own your own home, you could face major repairs as time goes by. Kids, of course, add to the uncertainties of life with unexpected medical costs and rising college tuition. Family vacations and babysitters aren’t cheap either!
Lower quality of life
If you truly enjoy living frugally, great. If you don’t and are secretly envious of moderate or nice vacations you see online, want high-end, new furniture someday, or to refresh your closet regularly with the latest trends, reconsider this path. Even if you are comfortable with your frugal lifestyle now, really consider if you can handle an even more frugal lifestyle in the future as costs rise.
Less freedom
I personally never felt like retiring early was true freedom if it meant I was stuck at home, unable to do the things I wanted to do because I couldn’t afford to do them. In lean FIRE, you’re less likely to have the freedom to live in the city you want, go on the vacations you want or as frequently as you want, eat out at the restaurants you want, and more. It is, if we’re being honest, a life of restricted living. You trade your 9-5 job restrictions for other restrictions in your overall lifestyle. If that is ultimately worth it to you, then have at it.
Traditional FIRE
If at this point you’re thinking you:
don’t want to work a part-time job in retirement
don’t want your partner to work either while you are in retirement
don’t want to live a frugal lifestyle in retirement
don’t want to wait to have a six figure income in retirement
regular FIRE may be the best option for you. If your salary of $50k, $60k, or whatever it may be is working for you now, there’s no reason to not shoot for that income as your yearly income in early retirement (except, of course, if considering the potential for higher taxes, inflation, medical expenses in old age, etc. make this income unattractive to you personally in the future).
Since we’ve now learned about all the flavors of FIRE, this pro/con section will be in comparison to all the other ways to FIRE introduced above.
Pros:
Less risky than Lean FIRE
You’re not on a bare-bones budget so you’re less likely to run into serious problems as costs rise or unexpected, costly events occur.
Faster than Fat FIRE
You’re not hoping to live in a penthouse in New York overlooking central park, so you don’t need to save for that kind of lifestyle. Being happy with typical middle-income living will shave a few years or more off your FIRE goal.
Work is not needed, unlike Barista FIRE
Under this method, no one assumes you’re going to work a part-time job. After you’ve finished serving out your two weeks notice, you’re truly time-free!
Still retire early, unlike Coast FIRE
Once you’re done aggressively saving and investing, you can be done with investing and work. This is unlike participants of coast FIRE who would only be done with the investing portion of the journey.
Cons:
Takes longer than Lean FIRE
To afford more comforts in life and not live frugally forever, you’ll have to put in more work to afford a larger retirement income.
Riskier & less luxurious compared to Fat FIRE
Even after all this sacrifice of living frugally and investing, you won’t be completely free to do whatever you want when you quit your 9-5. You’ll still have to budget and pass on certain activities that don’t fit within that budget.
Riskier compared to Barista FIRE
You’re fully retired under this path, which brings with it time freedom… but also the true feeling of being on your own with no employer to give you income or perks and benefits. Depending on your circumstances, you might not have a safety net should you run out of money. If you need to return to the workforce for any reason, you’ll have to explain that gap in your employment history.
Higher savings required compared to Coast FIRE, Barista FIRE, and Lean FIRE
Your cash goal for your portfolio will be higher (read: harder and taking longer to reach) than all other methods of FIRE except for fat FIRE.
I hope this article was like your own personal money jetpack - go forth and do great things!
Well, that’s it, folks! We’ve covered the main forms of FIRE and discussed pros and cons of each.
I hope you found a path that helps you achieve your dreams but if none of these sound great to you, consider mixing and matching to find your perfect fit!
For example… you could grow your retirement portfolio to where you don’t need to put any more cash towards it ever again (coast FIRE) and quit your job for a less stressful, more fulfilling job (barista FIRE) since you no longer need that extra income per month to put towards retirement.
Of course, you can (and usually will have to at some point on this journey) cut unnecessary expenses like in lean FIRE under any other type of FIRE as well.
If you want to find out the exact amount you need to save for early retirement based off the income you want to live off of in the future, check out this article on calculating your FIRE number.
Curious if DoorDash could be the side-hustle that lets you barista FIRE? Check out how much I made dashing on a holiday weekend!