Why Fat FIRE Might Be My Only Way Out

Freedom is fantastic, and Fat FIRE is one way to make your dreams come true.

What is Fat FIRE? Fat FIRE is a term that describes an early retirement lifestyle with a higher spending rate and, as a result, a higher net worth. Usually, Fat FIRE folks have a net worth of several million and spend close to $100,000 or more every year. 

Exactly how big a net worth? If you’re a follower of the Trinity study, a yearly spending rate of $100,000 a year means your net worth is probably in the neighborhood of $2.5 million. 

What we’re talking about here is financial freedom. 

When you reach financial freedom (also known as financial independence), you break through the “time” chains that bind you. Fat FIRE is a version of financial independence that allows more flexibility in how much is spent during retirement.

Having to go to work at a particular time, and complete specific tasks during the week restrict how you can use your available time. You might not have a choice. You’ve got bills to pay, and you might have a family to feed.

What if you can reach a spot where you could quit your job if you wanted to? Would you do it? How would you spend your time?

I’ve been thinking about what I would do if I no longer had a typical 9-5 job. It’s an interesting thought because there is a lot I love about what I do now.

After spending some time thinking about this concept, I realized what I want to do is not going to be cheap. I started to hear the term Fat FIRE recently. The idea is that you build up a large enough nest egg to not have to cut back on spending and live in a very urban environment. I think what we are working towards is Fat FIRE.

Can Fat FIRE help what you’re doing now?

Think about what brings you enjoyment and makes your heart flutter like a hummingbird. It’s a healthy way to figure out what you will do when you reach financial independence.

Below are some things I enjoy doing right now:

  • Solving problems
  • Spending time with my family
  • Planning the future, which can include activities, vacations, and finances
  • Building stuff
  • Having focused time to work on passion projects (like this blog)
  • Reading
  • Spending time with friends I connect with
  • Being active: working out, riding my bike, going for a walk, etc.
  • Cooking

What would I do with financial freedom?

Reaching financial independence would mean I become the master of my time, and I have 100% say in how I use it.

In addition to focusing on things I already like to do now, there are other things I would like to pursue. Some of them are not activities, per se, but they are changes nonetheless.

  • Not having to worry about getting paid
  • Traveling the world
  • Moving to a more walkable city
  • Not owning a vehicle
  • Downgrading our house and having less shit
  • Eating out more
  • Giving nice gifts to family and friends
  • Completing Zelda: Breath of the Wild
  • Reading more
  • Learning to enjoy nature and relax

And that is probably just the tip of the iceberg. And I hope to pursue some of these things before reaching financial independence.

Each of us has an inner dragon. What would this dragon do if it was unleashed?

Financial Independence Will Be Expensive

Looking at this list, I’m surprised at how much all of this will cost. Granted, some of these things cost nothing (or very little), but there are some big dollar bill items on this list.

Moving to a city in an urban environment that is walkable, will probably mean a higher cost of living. Traveling the world doesn’t necessarily have to be expensive, but plane tickets aren’t cheap. Going out to eat more means spending more on dining out. Purchasing more gifts for family and friends will drain my wallet.

All of this makes me wonder. Will our living expenses increase once we reach financial independence? How much of a nest egg will we have to build to generate a level of income that will support this lifestyle?

Fat FIRE vs. Lean FIRE: Defining Comfort

As I said, Fat FIRE is a term that describes a higher net worth and a higher level of spending lifestyle. Lean FIRE, on the other hand, is the opposite. Lean FIRE retirees spend significantly less each year than their Fat FIRE counterparts and have a lower net worth.

A common element I noticed once I started writing these thoughts down, was that we’re reducing the number of things we own, and the size, and focusing more on what will bring us value during this time in our lives.

Maybe we decide to move around or find a spot that acts as our base for long-term travel. Or perhaps we decide to move closer to our kids to help them out temporarily.

But the point is being able to change our plans, when we want, and having enough money to support our lifestyle.

The larger our nest egg, the more options we will have. I don’t want to be financially wasteful, but I also don’t want to feel like I am bound to be super frugal in everything we do. There is a time to be frugal and cut spending, but I dream about loosening up our budget when reaching financial freedom.

I don’t want extra space to store crap I will never use. We already have a large house full of shit we don’t utilize. We are beginning to change our habits, but I would like to simplify our lives even further once we reach financial freedom.

