FIRE

"Retire in your thirties or forties" sounds unrealistic to most people, and usually is — unless the saving rate behind it is extreme.

FIRE stands for Financial Independence, Retire Early. It is a personal finance movement, not a product or a scheme, built entirely around one idea: save aggressively enough, for long enough, and the accumulated corpus can support a person for the rest of their life decades before the usual retirement age.

The workbook's own definition: "FIRE — Financial Independence, Retire Early — is a personal finance movement, built around saving and investing aggressively during one's working years (often 50% or more of income) to accumulate a corpus large enough to become financially independent and retire well ahead of the conventional retirement age, sometimes in one's thirties or forties."

The workbook connects FIRE to the discussion of early retirement risk more broadly — the difference being that early retirement is usually forced by circumstance (poor health, job loss, inadequate savings), while FIRE is a voluntary, deliberately engineered version of the same challenge: funding a long retirement period out of a corpus built in a much shorter accumulation period than usual.

Ms Kapoor earns Rs 15 lakh a year after tax and decides to save 60% of her income — Rs 9 lakh a year — pursuing FIRE, well above what most retirement plans assume. She invests the bulk of it in equity, given her long expected time horizon and high risk tolerance in her twenties and thirties.

By channelling such a large share of her income into investments for 15–18 years, rather than the 25–30 years a conventional retirement plan assumes, she aims to accumulate a corpus large enough to be financially independent in her early forties — decades ahead of the conventional retirement age. The trade-off, which the workbook frames as the flip side of any early retirement, is a much longer retirement period the corpus then has to fund, and correspondingly less margin for error in the plan.

Chapter 1, in the section discussing the risk of early retirement (following the Advantages of Starting Early section), introduces FIRE as the voluntary counterpart to forced early retirement. Expect a definitional recall question — what FIRE stands for and its characteristic feature (a very high, deliberate savings rate).

• FIRE is voluntary; the workbook's broader "risk of early retirement" discussion is about involuntary early retirement (poor health, job loss) — the two are related but not the same concept.
• The defining feature of FIRE is the savings rate, described by the workbook as "often 50% or more of income" — not merely the goal of retiring early without that extreme savings discipline behind it.
• A FIRE retirement funds a much longer retirement period out of a much shorter accumulation period, which makes accurate corpus estimation and a conservative Safe Withdrawal Rate even more important than in a conventional retirement plan.