FIRE stands for Financial Independence, Retire Early. The core idea is to save and invest aggressively so that your investment portfolio generates enough passive income to cover your living expenses, freeing you from the need to work for money. The FIRE number is typically calculated as 25 times your annual expenses, based on the 4% safe withdrawal rate.

The 4% rule comes from the Trinity Study, which found that a retiree withdrawing 4% of their portfolio in the first year and adjusting for inflation each year thereafter had a very high probability of their money lasting at least 30 years. Some FIRE practitioners use a more conservative 3.5% or even 3% withdrawal rate, especially for very early retirees who may need their portfolio to last 50 or more years.

Your savings rate is the single most important factor in determining how quickly you reach FIRE. Someone saving 50% of their income can reach financial independence in roughly 17 years, while someone saving 25% may need closer to 32 years. Increasing your savings rate by reducing expenses or increasing income can dramatically accelerate your timeline.