FIRE: Financial Independence to Retire Early in Australia

Daniel Brown

Financial ExpertUpdated on June 13, 2023

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Is Your Dream to Retire in Your 50s, 40s, or Even Your 30s?   

Today, about half of Australian retirees’ income is from superannuation. You might be worried that sources such as your age pension won’t give you enough money to cover all living expenses if you opt for early retirement. 

A partially self-funded retirement through the Financial Independence Retire Early (FIRE) movement might be a practical option for you.

This article includes critical information about FIRE, including what it is, the basic plan, and variations. You’ll also learn the pros and cons of FIRE to help you make wise financial choices.     

Jump straight to…

Carlos Muza | Unsplash

What Is FIRE?

Financial Independence, Retire Early (FIRE) is a system dedicated to a program of investment and extreme savings.

This system allows Australians to retire much earlier than traditional retirement plans and conventional budgeting would permit. 

Suppose FIRE movement members can dedicate up to 70% of their income to savings, such as savings accounts. They can later quit their jobs and live off small withdrawals from personal portfolios. Early retirees make small, yearly withdrawals from their savings, such as 4%

FIRE members must diligently monitor personal finances including expenses. They must also maintain and reallocate their investments. 

In addition, early retirees can take this step decades before Australia’s current earliest age pension of 66.5 years old.  

It’s critical to consider various factors related to FIRE, such as the effects of extreme savings on your lifestyle and quality of life.   

Many millennials have supported the FIRE movement in recent years. Their goal is to retire several years before 65, which is the traditional retirement age. 

FIRE blogs have also been gaining popularity in Australia and triggered growth within the FIRE community.  

Early retirement enthusiasts function as informal financial advisers as they share their life-changing journey publically, which helps them stay on track.  

FIRE enthusiasts transparently reveal their financial experience, including their yearly spending and how they invest into savings. 

The blogs sometimes offer FIRE calculators to determine how long you’ll need to afford a comfortable retirement.

History of FIRE 

FIRE’s central ideas are based on the 1992 best-selling book Your Money or Your Life by Vicki Robin.  

This book became the foundation of the FIRE movement. It compares every expense a person makes, with the hours of work they spent to buy the item. 

Another cornerstone of the FIRE movement is the 2010 book Early Retirement Extreme by Jacob Lund Fisker. 

These books about the ‘Financial Independence, Retire Early’ movement combine the concepts of simple living and investment income to reach financial independence. 

For example, Fisker’s book shares how a person’s savings rate is relative to the time it will take them to retire. A person can then project their retirement date easily.   

The Mr. Money Mustache blog offers financial advice. It also helped popularise the FIRE movement by promoting frugality to achieve early retirement.  

Other blogs, podcasts, and books also promote the FIRE method through the function of “side hustles” to speed up the path to early retirement. 

After retiring, you can make work optional.

In recent years, several mainstream media outlets have provided significant coverage of the FIRE movement. 

FIRE: Theory vs. Reality

FIRE’s Theory 

The basic theory of FIRE is that if you make significant sacrifices during your early working years, you can stop working at a much younger age. 

Many FIRE followers wish to live a more fulfilling life than 9-5 workdays. 

They hope to achieve their financial goals by building a savings pot as quickly as possible. 

However, this goal raises some big issues, including FIRE’s practicality in regard to the different levels of earnings. 

Another issue is whether the movement can survive economic and market downturns, such as the ongoing COVID-19 pandemic.

Possible FIRE risks include losing a large portion of your investment portfolio to a market crash. 

Similarly, an unexpected medical expense due to a critical illness or accident could wipe out your savings. 

FIRE’s Challenges 

Australians can use online tools to calculate their FIRE date. With these tools, you can determine how many more years you’ll need to work to achieve financial independence.

These calculators factor in your superannuation and non-super investments to determine the ideal time to retire. They’re also customised for Australia’s 2-phase retirement.

However, the biggest issue related to FIRE is calculating how much you’d need to save to ensure you won’t run out of money. 

One of the main issues is knowing how much money you’d require for an unknown amount of time. This task is challenging.  

FIRE followers often argue that you need to save at least 25 times your current annual expenses so you can follow the 4% rule when you retire. 

This rule indicates how much of your savings you should withdraw each year.  

