Fat FIRE. I had a taste of it and I want it. I felt that my year-long maternity and parental leave was, in a sense, a little mini-retirement. I lost track of the days (a common thing I said was “It’s Friday again?”), I did not miss work, I got to make pancakes during a weekday, I got to run errands during non-peak traffic hours, and also go for a stroll whenever the baby pleased.
I also got to take advantage of birthday freebies for myself and my husband without having to take a vacation day or sick day from work. Most importantly, on my mini-retirement maternity leave, I lived on a limited income for six months.
After living on a limited income (employment income paid out as parental leave for about six months, which equated to about $2000 a month) I have come to a conclusion about early retirement.
I came to the conclusion that I will need more cushion in retirement (when that day comes). Things were getting a bit tight there with my mortgage payment, personal spending, contributions to our joint account, dog emergencies ($500 for treatment of hemorrhagic gastroenteritis, thankfully my dog didn’t need surgery since blood was coming out of both ends (sorry TMI)).
I had over 6 months of spending saved up but it still felt uncomfortable to not be able to save (maybe it was my angst about the Motherhood Penalty). I usually am able to squirrel away a chunk of money to save but wasn’t able to given the lack of cash flow in the latter part of my parental leave.
Being well into my 30’s, I know myself and know what makes me comfortable and what I need in my life, so that’s why I think I would want to order up some Fat FIRE in retirement.
What is Fat Fire?
If you haven’t heard of FIRE, in the financial independence community and as part of the FIRE movement, FIRE stands for Financial Independence Retire Early. You may have heard of the term Financial Independence. Financial Independence is often about fire extreme saving now to get to a wonderful sense of delayed gratification and freedom, later.
Commonly, FIRE (Financial Independence Retire Early) is further broken down into two subtypes, Lean FIRE vs Fat FIRE.
What is leanFIRE? Lean FIRE references the standard 4% safe withdrawal rate type of retirement, where if you save 25 times of your living expenses in an investment portfolio, you should be able to make your nest egg last for 30 years, as long as you withdraw not more than 4% from your portfolio every year. This term, the safe withdrawal rate was coined by Bill Benger. When you achieve the Crossover Point, or lean FIRE, you don’t need to rely on your active income to cover your monthly living expenses.
For example, if your annual expenses are $28,000, you will need to save a liquid net worth and investable assets of:
$28,000 x 25, which is equal to $700,000.
Once you’ve achieved that you will reach Lean FIRE.
The leanest cut of steak according to Men’s Journal is the Sirloin Tip Side Steak, with 5.4g of fat. Lean FIRE is like eating Sirloin Tip Side Steak. You got to make sure you don’t have problems chewing and will definitely need some water or something to wash it down and make the leanFIRE go down smoother. Some leanfire examples include having enough but not having enough for a super lavish retirement- no exotic travel, just staycations or local places, and not being able to eat out all the time. You might have to supplement leanfire with barista FIRE which means working at the local Starbucks to supplement your lean retirement income.
LeanFIRE doesn’t have much wiggle room. No wiggle from for $7000+ a month long term care needs when you’re 85 and unable to take care of yourself in your own home, for severe illness, for post secondary education savings for the kids, or for $5000 trips to see Mount Kilimanjaro. To me, Lean FIRE just covers the basics on a monthly basis (shelter, food, local entertainment like movies occasionally, gas, transportation etc.).
What is Fatfire? For the Fatfire definition, on the opposite side of the meaty spectrum is Fat FIRE, is the Rib-Eye Steak, which has a whopping 37.6g of fat. It tastes good, is good for the keto diet (which is all the rage now, by the way), and makes you feel fuller longer.
How Much Does FatFire Cost?
Fat FIRE according to Lily at The Frugal Gene (who is well on her way to FIRE, actually I think she is already FIRE’d in my eyes) is having about $100,000 in annual income (and spending up to that amount) in retirement. Personally I think that’s too much for one person (but for a family $100,000 is plenty enough for Fat FIRE).
Basically, the premise of Fat FIRE is that you don’t have to scrimp or change your current lifestyle to meet the demands of your retirement spending. So whatever you are spending now or whatever lifestyle you have now, you will continue it in your early retirement years.
For a $100,000 annual income, one would need to save up $2,500,000 in liquid investable assets. It’s definitely easier to save that much when you earn more. We are talking about minimum six figure earners since your early 20’s to be able to achieve this level of financial independence.
Yeah, that’s a lot of money to reach financial independence but that’s the sacrifice that those with high earnings and in Fat FIRE pursuit will take.
How much money do you need to be financially independent? Well, like all personal finance, that’s personal and if you live a rib-eye lifestyle now, you will likely not be used to a sirloin tip side steak lifestyle later.
In my world of Fatfire Canada, I don’t need $100,000 in annual income in retirement but I do want to be able to support myself and continue saving (even if it’s a little). As I mentioned in a previous post on the safe withdrawal rate and never touch your principal, I don’t want to be touching my principal when my time for financial independence comes.
