Fat FIRE: Pursue an Early Retirement Lifestyle 💸

Imagine a retirement where you don’t have to tighten your belt, where you can enjoy your best life without financial constraints. This dream scenario is called Fat FIRE (Financial Independence Retire Early). 

If you’re Fat FIRE, you’re living the high life because your investment income comfortably covers all your expenses, eliminating the need for part-time work or financial supplements. You can even relish the luxuries of the world’s greatest cities without worrying about costs.

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In this article, we explore the concept of Fat FIRE and how it enables you to lead a life of abundance in retirement.

What is Fat FIRE?

“Fat FIRE”, an acronym for Financial Independence Retire Early, represents the pinnacle of financial independence, allowing individuals to retire early while living life to the fullest. In the realm of Fat FIRE, you can enjoy retirement without making any spending sacrifices. 

This lifestyle is achievable when your investment income surpasses your living expenses, granting you the financial freedom to forgo part-time work and enjoy the world’s greatest cities without the fear of financial constraints.

How to Achieve an Early Retirement Lifestyle

The concept of Fat FIRE was popularized by the Financial Samurai blog, starting in 2009 when the modern-day FIRE (Financial Independence Retire Early) movement was in its infancy. In the early days, a passive income of around $80,000 annually was considered sufficient for an early retirement. 

However, the distinction between regular FIRE and Fat FIRE became clear when the passive income reached $200,000 per year in 2017. Today, Fat FIRE means having an annual passive income exceeding $380,000, particularly essential in high-cost cities like San Francisco.

The Perks of Fat FIRE

Choosing the Fat FIRE lifestyle unlocks a realm of possibilities. In Fat FIRE, you can:

• Reside in Premium Cities: Live in the world’s most expensive cities, enjoying their rich cultural offerings, top-notch cuisine, vibrant nightlife, outstanding schools, arts, and favorable weather.
• Comfortable Living: Reside in a comfortable house with at least three bedrooms, two bathrooms, and even a yard for those with children, or a luxurious two-bedroom condo for those without kids.

• Education Funding: Ensure your children’s college education is fully funded.

• Luxurious Travel: Travel for extended periods, residing in 4 or 5-star hotels.

• Quality Transportation: Drive a safe and reliable car that isn’t older than five years.

• Financial Peace: Experience less anxiety about your children’s futures.

• Culinary Pleasures: Savor the finest foods like toro sashimi, wagyu steak, jamon iberico, caviar, and more.

• Healthcare: Afford top-tier healthcare, such as a gold plan or higher without subsidies.

• Supporting Your Parents: Provide for your parents’ financial needs, as a gesture of gratitude for their sacrifices.

• No Need for Spouse’s Work: Achieve financial independence for both partners or spouses.

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The Spectrum of Early Retirement: Fat FIRE vs. Lean FIRE

In contrast to Fat FIRE, there exists the concept of Lean FIRE, where individuals streamline their expenses to the bare essentials for survival. 

This minimalist approach may include living in a compact studio, van, or airstream, choosing not to have children due to cost considerations, or living in more budget-friendly regions. Some even opt for living abroad to reduce costs. It’s important to emphasize that Lean FIRE is a valid approach to retirement, focusing on frugality and personal freedom.

Barista FIRE: The Middle Ground

Sitting between Fat FIRE and Lean FIRE is Barista FIRE. In this scenario, early retirees take on part-time work or require their partner or spouse to work part-time or full-time to supplement their income and benefits. 

However, reaching the realm of Fat FIRE typically involves a progression from Lean FIRE. Fat FIRE is positioned at the far-right end of the early retirement spectrum, offering maximum financial abundance and freedom.

Now, how much do you need to achieve Fat FIRE?

If you aspire to live the Fat FIRE lifestyle in expensive cities like San Francisco, New York, Los Angeles, and more, certain wealth milestones need to be reached. These milestones, illustrated in a chart, are a practical guide for diligent savers and risk-takers who aim to enjoy financial abundance in retirement.

– Minimum Investment for Fat FIRE: To embrace the Fat FIRE lifestyle, retiring before the age of 40 is best achieved with a minimum of $3 million in savings. This is a reflection of economic changes and rising costs.

– Fat FIRE with Children: For families with children, a more substantial safety net of at least $5 million in investable assets is recommended to maintain a comfortable lifestyle while raising a family.

– The Ideal Path: Ideally, a net worth exceeding $10 million grants even more financial freedom. This level of wealth can potentially generate between $200,000 to $500,000 annually in passive investment income.

Example of a Fat FIRE lifestyle with children

To illustrate the possibilities of $200,000 in annual passive income, consider the case of Jerry, a 45-year-old with a non-working spouse and an 8-month-old daughter. Jerry and his wife, Linda, reside in Los Angeles and have a combined net worth of approximately $6.3 million. Their goal is to never return to full-time work and cherish family time, demonstrating that a Fat FIRE lifestyle is achievable for those who plan diligently.

Make Budget Adjustments: It’s important to note that budget adjustments are possible if times get tough. This could include reducing contributions to a child’s education fund or lowering food delivery expenses.

Supplemental Income: If more income is needed or desired, individuals with professional backgrounds can leverage their skills to earn supplemental income, ensuring their financial comfort.

The Quest for Permanent Fat FIRE

While $3 million can secure an early retirement, the goal for many is permanent Fat FIRE. In this scenario, having at least $300,000 in passive to semi-passive investment income is advised. This sum helps maintain a high-quality lifestyle, with inflation in mind.

Increasing Passive Income: To reach the coveted status of permanent Fat FIRE, efforts to increase passive income through investments, such as rental properties and real estate crowdfunding, are crucial. As investment opportunities expand, it becomes easier to secure the financial freedom desired.

The Need for Knowledge: Before embarking on an early retirement journey, a comprehensive understanding of the financial risks involved is vital to ensure a smooth transition into retirement.

Financial Samurai’s Focus: Financial Samurai, a prominent advocate of Fat FIRE, aims to assist readers in building substantial wealth through savvy savings and intelligent investments. While Fat FIRE remains the focus, the journey may encompass Lean FIRE, Barista FIRE, and Regular FIRE along the way.

Protecting Your Wealth: With your financial goals within reach, the emphasis shifts to protecting your wealth through diversified assets and smart asset allocation.

In pursuit of the life of your dreams, it’s essential to build wealth smartly and maintain it diligently. 

By accumulating wealth and having a solid financial plan, you can achieve the desired early retirement lifestyle, whether it’s Fat FIRE or one of the other FIRE variations.

Remember, you only have one life to live, so get smart about managing your finances and securing the future you envision.

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