The problem with this guideline is that it’s based on several assumptions, including:

How Fast Your Portfolio Grows Yearly 

This rate can rise or fall based on how the market performs each year. Important factors include the long-term outlook of Australian stock markets and government bonds. 

Retirement Time Period 

Another problem related to calculating how much money you’ll need for retirement is the unknowns, like how many years your retirement will last based on factors like increased life expectancy. In 2018, Australia’s average life expectancy was around 83.

Future Market Performance 

This factor is the main one that will determine how long a FIRE follower’s savings pot will last. Projections are based on historic market returns, which aren’t guaranteed.

FIRE’s Reality 

Various factors make the reality of FIRE’s financial planning much different from its theory. They include unexpected expenses such as:

  • New dependent (e.g. child or parent)
  • Job loss
  • Health issues    
  • Lifestyle change

Meanwhile, your financial fortunes could also experience improvements, including increased earnings or a large inheritance. 

All these situations can alter how long it will take you to reach your target retirement age. 

Freelancing, moonlighting, and other options can boost the income you get from your regular job. 

The problem is that many people in developed countries like Australia are living paycheck to paycheck. 

People often set aside little or no income for investment and savings.  

Another key factor is people’s lifestyles. FIRE promotes a significant change focused on frugal lifestyles. It can be difficult for some people to invest.  

Wondering if FIRE is a Realistic Option for You?

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FIRE Variations

Several styles within the FIRE movement represent the lifestyle that followers adhere to: 

Fat FIRE – a person with a traditional lifestyle who saves up more than a typical retirement investor.

Lean FIRE – strict adherence to extreme savings and minimalist living, requiring a very restricted lifestyle. 

Barista FIRE – people who quit a standard 9-5 full-time job, but still do some part-time work to pay current expenses that would typically shrink their retirement fund.

Coast FIRE – followers who have a part-time job with enough savings to fund current living expenses and retirement.  

FIRE: The Basic Plan

In a nutshell, FIRE requires people to cut their expenses to a minimum and transfer every penny to savings and investments. 

Ideally, you should begin this process as soon as possible to maximise how long you can stay retired. 

Limit Expenses 

Debt Reduction 

It’s important to limit all high-interest debt, including:

  • Credit card debt
  • Personal loans
  • Student loans  

You should also try to reduce mortgage loans and other low-cost debts. Prioritise them less because they eat up less of your income. 

If you want to retire early, you’ll have to save a significantly higher percentage of your salary. 

Daily Expenses 

Review your monthly budget and remove any non-essential expenses. Some extreme FIRE followers stick to these rules:

  • No designer clothes and purses
  • No gym memberships (use alternatives like outdoor exercise) 
  • No eating out

How Much You Need to Save

The amount of money you’ll need to retire is based on various factors, including high costs during retirement and the lifestyle you want to maintain. 

Based on the average life expectancy in Australia, you’d generally need to have at least 20 years of retirement income if you retired at 65.  

Some high retirement costs include:

  • Rent 
  • Mortgage
  • Home renovations
  • Medicine 
  • Travel 

The Association of Superannuation of Funds of Australia (ASEA) estimates that you’d need about two-thirds of pre-retirement income to sustain that same standard of living during retirement.  

Based on ASEA’s estimates, here’s approximately how much Australians would need to maintain a comfortable lifestyle: 

  • Singles: $44,400 per year 
  • Couples: $62,800 per year 

If you’re planning to retire early, then you’ll also need additional funds for retirement before you turn 65.

One of the significant risks of FIRE is running out of money during your retirement years. 

For example, retiring early could mean your money has to last 40 or 50 years if you retire during your 30s. 

Maximise Income Sources 

Other sources of income, such as sideline jobs, can also maximise your savings and net worth. 

How to Invest Savings

Suppose you’re planning to follow the FIRE method. You might be able to invest more aggressively than an older Australian with the same number of years to retire.

Higher projected returns make it easier to achieve your target nest egg on schedule. Meanwhile, you could have to work longer if your investments underperform.  

Stock-heavy portfolios include better long-term success compared to balanced retirement portfolios. 

Keep in mind that aggressive investments also pose more risk factors.   

