What is Fat FIRE? Pursuing Early Retirement With More Luxury

By Todd Kunsman

Financial Independence

Published on

Updated on

If you’re following FIRE (financial independence, retire early), you may be looking for a bit more luxury when the time comes to officially retire. 

While you might be okay with retiring early based on your current yearly income or on a frugal lifestyle, living with less may not appeal to you.  

It’s true, planning your retirement future based on minimal living expenses comes with some risk and quite frankly, might sound boring. 

So, what if there was a version of FIRE that allowed you to live an above-average lifestyle; with more than enough money while still retiring early?

Enter: Fat FIRE.

What Is Fat FIRE?

Fat FIRE is the pursuit of financial independence, retire early on more than the traditional living income. Instead, your goal is to aim for an upper-middle-class lifestyle when you retire so you have more luxuries and can be freer with your spending rate. 

Essentially, Fat FIRE allows you to enter retirement with fat pockets; living in a comfortable house with expensive holidays, affording top-notch healthcare plans, and perhaps even paying for your child’s college education or your parent’s living expenses. 


It relies on the same basic principles you’ll find in other forms of FIRE, by increasing your income and reducing your expenses.

But Fat FIRE places a large emphasis on how you manage your increased income, with a focus on high-yielding (and potentially high-risk) investments that offer higher-than-average market returns.

The lifestyle also advocates for multiple streams of passive income, which allow you to earn more without sacrificing your time. 

Fat FIRE example

For example; Fat FIRE assumes you’re living on an annual income of above $200,000. Using the 4% rule; means you’ll have saved and invested over $5,000,000 or more over the course of your working life. 

How much money is Fat FIRE?

The average American household spends just over $60,000 per year, which is where traditional FIRE would fall. However, to be considered Fat FIRE you would be budgeting for a minimum of $100,000 a year. Others will argue that Fat FIRE begins when you plan on spending $200,000 or more. 

The Fat FIRE number can vary pending on what your cost of living will be, where you decided to live, and how much money you plan on spending. But anything from $100,000 and up will traditionally be how much money you need for Fat FIRE. 

How to Calculate Your Fat FIRE Number

In order to calculate your FatFIRE number, you’ll have to work out your typical or desired monthly living expenses. Of course, this number will be unique to you, with a higher cost of living requiring more in retirement. 

Then, what you plan on doing with your money in retirement. Do you want a bigger home, to travel more, and treat yourself a bit more than traditional FIRE? If so, you need to factor this in to understand where your FatFIRE number lies. 

To figure out the amount of money you’ll need to have saved and invested, we’ll use the 4% rule. 

  • Work out your monthly living expenses, including any rent or mortgage payments, bills, and direct debits, transport, food, childcare, health insurance, entertainment, and whatever else you may be paying for. Times this by 12 to get your average annual expenses. 
  • Add in things you plan on spending on and doing. It won’t be exact, but it helps you build a cushion to know how open your spending will be in retirement. 
  • FIRE subscribes to the 25x Rule, which states that to retire early, you need a net worth or assets exceeding your annual living expenses by 25 times. So next, calculate your expenses x 25. This is the number you’ll need before deciding to retire.
  • You will then withdraw 4% of the amassed total per year for the rest of your life and should be able to live comfortably. 

For example, Jane and Paul want to have $225,000 per year to use for their living expenses and spending. Their Fat FIRE number is 25 x $225,000 = $5,625,000. This is what the couple would need to have in savings and investments in order to retire but live their Fat FIRE lifestyle.

The Pros and Cons of Fat FIRE

Like any strategy when it comes to your finances, you’ll find both pros and cons. Fat FIRE is no different, below are a few reasons why you might want to pursue this path and some disadvantages to consider as well. 

The Pros

A Very Comfortable Retirement

How would you feel, knowing you’ll never have to worry about money, ever again? For some, Fat FIRE equals financial freedom from the mental pressures of employment and daily stresses that come with paying bills or affording child care.