Let’s Look At The Numbers

If we assume we won’t have any debt, including a mortgage, I think the amount of money we will need to live on will be less than what we make now.

But how much money will we need to live this lifestyle?

That is a hard question. A big part of the equation is where we decide to live. If we can find an urban environment where we could be happy, that doesn’t have incredibly expensive real estate, we could live comfortable lives for much less money. But that is a big IF. Our options might open up if we look into cities outside of the US.

And we might decide to live in a cheaper location, that isn’t super walkable, to save money. It isn’t like there is any rule that says we can’t compromise.

For the sake of this article, let’s say bringing home $100,000/year before taxes, should give us enough options. Again, this assumes we are 100% debt-free. We might be able to do what we want for much less, and I hope to calculate a more exact number as time goes on.

$100k per year may end up not being enough money to live where we want to settle down. The biggest risk I see is how expensive real estate is in the larger cities. Prices easily get into the $1m price range. We’ll either have to have a larger nest egg, live in a smaller place, or find a different location.

Rule of 33

An article on Financial Samurai inspired me, titled “The Ideal Withdrawal Rate For Retirement Does Not Touch Principal“. I think he is probably a little more conservative with his retirement funds than me. There was a comment on this article that talked about the “Rule of 33”.

The “rule of 33” in this context is about multiplying the amount you want to pull each year by 33, and that is the size of your nest egg you want to shoot for.

You’ll often read about the 4% rule, and this is more conservative than that. Especially if you are retiring early, I think fudging lower on your estimates is a smart move.

$100,000 x 33 = $3.3 million

I haven’t thought too much about how the different retirement funds, plus “hopefully” having some income from social security when we reach that age, play with each other. But generally, this is the amount we are shooting for, with our after-tax investment accounts.

Combined with pre-tax retirement savings, hopefully, we will have more money saved up than $3.3 million.

$3.3 million is a large amount of money. But if we want to pursue everything on our list, I think this amount (plus a good amount in retirement savings) would provide us many options, plus the ability to leave an inheritance to our children.

I would rather set a higher number, and face the situation where we don’t spend as much as we think than run out of funds and have to go back to work. If I’m going to retire, I never want to have to enter the work-force, unless that is what I want to do.

The Passive Aggressive Investor has a great article that goes over how large your retirement fund needs to be, to pull in a certain yearly income with different percentages. I found it useful to see how changing the annual withdrawal rate changes the amount we should save. As pointed out in the article, you always have the option in adjusting how much you pull out every year.


The above amount is based on current dollars. But as time goes on, inflation is going to decrease the value of $1. In other words, the $3.3m amount above does not account for inflation.

Military Dollar has a great article that covers how to handle inflation when creating retirement estimates. Let’s assume we are shooting to retire in 20 years, that inflation will be 3%/year, and that we are hoping to bring in $100,000/year. Here is our equation:

$100,000 * 1.03^20 = $180,611 (rounded)

This means that if we want to live on what is about $100k today in 20 years, we really should shoot for $181,000/year. This changes the numbers quite a bit. Using the Rule of 33 above, this now comes to almost $6m! If we use the 4% rule, instead of the rule of 33 (which is what Military Dollar uses), that value comes to $4.5m.

These numbers make my head hurt. How the heck are we going to get anywhere near this amount? I’m not 100% sure, as we are just starting our FIRE journey. But I’m going to continue thinking about this as our net worth increases this year.

What if we can’t reach our goal?

Life happens, and priorities change. If we can’t hit our goal, are we doomed?

It might require us changing our plans. Or it might mean we have to work a normal job for longer. But it won’t be the end of the world. We are still early in our FIRE journey, and we currently don’t have a goal date set.

But there is a good chance if we continue to push hard, we might be able to hit our goal faster. Reaching our goal earlier could be from job raises or increasing our income from side hustles. Also, when our nest egg starts approaching large numbers, we also have the option of going heavy into real estate or investing in other passive income streams.

If, for example, this blog takes off (big IF there), that might generate additional income.

At this stage, we are still trying to figure out ways we can increase our income, and we aren’t intimidated by this large number. In fact, we are motivated to reach FAT FIRE.