It’s Not to Galavant Across the WOrld
I would love to galavant across the world and take a luxury cruise, stay in an overwater bungalow in the Maldives, and finally go to Santorini. There are definitely lots of things I would do if I found $1,000,000 somewhere.
I would definitely love to do these things but wouldn’t need to do them to an excess- I don’t need to stay in a $1500 a night overwater bungalow place but would definitely like to see the Maldives. I don’t need $100,000 in passive income to do this.
How much is enough for retirement? To be honest, I really don’t need too much but the reason why I don’t want to be withdrawing from my nest egg is an irrational one.
Irrational but Powerful Compulsion to Save
The reason why I want to have Fat FIRE is that I want to be able to save. It doesn’t make sense, I know. It’s irrational. But I have this powerful compulsion to make sure I am saving (even if it’s a little bit). The last thing I want to be doing is taking money out of my nest egg and see it dwindle slowly by 4% per year. I like to see my portfolio grow and I like to see the dividend payments get bigger.
The Fatfire number that I would aim for is something like a fatfire income of $35,000 in annually on a passive basis (or about $3000 monthly after the mortgage is paid off). Even $2000 after a mortgage is paid off is doable too (which is roughly a $700,000 a nest egg). For a $3000 monthly income, that’s $36,000 annually, or a nest egg of $900,000.
I know it doesn’t seem like much, but that’s my version of FatFIRE since my husband and I have separate and joint finances. This would be in addition to our family spending. This would cover my separate spending such as trips with my friends, dinners out, gifts, and other personal spending.
So yes, the reason why I want FatFIRE is to alleviate my anxiety about having enough money in retirement.
I need some cushion in retirement. Nonetheless, my version of fatfire Canada probably doesn’t need that much cushion, what with our government pensions, my defined benefit pensions and Canadian government’s universal healthcare. However, I don’t want to rely on government pensions and healthcare because you never know what policy might be in place 50 years down the road. That’s a long time from now. We just got universal healthcare for Canadians relatively recently.
For more fat fire inspiration and ways to early retire and not compromise your lifestyle, check out the thread on reddit fatfire.
Hustlin’ and the Internet Retirement Police
Which brings me to why I think there are so many FIRE bloggers making money from their fire movement blogs in addition to their nest egg. It is human nature. Many of us are wired to want to produce and be productive and connect with each other and create.
My mother in law likes to hustle even though she’s been retired for over 10 years. She likes to have international homestay students- she cooks for them, does their laundry, and she gets paid per day or per month depending on how long they stay with her. I highly doubt she needs the money but she likes to hustle anyway and likes the social engagement with the students.
Similarly, I don’t think people should be calling out personal finance bloggers who make money from their early retirement blogs, as long as they are open about living off the business income (in addition to their 4% SWR nest egg income).
Warren Buffett The Ultimate FAT FIRE Mogul
It’s like telling Warren Buffett to stop working and live off his income, even though his work is really spending most of his time reading in his office, which he doesn’t view as work. We know Warren Buffett can ‘retire’ at any time, he is clearly financially independent. The key is that he is spending his time how he wants to spend it and we all know that is the key to FIRE.
Someone who is in the same boat (pun intended) as Warren Buffett, this 100 year old shipping billionaire from Singapore still goes to work every day. He’s clearly financially independent too, but is clearly not retired.
Fat FIRE Summary
Maybe the feeling of anxiety will change once I have enough in my nest egg to be financially independent and then I won’t feel the need to keep saving and growing the aforementioned retirement nest egg.
I really don’t know the answer to that because I haven’t experienced it yet. Hopefully, I will be able to save up to enjoy that rib-eye steak in a few years when I accomplish achieving financial independence, or my version of Fat FIRE retirement. After I achieve that, then I can focus on the 6 things I plan to include in my daily life in hopes of retiring happy. These are things to still have purpose in your life and daily goals.
To summarize, FIRE stands for financial independence retire early, and there are different ‘levels’ of financial independence.
- Lean FIRE is easy to achieve and doesn’t require a big nest egg, but only meets the bare minimum of expenses (and doesn’t account for future market melt downs, future health care needs, travel, or other big life expenses).
- Fat FIRE is more difficult to achieve and consists of maintaining (or increasing) your annual expenditures as if you did not have a limited income. Exotic vacations to the Maldives, university education for your children, future long term care needs are accounted for.
Everyone has a different “retirement number” and everyone has different expenses they need. Just because someone wants to retire at 28 with $24,000 in annual income, that doesn’t discount your own personal finance financial independence retire early journey, which may be to retire at 52 with $80,000 in annual income.
I want to be able to be part of the sandwich generation without feeling flattened.
Readers, how do you envision your financial independence or retirement?
Which FIRE are you leaning towards, Lean FIRE or Fat FIRE?
For those who have reached FI, does the feeling of wanting to save ever go away?
Do you have a Fat Fire Number?
GYM is a 40 something millennial writing about personal finance since 2009 and interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for a free dividend yield spreadsheet and the free Young Money Bootcamp PDF.