Exploring Fat FIRE: Achieving Early Retirement with Enhanced Lifestyle

You may want a little more luxury in your retirement when you follow FIRE (financial freedom, early retirement).

You may be able to retire early on the basis of your current income or a frugal way of life, but living on less might not be appealing to you.

Planning your retirement based on living expenses that are minimal is risky and, quite frankly, boring.

What if you could retire early and still live a lifestyle above average?

Enter: Fat Fire

Table of Contents
What is Fat FIRE?
How to calculate your Fat FIRE number
Fat FIRE: Pros and Cons
How to Prepare for Fat FIRE
Fat FIRE Alternatives
What is Fat FIRE?
Fat FIRE is a pursuit of financial freedom. Retire early with more than your traditional living income. You should aim to live an upper-middle class lifestyle in retirement so that you can enjoy more luxuries, and be able to spend less.

Fat FIRE is a retirement strategy that allows you to retire with a large amount of money. You can afford to live in upscale housing, take luxurious holidays, pay for top-notch health insurance, or even pay for your children’s education and your parents’ living expenses.


This method relies on the basic principles of other FIRE methods, which is to increase your income while reducing your expenditures.

But Fat FIRE puts a lot of emphasis on managing your increased income. It focuses on high-yielding investments (and possibly high-risk ones) that offer returns higher than the average market.

The lifestyle advocates multiple passive income streams, which allows you to earn without sacrificing time.

Fat FIRE Example
Fat FIRE, for example, assumes that you live on an income above $200,000. By using the 4% rule, you will have saved and accumulated over $5,000,000 over your lifetime.

What is the cost of Fat FIRE?
Traditional FIRE is defined as spending just under $60,000 annually by the average American household. To be considered fat FIRE, you must budget at least $100,000 per year. Some will say that Fat FIRE starts when you spend $200,000 or higher.

The number for Fat FIRE can change depending on your costs of living, where you decide to live and how much you intend to spend. The amount of money required for Fat FIRE is usually between $100,000 and $300,000.

Calculate your Fat FIRE number
You’ll need to determine your desired or typical monthly living costs in order to calculate the FatFIRE number. This number is unique to you. A higher cost of life will require more money in retirement.

What you want to do with your retirement money. You may want to buy a larger home, travel more and indulge yourself more than the traditional FIRE. You need to take this into account to determine your FatFIRE.

We’ll use a 4% rule to calculate the amount you’ll have to save and invest.

Calculate your monthly expenses. Include any rent or mortgage payment, bills and direct debits as well as transportation, childcare, health insurance and entertainment. Multiply this number by 12 to find your average annual expenditure.
Include things that you intend to spend money on. You won’t get exact figures, but you can build up a cushion so that you know what your retirement spending will look like.
FIRE adheres to the Rule of 25x, which states that in order to retire early you must have a net-worth or assets greater than your annual living costs by 25 times. So next, calculate your expenses x 25. You’ll need this number before you decide to retire.
Then, you will withdraw 4% per year of the total accumulated for the rest your life. You should be able live comfortably.
Jane and Paul, for example, want $225,000 per annum to cover their expenses and living costs. The number for their Fat FIRE is 25 x 225,000 = $5.625,000. The couple would have to save and invest this amount to be able to retire, but still live the Fat FIRE lifestyle.

Fat FIRE: Pros and Cons
You’ll find pros and cons to any financial strategy. Here are some reasons you may want to follow this path, as well as some downsides.

The Pros
Enjoy a Very Comfortable Retirement
What would it be like to never worry about money again? Fat FIRE is financial freedom for some. It means they can be free from the daily stress of paying bills and working.

Don’t burden your family or friends
In some cultures, it is normal for children to pay for their parents’ expenses once they become adults. Fat FIRE allows you to invest or spend the money in a way that will improve your lifestyle and future generations.

You’ll Have Enough Money for Unexpected Expenses
If something goes wrong, for instance, if you have a health scare, or if the stock market drops, Fat FIRE will prepare your finances so that they can last. If it means temporarily reducing the quality of your life and your cost of living, your retirement life should be pretty fail-proof.

Experience the Best
You can now afford to retire in luxury, as you have more money. You can afford to travel more, experience different cultures, enjoy nightlife and entertainment, go to the best schools, or live in a more expensive location.

The Cons
Hard to Achieve
Financial independence via Fat FIRE may be impossible for many. To save and invest enough money to live off $100,000+ per year without having to work, you need a high-income and a disciplined lifestyle. It is especially important to consider that 64% Americans aren’t even ready to retire at the traditional age.

You may be too late for this.
The earlier you begin investing, the longer your money will have to compound. Early investing and saving increases your chances of achieving Fat FIRE. If you’re 10 years away from retirement, and you only started contributing to your 401(k) recently, it is unlikely that you will achieve Fat FIRE unless you have multiple sources of income and a high savings rate.

Work Longer to Earn More
Fat FIRE may not be feasible for certain career paths. This is because they either don’t earn enough money or work too many hours. It may be difficult to find the time to start a side business or earn passive income. This may limit your ability earn a substantial income that will get you started on the Fat FIRE journey.

It’s More Difficult with a Family
There are many families who have achieved FIRE. It’s worth considering if you will have children who are relatively young, or a large family to support. It will increase your expenses, and a Fat FIRE life style will also dramatically increase your FI. Check out the Fat FIRE Subreddit. There are many great questions and discussions to help you learn.

How to Prepare for Fat FIRE
After all that, you can still take some practical steps to make Fat Fire more realistic. Here are a few simple tips.

Stick to your budget. You may find that a budget with a zero base is the best option for you. This will allow you to control every dollar you spend, and eliminate impulse purchases.
Compound interest can be used to your advantage if you start early and choose investments or accounts which will maximize your assets. Diversifying your savings, being aggressive with your investments and increasing your saving rate will all be key to your Fat-FIRE journey.
Maximize your income by creating multiple passive income streams. You can do this by creating digital downloads, investing in real estate, or receiving dividends.
You’ll need to sacrifice now to reach Fat FIRE soon. It’s not easy. You will have to sacrifice your current lifestyle in order to prepare for retirement, unless you make a high income.
You can use the following tools to assist you in your Fat FIRE journey.
Personal Capital allows you to track your net worth, investment, spending and much more.
Blooom can monitor your 401ks or IRAs. Free recommendations, hidden fees and more.
YNAB, or Savology. These budgeting tools will help you stick to your budget.
Fat FIRE Alternatives
There are many types of FIRE, and some may be better suited to your needs. Want to learn more? Here are some other types of fires:

Traditional Fire
Traditional FIRE is a good option if you want to save and invest more, but not have to supplement your income.

You may live more frugal and not need as much money in retirement as an average American. Lean FIRE is a better option in this situation.

Coast FIRE
CoastFIRE encourages young participants to invest a large portion of their income while they are still young, in order to achieve financial independence and stop working.

Barista Fire
You can work part-time and retire early, similar to Coast FIRE. This will help you cover some of your expenses. You can experiment with early retirement while still letting your investments grow.