Fat FIRE is hands down the best early retirement lifestyle. It’s the epitome of financial freedom.
When you dream of early retirement, you imagine having maximum freedom and no constraints.
This means living anywhere you want, buying whatever you want, and doing anything you want (within reason) whenever you want without ever stressing about not having enough time or money.
Who wants to retire early from a six or seven-figure job just to stay home all day, stress about money, and live off beans and rice? Boring!
With Fat FIRE, you have the best of both worlds: control of your time and the means to enjoy the finer things in life.
The Rich Henry’s definition of Fat FIRE is being able to live your ideal lifestyle without ever needing to work means.
This mean you can afford all the comforts and luxuries of a top 1% earner if you want, and spend your valuable time with the people you love, doing the things you love.
Living a Fat FIRE lifestyle means money is no longer a stressor in your life, and you never have to take on “work” for the sake of money because you have enough investable assets that generate passive income to cover your best life’s expenses.
If you’re looking to maximize your freedom and experience life to the fullest with no constraints, Fat FIRE is your answer.
Early Retirement Lifestyle Choices
The early retirement game can be divided into difficulty three levels:
- Beginner: Lean FIRE
- Intermediate: Traditional FIRE
- Advanced: Fat FIRE
Each level-up gives you a boost in your early retirement lifestyle but requires more investable assets and passive income.
Lean FIRE Lifestyle
The Lean FIRE lifestyle is the easiest to achieve out of all three.
Lean FIRE is a minimalist lifestyle that gives you full control of your time but cuts expenses down to the bone.
This lifestyle is ideal for those who want to immediately retire from their jobs and don’t mind cutting back on their expenses and living like a college student, in exchange for freedom of their time.
You cannot afford to live in a place by yourself so you might have roommates, or you might try your hand at van life in order to keep housing expenses at a bare minimum.
You cannot afford the upkeep of owning a car so you take public transportation and bike around instead.
You also don’t go out to eat often or at all, instead choosing to shop for your own groceries in bulk and cook at home.
If you’re going to travel, you’re likely doing it on a backpacker’s budget, choosing inexpensive destinations and cutting costs wherever you can.
Speaking of travel, you might take advantage of geoarbitraging to lower your cost of living and stretch your dollar in lower-cost areas of the country or even internationally in South America, Eastern Europe, and Southeast Asia.
With Lean FIRE, you definitely want to make some side income in case unexpected expenses such as health issues pop up because there is very little wiggle room in your budget.
During times of economic instability, you may stress about not having enough money to sustain your early retirement and may have to find a part-time job to supplement the passive income from your investments.
If you achieve Lean FIRE using The Rich Henry’s optimal saving rate, then your fixed living expenses are 60 – 80% of your total spending.
Using a 4% rule of thumb, Lean FIRE will require you to have investable assets of ~15x – 20x your current total annual spending.
If your current total expenses are ~$40,000 a year, you can achieve Lean FIRE with ~$600,000 – $800,000 of investable assets to cover your basic cost of living, with the benefit of paying 0% in taxes!
With Lean FIRE, your main concern is only having enough investment income to cover your necessary living expenses such as food, housing, transportation, basic healthcare, and not much else.
Traditional FIRE Lifestyle
The next major level up is the Traditional FIRE lifestyle. This is the traditional idea of retirement that most people strive to achieve at the normal retirement age of 67.
Traditional FIRE is maintaining your current lifestyle from your passive investment income.
You’re essentially living a comfortable middle-class life, even though you’re secretly a millionaire!
You can afford to live in a modest house in a decent neighborhood, drive an average car that’s a couple of years old, go out to eat at casual restaurants every week and upscale restaurants for special occasions, and travel a couple of times a year domestically with one or two trips internationally.
You have all your basic living needs met but also have some discretionary money to pick and choose what you want to splurge on.
While you don’t need to make any side income, you might choose to supplement your investment income to give yourself more budget to splurge and give you a bigger cushion in your early retirement nest egg.
During bad economic times, you’ll watch your spending closely and make adjustments to make sure that you don’t run out of money and be forced to go back to full-time work.
Based on the 4% rule, Traditional FIRE will require you to have inevitable assets of ~25x your current total annual spending.
