FIRE & Retirement Planning

What is FIRE?

FIRE stands for Financial Independence, Retire Early. The core idea is simple: save and invest aggressively until your investment income covers your living expenses. At that point, work becomes optional.

But "FIRE" isn't one-size-fits-all. Different lifestyles require different targets, which is why Promi models five distinct variants:

The Five FIRE Variants

1. Regular FIRE

The standard formula: accumulate 25x your annual expenses (based on the 4% safe withdrawal rate). If you spend $60,000/year, your target is $1.5M. This assumes a 30-year retirement horizon and a diversified stock/bond portfolio.

2. Lean FIRE

For those willing to live frugally in retirement. Lean FIRE targets 25x of minimal expenses — cutting discretionary spending to the bone. Typical targets are under $40,000/year. The tradeoff is less financial cushion if unexpected costs arise.

3. Fat FIRE

The opposite of Lean — Fat FIRE means maintaining (or upgrading) your current lifestyle. Targets are typically $100,000+ per year in retirement spending. This requires a significantly larger portfolio but provides more comfort and flexibility.

4. Barista FIRE

A hybrid approach: you reach partial financial independence, then work part-time to cover the gap. The name comes from the idea of working a low-stress job (like a coffee shop) for benefits and supplemental income while your portfolio grows.

5. Coast FIRE

You've saved enough that compound growth alone will reach your retirement target — even if you never contribute another dollar. You still work, but only to cover current expenses. This is often the first FIRE milestone people hit.

Monte Carlo Simulations: Why One Number Isn't Enough

Traditional retirement calculators give you a single projected balance at age 65. The problem? Markets don't move in straight lines. A 7% average annual return can look wildly different depending on the sequence of good and bad years.

Monte Carlo simulation solves this by running your plan through 1,000 different market scenarios — each with randomized returns based on historical distributions. Instead of one number, you get:

• Success rate — what percentage of scenarios leave you solvent through retirement
• Confidence bands — p10 (pessimistic), p50 (median), and p90 (optimistic) outcomes
• Failure analysis — which scenarios fail and when, so you can stress-test your plan

A plan with a 94% success rate means 940 out of 1,000 simulated futures ended with money remaining. Most financial planners consider 85%+ acceptable and 95%+ conservative.

Tax-Smart Drawdown: The Order You Withdraw Matters

Most people have money spread across accounts with different tax treatments: pre-tax (401k, traditional IRA), Roth (tax-free growth), taxable brokerage, HSA, and tax-free municipal bonds. The order you draw from these accounts can save or cost you tens of thousands in taxes over a 30-year retirement.

Promi models five tax buckets:

1. Pre-tax — 401(k), traditional IRA (taxed as ordinary income on withdrawal)
2. Roth — Roth IRA, Roth 401(k) (tax-free withdrawals)
3. Taxable — brokerage accounts (capital gains tax)
4. HSA — Health Savings Accounts (tax-free for medical expenses)
5. Tax-free — municipal bonds, inherited Roth (no tax on withdrawals)

The general strategy: draw from taxable first (lowest tax impact), then pre-tax to fill low tax brackets, then Roth last (preserving tax-free growth). But the optimal order depends on your specific tax situation, which is why Promi models it per-scenario.

Social Security: When to Claim

You can claim Social Security as early as age 62 (reduced benefit) or as late as 70 (maximum benefit — roughly 76% more than the age-62 amount). For every year you delay past your Full Retirement Age, your benefit increases by about 8%.

Promi models the full SSA PIA formula using your 35 highest-earning years and shows you the projected monthly benefit at ages 62, 67, and 70 — plus how each claiming age affects your overall retirement success rate.

Getting Started

The best way to understand how all these pieces fit together is to see them with your own data. Promi's interactive demo includes pre-loaded retirement scenarios you can explore immediately — or connect your accounts to see projections based on your real balances and spending.