FIRE Glossary
30 essential FIRE terms — from Coast FIRE and the 4% Rule to Geo-Arbitrage and Roth Conversion Ladder. Definitions, worked examples, and how to apply each to your plan.
Showing 52 of 52 terms
FIRE
FIRE stands for Financial Independence, Retire Early, a lifestyle and savings strategy where you accumulate enough invested assets that work becomes...
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Coast FIRE
Coast FIRE is the point where your existing investments, left untouched, will grow to a full FIRE number by traditional retirement age, meaning you no...
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Barista FIRE
Barista FIRE is a semi-retired state in which your portfolio covers most but not all of your expenses, and you work part-time, historically at a job like...
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Lean FIRE
Lean FIRE is financial independence achieved at a frugal spending level, typically under $40,000/year per person in the US, or roughly the national median...
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Fat FIRE
Fat FIRE is financial independence designed around a comfortable or luxurious spending level, typically $100,000 to $250,000+ per year, requiring a...
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Chubby FIRE
Chubby FIRE is the comfortable middle ground between Lean and Fat FIRE, an annual spending target of roughly $80,000 to $120,000 per household, that funds...
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Safe Withdrawal Rate (4% Rule)
The Safe Withdrawal Rate (SWR), popularized as the "4% rule", is the annual percentage of a retirement portfolio you can spend in year one (then adjust for...
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25x Rule
The 25x Rule is a FIRE shortcut stating that your FI Number equals 25 times your expected annual expenses, the arithmetic inverse of a 4% Safe Withdrawal...
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Crossover Point
The Crossover Point is the moment when monthly investment income from your portfolio exceeds your monthly expenses, the tipping point after which your money...
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Geo-Arbitrage
Geo-arbitrage meaning: earn in a strong currency, spend where costs are low, and reach FIRE years sooner. Includes real estate strategy and examples.
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Early Retirement
Early Retirement means permanently leaving full-time paid work before the traditional age of 65, typically anywhere from the late 30s to the late 50s, ...
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Financial Independence
Financial Independence (FI) is the state in which your passive income from investments, rentals, and other non-labor sources fully covers your living...
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Passive Income
Passive Income is recurring revenue that requires little to no ongoing active work to maintain, dividends, interest, rental income, royalties, and capital...
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FI Number
The FI Number is the total invested-asset value required to sustainably cover your annual expenses indefinitely, the headline goal of any FIRE plan.
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Expense Ratio
An Expense Ratio is the annual fee a mutual fund or ETF charges, expressed as a percentage of assets under management, deducted silently from returns and...
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Sequence of Returns Risk
Sequence of Returns Risk is the danger that poor market returns in the early years of retirement will permanently impair your portfolio, even if the...
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Bond Tent
A Bond Tent is a retirement glide path where you temporarily raise your bond allocation around the retirement date, then gradually reduce it over the first...
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Roth Conversion Ladder
A Roth Conversion Ladder is a US tax strategy where early retirees annually convert Traditional IRA or 401(k) funds to a Roth IRA, paying income tax now at...
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Mega Backdoor Roth
The Mega Backdoor Roth is a US tax strategy that lets high earners contribute tens of thousands of after-tax dollars per year to a Roth account by exploiting...
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HSA for FIRE
A Health Savings Account (HSA) used for FIRE is a triple-tax-advantaged investment vehicle, tax-deductible contributions, tax-free growth, and tax-free...
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SEPP/72(t)
SEPP (Substantially Equal Periodic Payments), governed by IRS Rule 72(t), is a US provision that lets you withdraw from a Traditional IRA or 401(k) before...
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Rule of 55
The Rule of 55 is a US provision that allows penalty-free withdrawals from your current employer's 401(k), but not prior employers' plans or IRAs, if you...
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Die With Zero
Die With Zero is a retirement philosophy, popularized by Bill Perkins' book of the same name, arguing that maximum life utility comes from spending your...
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Sabbatical FIRE
Sabbatical FIRE is the practice of taking extended breaks from work, typically 6 to 24 months, funded by savings rather than a full portfolio, then...
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Mini-Retirement
A Mini-Retirement is a deliberately taken break of typically 1 to 12 months between jobs or careers, popularized by Tim Ferriss in The 4-Hour Workweek, ...
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Slow FI
Slow FI is a philosophy of pursuing Financial Independence at a deliberately unhurried pace, accepting a longer timeline to FIRE in exchange for a more...
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Flamingo FI
Flamingo FI is an FI strategy where you aggressively save to reach half of your full FI Number, then stop contributing entirely and let compounding alone...
