How the FIRE Movement Works
- The 4% Rule: The foundation of FIRE is the "Safe Withdrawal Rate" (SWR). Studies show that if you invest your money in a mix of equity and debt, you can withdraw 4% of the initial portfolio value every year (adjusted for inflation) for 30+ years without running out of money.
- The 25x Target: Because of the 4% rule, your target FIRE corpus is mathematically exactly 25 times your annual expenses. If you spend ₹10 Lakhs a year, you need ₹2.5 Crores to retire.
- Income doesn't matter: Notice that your FIRE corpus target depends entirely on your expenses, not your income. Someone earning ₹50 Lakhs but spending ₹40 Lakhs will take decades longer to FIRE than someone earning ₹20 Lakhs and spending ₹5 Lakhs.
- The Accelerator: The only way to hit FIRE faster is to increase your Savings Rate. If you save 50% of your income, it takes roughly 15 years to reach FIRE starting from zero. If you save 70%, it takes less than 10 years.