Glossary

FIRE terms, defined

33 terms used across this site and the wider financial independence literature, written to be understood rather than to be technically complete. Where a term deserves more than a paragraph, there is a link to the guide that covers it.

The core idea

The terms you need before any of the rest make sense.

FIRE: Financial Independence, Retire Early. A saving and investing approach aimed at accumulating enough invested capital that work becomes optional decades before conventional retirement age. The 'RE' half is optional in practice — many people who reach the number keep working, on different terms.
Financial independence: The state in which your investments can fund your living costs indefinitely without employment income. It is the actual goal; early retirement is one of several things you can do once you have it.
FIRE number: The invested capital you need to reach financial independence. Popularly 25× annual expenses; more accurately, the present value of your future spending over your actual retirement horizon, plus a buffer and any one-time costs you will fund after you stop earning. How to calculate your FIRE number →
Savings rate: The share of your take-home income you invest rather than spend. The single strongest determinant of how long financial independence takes, because it raises what you save and lowers what you need at the same time. Savings rate vs investment return →
Accumulation phase: The period during which you are adding to the portfolio. Market crashes are broadly good news here: your contributions buy more shares, and there is time for recovery.
Decumulation phase: The period during which you are withdrawing from the portfolio. The same crash is now genuinely harmful, because withdrawals convert temporary losses into permanent ones.

Withdrawal and safety

How a pile of capital becomes an income, and what can go wrong.

Safe withdrawal rate (SWR): The percentage of your starting portfolio you can withdraw in year one, rising with inflation thereafter, without exhausting the portfolio over a given horizon. Not a constant — it falls as the horizon lengthens.
The 4% rule: The finding that a 4% initial withdrawal, adjusted for inflation each year, survived nearly every historical 30-year period for a stock-heavy US portfolio. Inverted, it produces the 25× rule of thumb. It was never tested on the 40-to-50-year horizons early retirees face. The 4% rule and early retirement →
Trinity Study: A 1998 paper by three Trinity University professors that tested withdrawal rates across portfolio mixes and horizons using historical US returns, reporting success probabilities. The most commonly cited source for the 4% figure, alongside William Bengen's 1994 work.
SAFEMAX: Bengen's term for the highest withdrawal rate that would have survived the single worst historical period. A worst-case figure, not an expected one — which is why the median outcome under a 4% rule is dying with more money than you started with.
Sequence of returns risk: The risk that poor returns arrive early in retirement, when the portfolio is largest and withdrawals are locking in losses. Two retirees with identical average returns in different orders can have opposite outcomes. Sequence of returns risk →
Guardrails: A withdrawal system that sets bands around your target withdrawal rate and adjusts spending when the rate drifts outside them — cutting after bad markets, raising after good ones. Supports a higher starting rate than a fixed rule, in exchange for accepting variable income. Withdrawal strategies compared →
Bucket strategy: Splitting the portfolio by time horizon — cash for the next few years, bonds for the medium term, equities for the long term — so a market fall never forces you to sell equities to cover living costs.
Floor and upside: Funding non-negotiable spending from something market-independent (an annuity, a bond ladder, a pension) and discretionary spending from the portfolio. Trades expected value for the elimination of catastrophic outcomes.
Perpetual withdrawal rate: The rate at which a portfolio can be drawn indefinitely without depleting the principal in real terms — necessarily lower than a 30-year SWR, and the more relevant concept for someone retiring in their thirties.

Variants and milestones

The named points on the path, and what each one actually means.

Lean FIRE: Financial independence at a deliberately minimal spending level, often around 70% of current expenses. The fastest route out, with the least margin left for a bad decade. Lean, chubby and fat FIRE →
Chubby FIRE: Roughly 110–130% of current spending. Keeps meaningful discretionary spending in the budget, which is also what makes it more resilient — discretionary spending is what you cut when markets misbehave.
Fat FIRE: Around 150% of current spending or more. Usually reached by raising income rather than by raising the savings rate, because at a fixed income the required timeline becomes impractical.
Coast FIRE: The point at which your existing portfolio, with no further contributions, will grow into your full target by retirement age. You still need income to cover today's costs — you just no longer need to save. Coast FIRE explained →
Barista FIRE: Working part time or in a lower-stress role that covers current expenses while the portfolio finishes compounding. Named for taking a coffee-shop job for the health insurance; mathematically powerful because it removes withdrawals from the riskiest years. Barista FIRE explained →
Slow FI: Deliberately extending the timeline in exchange for a better present: shorter hours, sabbaticals, lower-paying but preferable work. An explicit rejection of optimising purely for the earliest possible date.
One more year syndrome: The pattern of repeatedly postponing retirement after reaching the number, usually driven by risk aversion or an unexamined attachment to the identity that work provides. A real phenomenon and a real cost.

Returns, inflation and mechanics

The arithmetic underneath every projection.

Nominal return: The return before adjusting for inflation — the number on your statement. Useful for tracking, misleading for planning.
Real return: The return after inflation, and the only one that funds spending. Calculated as (1 + nominal) / (1 + inflation) − 1, which is slightly lower than simple subtraction. Inflation and your FIRE number →
Present value: What a future stream of money is worth today, given a discount rate. The concept that makes a FIRE number calculable from first principles instead of from a multiple.
Compounding: Growth earning growth. The reason a decade of early saving beats two decades of late saving, and the reason the cost of reaching Coast FIRE rises every year you delay.
Contribution step-up: Increasing your monthly investment each year, typically in line with income growth. Modelling a flat contribution across a whole career materially understates most people's outcome.
Lifestyle inflation: Spending rising alongside income. Uniquely damaging to a FIRE plan because it both reduces contributions and raises the target — each extra dollar of permanent annual spending adds 25–30 dollars to the number.
Rebalancing: Periodically returning the portfolio to its target allocation by selling what has grown and buying what has not. Controls risk drift; in decumulation it also provides a rule for which assets to sell.
Glidepath: A planned change in asset allocation over time. The conventional version de-risks with age; research on early retirement suggests a rising equity glidepath through the first decade may perform better.
Expense ratio: The annual percentage a fund charges. One of very few return improvements available without taking on more risk: 0.65% of avoided fees compounds to a large share of a portfolio over forty years.
Emergency fund: Cash held outside the invested portfolio to cover unexpected costs. It matters more after retirement than before, because there is no longer income to rebuild it.
Committed vs discretionary spending: The split between costs you cannot cut (housing, insurance, debt service) and those you can. The honest measure of how much risk a plan carries — two identical budgets are not equally safe if one is 80% committed.

Put the terms to work

Most of these become concrete the moment you attach your own numbers to them. Thecalculator computes the FIRE number, coast number, implied withdrawal rate and real return from your own inputs, and themethodology pageshows exactly how.