FIRE stands for Financial Independence, Retire Early. Save and invest until your investments can pay your living costs, and work becomes a choice instead of a necessity.
Barista FIRE means your investments cover part of your living costs and a relaxed part-time job covers the rest. Your portfolio no longer needs your savings to keep growing.
Say your life costs 2,000 a month and your investments pay 1,500 of it. At a 4% withdrawal rate that takes 450,000; a part-time job pays the other 500.
It suits people who want out of a demanding career sooner but don't mind working a little. Of the three, it is the first you reach.
Upside: The earliest way out of full-time work, and your portfolio keeps growing while you work part-time.
Downside: You still need to work, and part-time income can be less steady than a salary.
Lean FIRE means your investments pay for a modest, frugal life, so you can stop working entirely.
With living costs of 2,000 a month you need about 600,000, 25 times your yearly spending.
It suits people who are happy with a simple life and would rather have free time than more spending.
Upside: Full independence years sooner than Fat FIRE.
Downside: Little room for surprises: a market drop or an unexpected bill hurts more when the budget is tight.
Fat FIRE means your investments pay for a comfortable, even generous life, with room for travel, hobbies and helping family, without working.
For 4,000 a month you need about 1,200,000, which takes years longer to build.
It suits people who want to keep or raise their current lifestyle and are willing to work longer for it.
Upside: A big safety margin and the freedom to spend.
Downside: It takes the longest: in the example, 11 years longer than Lean FIRE.
The 4% rule comes from studies of past US stock and bond returns: a portfolio that paid out 4% of its starting value each year, raised with inflation, lasted at least 30 years in almost every historical period. That is why you need about 25 times your yearly spending.
It is a rule of thumb, not a promise. Markets go up and down, and a retirement longer than 30 years may call for a lower rate. The calculator lets you choose the rate for each goal.
The example invests 250 a month, raised 5% a year, with a 7% yearly return and 2% inflation. All amounts are in today's money.