At ~$40,000 of expenses a year, you can achieve Traditional FIRE with ~$1 million of investable assets to enjoy the same lifestyle you had before retiring, and still benefit from paying 0% in taxes!
Fat FIRE Lifestyle
The Fat FIRE lifestyle is the most difficult to achieve and allows you to live your ideal life. Instead of cutting corners and trying to save money, at this level, you’re living large!
There’s very little that you can’t do (within reason) because you have enough money and all the free time to do the things you love, with the people you love, and enjoy the finer things in life.
If you want the amenities that come with living in the most expensive cities in the world, you can afford to get yourself a place in the middle of the action, just steps away from all the dining, entertainment, and cultural destinations.
If you want to give back to your parents for the sacrifices they’ve made to give you a shot at life, you can spend more time with them and provide them with the best care in their own retirement.
If you enjoy fine dining, you can eat at the finest 3 Michelin-star restaurants around the world. Enjoying tasty delicacies like king crab, Hokkaido bafun uni, A5 wagyu, bluefin otoro, beluga caviar, and freshly imported white truffles from Northern Italy.
If you like to travel, you can do it in comfort. Flying business or first-class on flights around the world, staying at luxurious 4 & 5-star hotels, and paying for convenience and experiences to have the best time possible in every city you visit.
When you get to Fat FIRE, you might find yourself “working” on a passion project or business that keeps you mentally stimulated while making you even richer so you can live an even fatter lifestyle!
While making money is nice, it no longer becomes a priority if you’re living a Fat FIRE lifestyle. You’re just trying to enjoy the time you have left and do the things that make you happy.
Which Lifestyle Do You Prefer?
There’s no doubt in my mind that all Rich Henry readers can achieve Traditional FIRE by the time they want to retire.
When you’re taking action to improve yourself and take control of your financial future, it’s impossible not to make progress toward your financial and life goals.
At the end of the day, only you know your own needs and desires in life.
There’s nothing wrong with any of these three lifestyles. They all give you back full control of your time which is the most valuable part of early retirement!
How much comfort, flexibility, and luxury you want in your early retirement life boils down to your personal desires and ability to accumulate a large enough investment portfolio to support your best life.
Flexibility Is Key
Being flexible is crucial for a successful early retirement.
The economy will plummet, the stock market will crash, and you will have unexpected expenses come up.
When you are no longer working, it’s best to have as big of an investment portfolio, a flexible withdrawal rate, and as many income streams as possible to give you the most amount of financial flexibility.
There’s no point in retiring early if you’re going to constantly stress about money!
Fixed living expenses are hard to cut, and impossible to get rid of completely. We all need a roof over our heads and food on the table.
Having a large discretionary budget in your retirement lifestyle allows you to scale back parts of your spending if you ever hit a rough patch.
You can trade business class for economy class flights, wagyu steaks for burgers, and cocktails for beer all day long until things get better! It won’t make too big of a difference to your happiness.
On the other hand, I bet you’re not going to be very happy if you have to sacrifice your family’s privacy by renting out rooms to strangers or giving up your apartment to move into a van! That’s a big drop in your quality of living.
Once you have a taste of a certain lifestyle, it’s very painful to downgrade. So it’s very important to maintain a steady retirement lifestyle that won’t change drastically if anything unexpected happens.
Reaching the fattest FIRE lifestyle that you can with the most amount of financial flexibility will help you weather any financial storm.
The Minimum Net Worth For Fat FIRE
Now for the fun part. How much money do you need for Fat FIRE?
Fat FIRE starts with $3 million or more in after-tax investable assets as a single individual.
Based on the 4% rule, this will provide roughly ~$120,000 of passive income a year, which is 2.4x the median individual income of $50,000 in 2023, or ~$10,000 a month.
With the current US 10-year treasury rates, that estimate sets a good starting point since you can earn a ~4% risk-free return.
If the interest rate environment changes or you have a different risk tolerance, assuming a range of 3% – 5% returns/withdraws would give you ~$90,000 – $150,000 a year of income.
If you’re on the older side, you can be even more aggressive with your withdrawal assumptions since you have less time to enjoy your money!
The beauty of Fat FIRE is that you have a lot of wiggle room to scale your expenses up and down depending on the interest rate environment and the health of the economy!