Setting a general goal, even if you aren’t sure you can hit it, can help motivate you to optimize your time.

Life is More Than Money

A re-occurring idea that keeps on popping up in my articles is pursuing our financial goals shouldn’t sacrifice what matters most to us.

And money is not the most valuable thing we have.

This idea is an area I’m constantly fighting. I’m super passionate about making this blog successful through pure grit, but it is not more important than the relationship I have with Andrea and my two girls. I would do anything for them.

Sometimes I need to stop what I’m doing and do a “time check” to make sure I’m not focused too much on my passion projects. I’m a very passionate person and can get lost on what I want to focus on in a given moment. This passion works great when pursuing goals, but it can also sacrifice what matters most to me.

Sacrificing my relationship with Andrea and my girls is not worth reaching my financial goals.

What do you think about my plan in pursuing FAT FIRE? Am I shooting to spend too much during retirement?

11 thoughts on “Why Fat FIRE Might Be My Only Way Out

  1. I am feeling the same as you about so many of the points in the article. My life is inexpensive now, largely because of our routine. Our spending is well-tuned. When I retire, I plan to sell the house and travel the world for a few years. I will mostly be in inexpensive places, but I will be out of my element, so I won’t be spending as efficiently as I am now. All that is to say, I think my expenses will be higher than now, at least in the first few years.

    Don’t be too alarmed by numbers like $6 million. Remember that your nest egg will start to grow exponentially. $6M probably means just another 7 years after hitting $3M. By the time you hit $6M you might be piling on close to $1M per year.

    BTW, I think that $6M is probably more than you need

    1. Thanks, Perpetual Money Machine for your thoughts. I kind of think you are right in that $6M is probably more than we need. I’m hoping after we can start heavily investing or paying off the mortgage, that we can get a better idea in what we want. But I figure shooting for a larger number is safer than hitting a number that ends up being too low. Thanks for stopping by. 🙂

  2. As always, I really enjoyed this post. The 33x expenses “rule” is approximately a 3% (33.33333333 x is exactly 3%), 25x expenses is 4%, etc. studies using actual historical data and Monte Carlo simulations both suggest that 3% is “perpetual”. While we don’t know the future, based on historical and simulated data, it would theoretically last forever. Most suggest that 3.5%-4% is a reasonable starting point.

    The notion of safe withdrawal rates tends to focus on worst case, which is good. But, research also shows that 1 in 2 portfolios using a 4% withdrawal had more inflation adjusted wealth after 30 years of withdrawals and nearly 1 in 3 had portfolios valued at more than 200% (inflation adjusted) of their initial savings (Tharp, Derek. “Does Monte Carlo Analysis Actually Overstate Tail Risk In Retirement Projections?” http://www.Kitces.com).

    No one will draw down portfolios exactly at 4%. When the market is not doing well cut back on withdrawals. The portfolio will last much longer by just being mindful. I am not going to spam your blog, but I have a post on some of the background on the 4% withdrawal, if you are interested you can dm me for the link.

    The inflation issue is a non issue. Calculate what you need in today’s dollars and account for an inflation adjusted return (5-6%). This keeps it in your understanding of money today, but in reality your portfolio will be worth much more because the nominal gains will be larger, say 8% nominal. Try to also increase you contribution by a minimum of inflation as well. Just my thoughts for what they are worth.

    As always, I always look forward to reading your next post!


    1. Thanks for the kind words! I’m still wrapping my head around the math. What you mention makes total sense. I’m definitely going to DM for that link. You definitely have a deeper understanding of this math, and I’m looking forward to learning from you. 🙂

      I’d be curious how people actually handle figuring out how much to withdraw during retirement. For example, is this something they calculate at the beginning of the year, or month-to-month? I’m wondering if you just set a lower number like 3% if you could pretty much ignore what the market is doing and withdraw the same amount every month with little risk? I have doubts we will be able to hit that 3% number, at least for retiring “early”, so this is a good reminder that there are other options to consider if we don’t hit our high target.

      1. The safe withdrawal research (swr) did exactly what you suggest (e.g., Bengen 1994). It tried to determine the max withdrawal that would not deplete a portfolio over time using historical data. He basically used rolling time periods (e.g., 30 year). It is a counter factual analysis, asking what if I retired in 1929 and took 4% the first year and then inflation adjusted each subsequent year, would my money last 30 years. What if Imstarted in 1930, 1931, etc. looking across all rolling periods he suggested 4% was the SAFEMAX.