One option to reduce the risk of running out of money as a retiree is to live off the dividends of stocks that have a record of increasing dividends over the past several decades. If companies cut dividends, you can boost income or cut spending.

FIRE enthusiasts can also make investments in rental properties.

How to Minimise Taxes on Investments 

One of the benefits of FIRE’s high savings rate is that you’ll probably be able to maximise all tax-friendly retirement accounts. 

You could use taxable accounts for the most tax-efficient investments such as:

  • Direct real estate
  • International investments (foreign tax credit)
  • Individual stocks    

Some tax-exempt investments let you qualify for lower long-term capital gains taxes.

It’s tougher to take money out of tax-efficient accounts during early retirement while avoiding penalties.

Make sure to review which investments are subject to taxes if penalties for pre-retirement withdrawal exist. 

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Pros and Cons

Early retirement offers many FIRE followers a plan to live frugally and invest extra funds into low-risk yet high-yielding investments.

This process allows them to live off the passive income for several years before their superannuation would take effect. 

However, it’s essential to consider the advantages and disadvantages of FIRE so you can make wise decisions.   

FIRE Pros 

You Won’t Live to Work 

Making good investment decisions early means you’ll get long-term benefits from the compound interest. Therefore, your money will work for you instead of the other way around. 

FIRE allows you to live on your terms. This method will enable you to avoid:

  • Focusing on mindless consumerism 
  • Working every day of your life
  • Buying things to survive the daily grind

Living frugally isn’t about depriving yourself of fun and leisure. It’s about being smart and respectful with money. 

Ironically, FIRE isn’t focused on money. It’s about utilising money as a means to live.

Safe Investing 

One goal of FIRE is to draw down money long-term without running out of it. Solid investments have historically been able to survive financial and economic downturns. 

History shows that markets are volatile short-term due to factors such as stock market crashes. However, these markets always win in the long term. 

As a FIRE follower, you could buy on-sale during economic dips.

This approach isn’t about high-risk ventures or big investment opportunities; FIRE is instead about learning how to manage money in a somewhat safe financial environment while preparing for the future.  


Real Planning Is Required

Being out of the workforce for a decade after retiring could put you in a difficult spot. Failing to plan could make it hard for you to sustain long-term retirement plans. 

You might want to implement certain money management foundations of FIRE. This step could allow you to retire a few years before 65. 

Perceived Limitations of Mainstream FIRE

FIRE bloggers often provide a linear path to financial independence which includes:

  • Index funds
  • Stocks
  • Diverse property investments 
  • Term deposits 

FIRE variants can provide more options for Australians. 

The path to early retirement includes different approaches to issues, such as retirement age and investments in real estate or startups. 

These FIRE variants provide a non-traditional path to financial independence. 

If you stop work suddenly and early, this can cause various mental health risks. 

For example, FIRE proponents might wonder how to fill their days once retired. They also may be bothered if friends or family perceive them as lazy. 

One option is to shift to a FIRE work schedule. This step could include working part-time or half the year before retiring early. 

The option supports the idea that people do or don’t have financial freedom. It’s a continuous process, like finding your purpose in life. 

Today, many Australians are eager to achieve early retirement to start enjoying the good life before 65. FIRE makes it easier to achieve that goal through extreme frugality, retirement savings, and investment. 

Your first step is to learn how you can cut spending and boost income. 


1. Did anyone intentionally invent FIRE? 

FIRE enthusiasts often credit Viki Robin’s 1992 book Your Money or Your Life for inspiring their movement’s creation.

2. How can I follow FIRE since I have living expenses?

The goal of FIRE is to save several years’ worth of living expenses. Then, after retiring, you withdraw a small amount of retirement savings every year.    

What if you could tap into the wisdom of an experienced financial adviser instead of taking the all too common ‘hit-and-hope’ approach?  

Many people may be unaware of this…but just like you, 41% of Aussies intend to get financial advice rather than going it alone, according to an Australian Securities and Investments Commission (ASIC) report.

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1. Financial independence retire early (FIRE) 


2. Ibid.

3. Age pension – who can get it 


4. Financial independence retire early (FIRE) 


5. Early retirement extreme  


6. 4% rule 


7. Deaths in Australia


8. Ibid.

9. How much super you need


10. How much super you need


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