Avoid Burdening Family or Friends

It is common in some cultures for children to start paying for the expenses of their parents once they reach adulthood. With Fat FIRE, the money can otherwise be spent or invested to build a better lifestyle for generations. 

There’s Enough for Unexpected Expenses

In case something were to go wrong; for example, you experience a health scare or the stock market takes a hit, Fat FIRE has prepared your finances to last. Even if it means reducing your quality of life, and cost of living for a short period, the overabundance of cash you’ll have invested for Fat FIRE should make your retired life pretty fail-proof.  

Experience The Best 

Since you have amassed much more money, you can afford to live a more luxurious life in retirement. You can experience more things like different cultures when traveling, spend on food, nightlife, entertainment, afford the best schools, and live in more expensive locations. 

The Cons

Hard To Achieve

For many, financial independence through Fat FIRE is simply unachievable. It requires a high income and an incredibly disciplined lifestyle in order to save and invest enough to live on $100,000+ every year without working. Especially when you consider that 64% of Americans are not even prepared to retire by the traditional age. 

It May Be Too Late For You

As with any form of investing, the earlier you start the more your money has the time to compound. Investing and saving early gives you a greater probability that you’ll achieve Fat FIRE. Unfortunately, if you are 10 years off from retirement and only recently started serious contributions to your 401(k), it’s unlikely that you can achieve Fat FIRE without some serious multiple streams of income and savings rate.  

Working Longer and Earning More

One of the biggest problems with Fat FIRE is that it may not be possible for those on certain career paths, who either do not earn enough or maybe already work long hours. You may not have the time to set up a side hustle or find a way to earn passive income as easily. This can limit your ability to earn some substantial income to get you on the Fat FIRE path.  

More Difficult With A Family

It’s not impossible to achieve FIRE with a family, there are plenty who have done it. But it’s something to consider if you have kids that will be relatively young or a larger family to support. This increases your amount of expenses and living a Fat FIRE lifestyle will mean drastically increasing your FI number too. Definitely check out the Fat FIRE subreddit, lots of great questions and discussions that can help you learn more. 

How You Can Prepare For Fat FIRE

Having said all of that, there are several practical steps that you can take in order to make Fat FIRE more realistic. Here are some simple tips: 

  • Create a realistic budget, and stick to it. Perhaps a zero-based budget is best for you, with total control over every cent you spend and no room for impulse spending. 
  • Use compound interest to your advantage by starting as early as possible, and choosing investments or accounts that will maximize your assets. Being aggressive with your investments, savings rate, and diversifying will be critical to your Fat FIRE pursuit.
  • Create multiple passive income streams alongside your regular 9-5 to maximize your income. This might include creating digital download products, real estate investing, and dividends. 
  • Recognize the sacrifices that you’ll have to make now, to achieve Fat FIRE in the near future. Unfortunately, it’s not plain sailing; and you will likely have to live below your desired cost-of-living while you are preparing for retirement unless you earn an exceptionally high amount.  
Tools to help you on your Fat FIRE journey:
  • Personal Capital to monitor net worth, investments, spending, and more for free.
  • Blooom to monitor your 401k or IRAs. Get recommendations, catch hidden fees, and more for free.
  • YNAB or Savology. These budgeting tools can help you keep to a stricter budget, especially since Lean FIRE you need to keep your costs down.

Alternatives to Fat FIRE

Fat FIRE potentially can be a great option for you, but there are other types of FIRE that may fit your desires better. Interested in learning more? Below are the other common types of FIRE: 

  • Traditional FIRE

If you’re looking for a more aggressive savings and investment plan which means you aren’t required to supplement your income, traditional FIRE may be a better option. 

Perhaps you live frugally and won’t require as much income during retirement as the average American. In this case, Lean FIRE would be more well-suited.

CoastFIRE sees younger participants investing a large proportion of their income at a young age, so that they can stop investing while still working and achieving financial independence in the future. 

Similar to Coast FIRE, but instead you can retire early and work part-time to help cover a portion of your expenses. This lets you dabble in early retirement but still lets your investments compound.