FIRE means financial independence, retire early. You save a large share of your income, invest it, and once your investments can pay your spending for life, work becomes optional. Your FIRE number is usually 25 times your yearly spending. In Australia you also need to plan for super, which you usually can’t touch until 60.
The FIRE movement has gone from a niche blog topic to one of the most searched money ideas of the past decade. It’s simple to explain and hard to do. Here’s what FIRE is, where it came from, the different types, and how it works with Australian super.
1. What FIRE means
FIRE is not really about never working again. It’s about reaching the point where you don’t have to. Many people who reach it keep working part-time, change careers or start a business. The difference is that the choice is theirs.
The plan has three parts:
- Spend less than you earn, often by a wide margin.
- Invest the gap, usually in low-cost, diversified share funds such as ETFs.
- Stop when your investments can pay your spending, drawing a small percentage each year.
2. Where the FIRE movement came from
The ideas go back to the 1992 book Your Money or Your Life, by Vicki Robin and Joe Dominguez, which asked readers to measure purchases in hours of their life. In 1994, US planner William Bengen studied how much retirees could withdraw each year without running out over 30 years, and found about 4%. The Trinity study later backed this up. From around 2011, bloggers such as Mr. Money Mustache turned it into a movement, and it spread through forums, podcasts and YouTube.
Most FIRE material is still American. That matters, because US rules on retirement accounts, health care and tax are different from ours.
3. Your FIRE number
Your FIRE number is your yearly spending divided by your withdrawal rate. At 4%, that’s 25 times your spending:
- Spend $40,000 a year: you need about $1 million.
- Spend $60,000 a year: you need about $1.5 million.
- Spend $80,000 a year: you need about $2 million.
Two things to note. First, it’s based on what you spend, not what you earn, so cutting spending helps twice: you save more now and need less later. Second, 4% was tested over 30 years. If you stop at 40, your money may need to last 50 years, so many people use 3.5% (about 29 times spending) to be safer. We cover this in the risks of FIRE.
🎥 Watch me explain this
▶3:12The 20× rule, and where the withdrawal rate comes fromHow much do you need to retire in Australia? · from 3:12 · read the post- ▶1:37Start with the income you need, not a lump sumHow much do you need to retire in Australia? · from 1:37 · read the post
4. Your savings rate is what matters
The share of your take-home pay you save decides how long FIRE takes, much more than your salary or your investment choice. Save 10% and it takes about 50 years. Save 50% and it takes about 17.
5. Lean, fat, coast and barista FIRE
There’s no single version of FIRE. Pick the one that matches the life you want.
6. How FIRE works in Australia
Super is the big difference. It’s a low-tax place to grow money: earnings are taxed at up to 15%, and nothing in a retirement pension. But you usually can’t access it until you reach your preservation age of 60 and retire. So an Australian FIRE plan has two buckets:
- Outside super: enough to pay your way from the day you stop work until 60.
- Super: enough to carry you from 60 for the rest of your life, with your employer’s 12% contributions doing a lot of the work.
Later, from 67, a part Age Pension may also help, which lowers the risk of running out in your 80s and 90s. Our step-by-step guide to retiring early shows how to plan both buckets.
Our free FIRE calculator checks both buckets: money outside super to get you to 60, and super for after.
7. Is FIRE realistic?
For most people, retiring at 35 isn’t. It needs a high income, very low spending, or both. But the ideas behind FIRE work for everyone: save a higher share of your pay, invest it in low-cost ETFs, and know your number. Even if you only bring retirement forward from 67 to 57, or reach the point where you can work part-time at 55, that’s a big change to your life.
🎥 Watch me explain this
▶1:33What retirement do you want?How much super should you have at 30, 40 and 50? · from 1:33 · read the post- ▶4:43The ramp strategy for building superHow much super should you have at 30, 40 and 50? · from 4:43 · read the post
Every FIRE guide, plus the calculator, in one place.
Frequently asked questions
What does FIRE stand for?
Financial independence, retire early. It means saving and investing enough that your investments can pay your living costs, so work becomes optional.
What is the FIRE number?
Your yearly spending divided by your withdrawal rate. At the classic 4% rule, that’s 25 times what you spend each year: $1.5 million if you spend $60,000.
Can you do FIRE in Australia?
Yes, but you need to plan around super, which you usually can’t access until 60. That means building money outside super to cover the years from when you stop work until 60.
What is coast FIRE?
You’ve saved enough that investment growth alone should reach your FIRE number by 60, so you only need to earn enough to cover today’s costs.
How long does FIRE take?
It depends mostly on your savings rate. Saving 50% of your take-home pay takes about 17 years from scratch, at 5% a year after inflation and a 4% withdrawal rate.