        Hence, regardless of market fluctuation, what if you would have withdrawn 3%, 4%, 5%, etc. it asked how long would the money last. Most years would sustain a higher withdrawal but there are some periods in US history (e.g., Great Depression) where a 4% would be the highest safe withdrawal that would not deplete the portfolio over a 30 year period. The research identified 4% as the amount that would sustain 30 year periods.

  3. Really interesting stuff Chris. Reading it though I wonder if part of the issue is that you’re looking at this in too abstract a way? Is it worth breaking this down to put together what you expect your FAT FIRE budget to be?

    So, for example, you have on your list you want to eat out in retirement. Cool. But how many times a week/month do you want to do that? How often do you go out to eat now? What sort of places? That’ll give you a better guess for that line item.

    Similarly nice presents for family and friends. Great. How many people is that? How much is each gift? What do you spend on them today?

    If you go through it line by line you can then see if $100,000 is reasonable, or too much, or two little. That will then give you a better number to multiply by 33 (or 25!). That in turn will help you to work out your savings rate and give you a sense of how long that will take.

    The beauty is that you can then iterate that to trade off the level of FAT in your FIRE (number of meals out, price of gifts etc), against saving/living for today, against time to hit FAT FIRE.

    Just a thought. You’re clearly very motivated though so I’m sure you’ll succeed however you approach it!

    Good luck!

    1. Great points all around! I love how you framed the question “how much FAT is in your FIRE?” I hope it ends up being less fat than is currently in my body, lol. Right now we have a $200/mo dining out budget, which equates to about going out to each once per week.

      Honestly, there are two aspects of our retirement that I think would contribute the most to increasing our expenses: where we live and how much traveling we do. I have a hard time ironing out how much money that would come to per month exactly, and I think this will require more research to figure out a more realistic FIRE number. I’m pretty confident though, even if we move to a more urban environment, we could figure out ways to reduce costs. I just don’t know how much. Which furthers your point that I’m probably being too abstract to be useful. I basically just came up with a number based on my gut and put my random thoughts in writing.

      I love your term How Much FAT is in your FIRE, that I think I am going to use that as a future article title that gets into the specifics. I’ll make sure to give you a backlink as credit for coming up with that term. That term is GOLD.

  4. I love this exploration. I’ve had similar thoughts and think we’ll end up landing somewhere between FIRE And FATFire. Some of it will just come down to how long we want to wait once we see a reasonable end in sight.

    In terms of the rule of 33 – I tend to think 3% is a little too conservative. If you haven’t, I highly suggest reading The Safe Withdrawal Rate series over at earlyretirementnow.com

    That series had a huge impact on my FI thinking, second only to JL Collin’s Stock Series. It’ll help solidify your thinking about what rate you’re comfortable using.

    Good luck on the journey – I look forward to following.

    1. Thanks for stopping by PFI! I’ll add those two articles that you reference to my reading queue. Yeah, I think you are probably right about the 3% number. I need to dig deeper into this thought process.

  5. I think that we might end up someway like what you are talking about here.
    FATFire is maybe one way of doing it.
    Looking at our spending (UK and estimated $ figures) we would struggle to spend less than $30,000 a year but don’t spend more than maybe $40,000 – excluding childcare.
    Our pensions look good but we can’t touch them for another 20 years and we don’t have 25x (or 33x) $30,000 available now. So work we choose – because it’s better in my mind for us both to work than to give that up and risk career uncertainty.
    Careeraholics? Maybe – but we are at the cusp of FI at the moment so who knows what way we’ll go in the future.

  6. I think there are some factors in your favor that will get you there. You are crazy articulate, just very readable. Communication skills like that are scarce and I think your income will increase way faster than inflation. Those were my strengths too and my income went way past my biggest expectations so achieving fat fire turned out to be not so hard. I loved my job and only retired slightly early which helped also but I doubt you will ever stop earning money. I’ve found it’s pretty easy to earn good money just side gigging one day a week even if you don’t need it and if you even earn just a little it drops that fat fire withdrawal rate a lot. Which drops that target amount a lot! I’d be shocked if you don’t surprise yourself with success.

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