Is Fat FIRE realistic?

By Mark Seed, myownadvisor

Special to Financial Independence Hub


Weekend Reading - is Fat FIRE Realistic
Image Source: Pexels, Gantas Vaičiulėnas

Is Fat FIRE realistic?

Before my answer to that question, for those outside the personal finance, devout FIRE (Financial Independence, Retire Early) bubble, a primer based on what I know …

What is FIRE?

I would like to provide a universal definition from the personal finance community today but there isn’t one. There are, however, some general thoughts/themes when it comes to FIRE and those who follow the philosophy around it:

  • Financial Independence, Retire Early (FIRE) is a movement related to extreme/aggressive savings rates and investment tactics that allow individuals to retire sooner than potentially any traditional budgeting or retirement planning approach might permit.
  • When it comes to savings rates: in some circles, by saving up to 70% of your annual income, some FIRE enthusiasts aim to retire early (and live off small portfolio withdrawals from their accumulated assets).
  • When it comes to portfolio withdrawals: in some circles, by withdrawing a small % of the accumulated assets (e.g., 4% of the portfolio), said FIRE enthusiasts may expect their portfolio to last a lifetime without fear of running out of money.

The FIRE movement – new term, old concept

The FIRE movement takes direct aim at some traditional retirement ages, such as age 60, 65 or even later on but there is no consensus on what is / is not a retirement age, of course.

The theory and movement goes: by dedicating the majority of your after-tax income to savings and specifically saving for retirement, well, you could “retire” sooner than most. Probably true.

From this perspective, FIRE is not a new concept even though the moniker is somewhat newish.

I’ve written multiple times about the FIRE movement and my thoughts on FIRE.

I’ll link to those thoughts here for additional reading as well.

I’m hardly anti-FIRE; this movement/approach/philosophy has always resonated how I live for the most part:

  • To live within your means or slightly below what you make as income.
  • To save early and often.
  • To avoid long-term debt that is not used for wealth generation.
  • To optimize your investing (i.e., keep your costs low and diversified, and avoid money managers).

Several FIRE retirement variations have emerged over the years to frame a particular lifestyle expectation that could come with FIRE. I’ll rank them in order of cashflow significance although these terms also vary based on the FIRE enthusiast you’re talking to:

1. Lean FIRE

As the first word suggests, lean is a strict adherence to a minimalist lifestyle. Many Lean FIRE adherents live on $25,000 per year, or less per year. Here are a few examples:

Jacob Fisker – Early Retirement Extreme. How he used to live on just $7,000 per year. Not a typo.

There is Jessica from Financial Mechanic, who spent less than $20,000 in 2020.

In more recent years, A Purple Life, wrote about a nomadic life earlier this year, living off less than $25K USD.

These are certainly jaw-dropping low numbers …

2. Barista FIRE

Not that you have to become a barista, rather, the term is used to highlight a combination of work-life balance that can be juggled – a form of semi-retirement if you will.

Barista FIRE is a type of semi-retirement whereby you can consider part-time work or work on your own terms, and still enjoy the benefits of some income and workplace benefits. (The term was coined as such since Starbucks offers benefits to part-time workers … something to consider for your semi-retirement plans!?)

I’ve read emails and reviewed literally 100s of comments on this site over the years that point to a desire, like me a bit, to work on your own terms more – and many folks have done just that. Contract work. Seasonal work. Temporary work. Occasional work. All in the name of staying busy, remaining engaged with others, and earning a bit of income too. For the most part, any job that you enjoy could put you in the Barista FI category of semi-retirement … it’s a very loose term.

This Barista FIRE term should not necessarily be confused however with any Coast FI concept.

Coast FI is when someone no longer needs to continue to save for traditional retirement and instead, continue to work and coast to that destination. Coast FI advocates have saved and invested enough, for the most part, to never save for retirement again. They could consider working full-time at what they love, take a leap of faith to work part-time, or simply scale back earning income as they please. Coast FI could offer the chance for FIRE enthusiasts to devote time to hobby or passion projects they would otherwise have no time for.

3. Fat FIRE

Last up, in my list of terms and defintions list before I answer the question of the week, is Fat FIRE.

Fat FIRE goes exceedingly beyond Barista FIRE and is really the total opposite of Lean FIRE. This is for individuals who can and do save substantially more than the average worker but don’t want to reduce their current standard of living in retirement. In fact, they might want a higher standard of living in retirement.

Lean FIRE and Barista FIRE, to some degree, both require delayed gratification to realize your retire early goals. You either have to reduce your spending in extreme ways (Lean FIRE) or continue working (Barista FIRE) in order to retire early. By contrast, Fat FIRE is about building a large enough nest egg that you don’t have to worry about either approach. Fat FIRE has the objective to live it up in retirement. In some circles, this is not about saving and having $1 million or slightly more invested at any point for retirement. It’s about having millions …


Back to the question for this Weekend Reading edition …

is Fat FIRE realistic?

For most, heck no.

Remember, unless you are ruthless with spending or have very modest needs, FIRE is generally restricted to higher income earners in the first place. This is not to say FIRE principles do not have merit, they do, they simply don’t translate to everyone as much as the marketing might suggest.

On Nick Maggiulli’s site Of Dollars and Data this week (well worth the follow BTW), Nick wrote about the comprehensive guide to Fat FIRE and your ability to “unlock the secrets to a comfortable early retirement“.

Those secrets are either:

  1. Earn a very high income and invest in a diversified portfolio of assets, and/or
  2. Start a successful business and sell it.

Nick will be the first to say, there are no secrets – to high net worth and asset growth. There is hard work, skill and to be honest an awful lot of luck.

But his article this week did have me reflecting once again on the sheer power of financial marketing and just how much rarefied air there is for high net worth individuals compared to the rest of us.

What’s your take on Fat FIRE? 

Mark Seed is a passionate DIY investor who lives in Ottawa.  He invests in Canadian and U.S. dividend paying stocks and low-cost Exchange Traded Funds on his quest to own a $1 million portfolio for an early retirement. You can follow Mark’s insights and perspectives on investing, and much more, by visiting My Own Advisor. This blog originally appeared on his site on July 15, 2023 and is republished on the Hub with his permission.

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