With ~$10,000 a month (and the benefit of lower taxes on investment income) as an individual, you can live a great lifestyle in most cities around the world.
Of course, some areas are far more expensive than others (think New York, Los Angeles, and San Francisco) and will have a big impact on how far your dollar goes.
Therefore, $3 million is the least amount you should have if you want to quit the rat race and live a Fat FIRE lifestyle.
Minimum Fat FIRE Net Worth For A Couple
For a couple to enjoy the Fat FIRE lifestyle, they should have at least $5 million together.
That will provide ~$200,000 of passive income a year to live your best life together, based on a ~4% return/withdrawal rate.
Or ~$150,000 – $250,000 a year based on a ~3-5% return/withdrawal rate.
Your cost of living as a couple doesn’t just double because there are cost savings (but also a tax penalty) for 2 people living under one roof.
While $5 million is the minimum for a couple to enjoy Fat FIRE, ideally they would have a couple more bucks in the bank to cover the additional costs if they want to raise a family.
It’s no lie that kids are expensive!
Living off ~$200,000 a year as DINKs is nowhere near the same lifestyle as a young couple with children.
Keep that in mind when you’re planning your Fat FIRE lifestyle and want to raise a family.
The Ideal Fat FIRE Net Worth
The ideal net worth for a Fat FIRE lifestyle is $10 million.
With this amount of investable assets, you have ~$400,000 a year in passive income to fund your best life if you believe in the 4% rule.
At this level, you are no doubt living a Fat FIRE lifestyle and do not have any real financial constraints because you earning a top 1% income and can spend every penny of it!
If you put in the hard work and effort to achieve Fat FIRE, now is the time to live it up and live paycheck to paycheck to enjoy your life to the max!
For fun let’s say you had $10 million to invest in late 2023 when a 30-year US treasury bond was yielding just over ~5%…
Now you’re looking at over $500,000 of risk-free income for the next 30 years!
Since the average American feels they’d need about $483,000 a year to feel rich, regardless of what goes on in the economy, you’ll go to sleep feeling rich for the next 3 decades knowing that a guaranteed fat interest payment will hit your account every 6 months.
Fat FIRE for life baby!
The Secret To Staying Rich
If you’ve worked your whole life to become rich, there’s no chance you’ll want to risk it all.
Once you’re rich, your focus will naturally shift to staying rich so you can enjoy the fruits of your labor for the rest of your life!
The secret to staying rich is taking less risk with a lot of money.
Remember that risk and return are always inversely correlated. The higher your returns, the more risk you’re taking, and vice versa.
Even though you can earn a higher return from the stock market, (i.e. giving you ~$2 million of additional gains due to the incredible outperformance in 2023) you are also taking the risk of losing millions of dollars from a crash in the stock market.
Investing $10 million in a risk-free treasury bond that guarantees you over ~$500,000 a year of income becomes a no-brainer when you’ve worked your entire life to build wealth.
At a certain point in your financial and life journey, protecting your investment portfolio and passive income streams becomes your priority, not earning maximum returns.
Even if we go back to a lower-interest rate environment due to a recession, at the very least your portfolio should still provide you with ~$300,000 until the economy recovers.
When you’re up, take some chips off the table and lock in your wins for life!
Shoot For The Moon
The Rich Henry is focused on helping readers shoot for Fat FIRE.
As a high-income earner, you have a unique opportunity to build great wealth through aggressive saving, smart investing, improving yourself, and taking risks.
Fat FIRE is no doubt the hardest early retirement lifestyle to achieve. For most people, it might be out of the question.
But you have a choice.
If you have the option to bet on yourself and have the drive to achieve Fat FIRE so you can unlock a life of freedom and comfort that most people can only dream about, why not go for it?
Don’t cut yourself short. You only have one chance to live the best life possible, why not shoot for the moon?
Along the way, Lean FIRE and Traditional FIRE will act as checkpoints on your road and set a minimum bar for your early retirement lifestyle.
People can argue all day if money can buy happiness, but there’s no denying that money can buy comfort and it can buy time.
Even if you fail to reach Fat FIRE at the end of your road, you’ll still be living an awesome early retirement lifestyle with full control of your time, and that’s what truly matters!