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Coast Number
A Coast Number is the invested-asset balance that, left entirely alone and compounding, will grow to your full FI Number by a chosen target retirement age.
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FIRE Movement
The FIRE Movement is the global community and cultural phenomenon, primarily online, dedicated to achieving Financial Independence and Retire Early through...
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Mustachianism
Mustachianism is the FIRE sub-philosophy founded by Pete Adeney, aka Mr.
Read definition →Half FIRE
Half FIRE is the milestone of building a portfolio that covers roughly half your target annual expenses at a safe withdrawal rate, with part-time or...
Read definition →Cash Cushion
A Cash Cushion is a reserve of cash or cash-equivalents held outside your invested portfolio, sized to cover one to three years of living expenses,...
Read definition →Glide Path
A Glide Path is a pre-planned schedule for shifting a portfolio's asset allocation, typically from stock-heavy to bond-heavy or vice versa, over...
Read definition →Bridge Account
A Bridge Account is a taxable brokerage account built specifically to fund living expenses between an early retirement date and the age when...
Read definition →Savings Rate
Savings Rate is the percentage of after-tax income that a person saves and invests rather than spends, the single biggest lever in FIRE math...
Read definition →Rebalancing
Rebalancing is the practice of periodically buying or selling assets to return a portfolio to its target allocation, for example 80% stocks /...
Read definition →Net Worth
Net Worth is the total value of everything you own minus everything you owe, assets minus liabilities, the single number FIRE practitioners...
Read definition →Emergency Fund
An Emergency Fund is a cash reserve, typically three to six months of living expenses, kept in an easily accessible account to cover unplanned...
Read definition →Asset Allocation
Asset Allocation is how a portfolio is divided among asset classes, typically stocks, bonds, cash, and sometimes real estate, chosen to balance...
Read definition →Tax-Loss Harvesting
Tax-Loss Harvesting is selling an investment at a loss to realize a capital loss for tax purposes, then reinvesting the proceeds in a similar...
Read definition →Expat FIRE
Expat FIRE is pursuing or living out Financial Independence while based abroad as a long-term resident of a country other than your home...
Read definition →Schengen 90/180 Rule
The Schengen 90/180 Rule limits non-EU visitors to a maximum of 90 days inside the Schengen Area within any rolling 180-day window, counted...
Read definition →Tax Residency
Tax Residency is the country (or countries) that has the legal right to tax your worldwide income, determined by factors like days physically...
Read definition →183-Day Rule
The 183-Day Rule is the most common threshold countries use to determine Tax Residency, generally meaning that spending 183 or more days in a...
Read definition →Territorial Taxation
Territorial Taxation is a tax system where a country only taxes income earned within its own borders, leaving foreign-sourced income untaxed...
Read definition →Foreign Earned Income Exclusion (FEIE)
The Foreign Earned Income Exclusion (FEIE) is a US tax provision that lets qualifying Americans living abroad exclude a set amount of...
Read definition →Digital Nomad Visa
A Digital Nomad Visa is a residence permit that lets remote workers legally live in a country while working for employers or clients based...
Read definition →Purchasing Power Parity (PPP)
Purchasing Power Parity (PPP) is an economic measure that adjusts for cost-of-living differences between countries, showing how much a given...
Read definition →Cost of Living Index
A Cost of Living Index is a numeric score that compares typical expenses (rent, groceries, transport, utilities) across cities or countries,...
Read definition →Tax Treaty
A Tax Treaty is a bilateral agreement between two countries that determines which country has the primary right to tax specific types of...
Read definition →Totalization Agreement
A Totalization Agreement is a bilateral treaty between two countries that coordinates Social Security-style contributions and benefits,...
Read definition →Travel Health Insurance
Travel Health Insurance is a policy that covers medical costs incurred outside your home country, ranging from short-term trip coverage to...
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FIRE terms, explained
- What is geo-arbitrage?
- Geo-arbitrage means earning in a strong currency or high-paying market while living somewhere with lower costs. It can dramatically shrink your FI number, because the same lifestyle costs less in a cheaper location.
- What is Coast FIRE?
- Coast FIRE is when you have already invested enough that, with normal market growth and no further contributions, your savings will reach your FI number by traditional retirement age. You still work to cover current expenses, but you no longer need to save for retirement.
- What are Barista, Lean, and Fat FIRE?
- Lean FIRE means retiring on a modest, frugal budget. Fat FIRE means retiring with a generous budget and more comfort. Barista FIRE is a middle path where part-time or casual work covers some expenses, often for the benefits, while investments cover the rest.