What's FatFIRE and How YOU Can Achieve It

The Financial Independence Retire Early (FIRE) movement is a community of many different walks of life and many beliefs about what retirement or financial independence means. Two common paths are LeanFIRE and FatFIRE. LeanFIRE is the minimalist approach to personal finance and often results in people living at their minimum household expenses. Then, what’s FatFIRE?

FatFIRE is the traditional retirement achieved at an earlier age. When your retirement savings surpass the point where your minimum monthly expenses can be covered by your retirement income independent of earned income. FatFIRE is the ability to retire above your minimum household expenses to fund travel, entertainment, and other luxuries.

In order to calculate your FatFIRE number, you will need to understand what your minimum expenses will be in retirement, and plan to save and invest so that you exceed those minimum expenses.

Continue reading to learn more about FatFIRE and how you can achieve financial independence.

An image of what fatfire would look like using the fire calculator.

An image of what fatfire would look like using the fire calculator.

How to achieve FatFIRE?

The key to achieving FatFIRE is to start saving and investing as early as you can to allow compound interest to grow your investment over time. Because FatFIRE exceeds your minimum expenses in retirement, you need to maximize the amount you invest and the time it’s invested.

For example, you may need $50,000 per year to cover your minimum annual expenses, but $100,000 per year provides your ideal (FatFIRE) retirement. Using the Bengen Rule, you will need about $2,500,000 to pay yourself $100,000 in retirement at a 4% safe withdrawal rate.

5 steps to achieve FatFIRE:

  1. Track your spending

  2. Create a budget

  3. Spend less than you earn

  4. Save for emergencies

  5. Invest consistently

The formula for achieving financial independence is the same whether you’re aiming for LeanFIRE, FatFIRE, or CoastFIRE. The variables you can control are your income, your savings rate, how you invest, and how consistently you invest. Compound interest will take care of the rest as long as you give it the time that it needs to work its magic.

How to calculate your FatFIRE number

I created The FIRE Calculator specifically for you to calculate your ideal retirement and how to get there. As you can see in the image above, this example retiree desires to have $100,000 annually in retirement.

They would have over $2.7 million by the age of 55 and be able to safely withdrawal $100,000 per month for 30 years. This adheres to the 25x rule where $100,000 annual expenses X 25 = $2.5 million.

How much money do I need to FatFIRE?

To achieve FatFIRE, you will need to amass more than your required monthly expenses because you won’t be living at the minimum. Determine how much money you would like to have access to on an annual basis in retirement and multiply that by 25.

For example, if you need $40,000 per year, but want $70,000 per year, then multiply $70,000 by 25 to get your FatFIRE number of $1,750,000.

Another consideration to make is what your expenses will be when you want to live the FatFIRE lifestyle and start withdrawing your investment income. For us, we’re aiming to be financially independent in our 40’s with at least $1.5 million, but will likely continue to work and earn an income to allow our retirement fund to continue its growth.

Why do people want to achieve FatFIRE?

FatFIRE is often represented as the ideal retirement. Visions of golf courses, sandy beaches, and world travel come to mind. FatFIRE is the retirement sold to previous generations by the government. Work hard for a lifetime to enjoy a short time of luxury. The difference between traditional retirement and FatFIRE is the goal of FatFIRE is to achieve independence at a much younger age.

this Fatfire vs leanfire infographic is property of firethefamily.com

this Fatfire vs leanfire infographic is property of firethefamily.com

What are the benefits of FatFIRE?

The benefits of FatFIRE are many and they may be different depending on your own wants needs and desires.

If you’re looking to join a dedicated FatFIRE community, consider joining the FatFIRE Subreddit.

Here are 7 benefits of achieving FatFIRE:

  1. Less financial stress

  2. Ability to choose how you spend your time and energy

  3. No boss unless you choose to have a boss

  4. More time to spend how you choose

  5. Generational wealth that can be passed down

  6. Reduced occurrence of work-related injury

  7. Less reliance on the government

What are the drawbacks of FatFIRE?

There aren’t many drawbacks to achieving financial independence, but I was able to list a few.

Here are 4 drawbacks of achieving FatFIRE:

  1. You may have to sacrifice time and energy now

  2. It’s more difficult to achieve than LeanFIRE

  3. You’ll likely work longer to be able to save enough

  4. More money might not be satisfying in the end

  5. The feeling of a lack of purpose without a job/career

LeanFIRE vs FatFIRE - Which is better?

The difference between LeanFIRE and FatFIRE is in the amount of money you plan to live off of in retirement. If you choose to live a minimalistic LeanFIRE lifestyle then you will need less money than if you choose to live a more luxurious FatFIRE lifestyle.

FatFIRE is more difficult to achieve than LeanFIRE because time is your greatest enemy. Many people don’t get started saving for retirement until it’s mathematically impossible for them to save for a FatFIRE lifestyle.

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