Financial Independence Retire Early (FIRE) in Canada

What is FIRE?

The FIRE method (Financial Independence, Retire Early) advocates saving as much money as you can, as early as you can, so you can live off the profits of your investments without having to work — before the traditional retirement age of one’s mid-sixties.

Usually, that saved money goes into a long-term, low-yield, low-volatility investment account.

Then, due to the magic of compound interest, once that account hits a critical mass, FIRE investors can withdraw enough to sustain their lifestyles each year without making much of a dent in the total amount of the fund.

There are different types of FIRE, like LeanFIRE, FatFIRE, and BaristaFIRE.

They all boil down to cutting back on indulgences to reward an early retirement, but they vary in extremity.

LeanFIRE adherents live an ultra-spartan lifestyle, focusing on obtaining financial independence ASAP.

FatFIRE devotees allow themselves a few more pleasures and are okay with delaying the full rewards for a few years.

BaristaFIRE investors have the goal of semi-retirement and are okay with — or even prefer — to work part-time when they’re older.

Whether you choose to follow FIRE — and if so, which type you choose — will depend on how early you want to get to financial independence and how much you’re willing to give up right now.

Key Considerations Before Choosing the FIRE Lifestyle

If you’re trying this aggressively to retire early, it’ll come with a few tradeoffs.

1. How Much are You Willing to Give Up?

This is the first question most people have about FIRE.

Many of us save money every month.

Maybe you even max out your RRSP contributions.

But are you willing to make a more drastic change for the promise of early retirement?

Are you a big “foodie” or are you okay with eating simply? Depending on which FIRE method you go with, you may have to give up eating out almost entirely.

And when you do, prepare to think about how that bill could have grown as an investment 20 to 30 years down the road.

The same thinking can be applied to fashion, cars, housing — anywhere you can feasibly cut costs.

It’s a question of values here, and there are no wrong answers.

2. How Will Your Partner Handle This?

If you share your life with someone — never mind your finances — you’re going to want to discuss this decision with them.

Even if their bank account won’t be affected by your FIRE journey, it’s not exactly fun to share a bed with someone eating rice and beans three times a day.

Do you have kids? Will you have to scale back on Christmas gifts or after-school programs?

Do you split groceries? What if they want to grab a carton of ice cream, but you’re willing to let it go to get to FIRE sooner?

Are you going to cancel any planned vacations? What about future ones? Maybe your partner would instead maximize their time on beaches now, while they’re not old and wrinkly.

Seemingly basic questions that you settled long ago may need to be rethought if you’re going to embark on this journey.

3. How Old Are You, and When do You Want to Retire?

Compound interest is a magical thing.

A few paycheques invested early in life can turn into a small down payment on a Florida condo in retirement.

But the most significant returns come in the most prolonged time frames.

If you’re childless, single, and in your 20s, it’s a great time to start FIRE.

Your expenses are likely lower, and while you’re probably not making as much money as you will later in life, you can live cheaper than people with families to support.

Want to retire at age 45? Poke around a few investment calculators — you might be surprised at what’s possible.

If you’re middle-aged, the fact is that FIRE will be more difficult.

However, it’s far from impossible! Many FIRE investors started in their 30s or 40s — or even later — and achieved their financial independence dreams.

If you’ve always assumed you will retire at age 65 and shift into the senior citizen categorization, moving that up by a decade could be very appealing.

Don’t Forget!

You not only need to decide when to retire, but what you want out of retirement — will you be living it up in Europe, or travelling Southeast Asia in a camper van? Will you work part-time, or not at all? Different retirement plans will require different spending levels that your investments will need to sustain.

FIRE Isn’t Right for Everyone

If you’re unwilling to give up any luxuries you currently splurge on, you can rule out FIRE.

But if that’s you, you probably already knew that in the intro of this article.

FIRE is about more than throwing money into an investment portfolio whenever you can.

It’ll require a plan for how much you can cut back spending, how much to save, where to invest, and for how long.

If you’re not the budgeting type, try keeping track of your income and expenses for a few months before jumping into FIRE.

Consider whether you have an appropriate job for FIRE right now.

If you’re just making ends meet as it is, it might be hard for you to find fat in your budget to cut, and you might not be able to save enough for financial independence.

Also, think about your current debt and whether you can pay it down quickly.

Debt — especially if it carries high interest — is a common barrier to the FIRE lifestyle, as investing money usually won’t generate a more significant return than the financial drain of debt.

Finally, think about the other people in your life.

Will they learn to live with a more minimalist version of you, or will their happiness be drastically affected by your decision to spend less?

Financially independent lady relaxing in retirement

Frequently Asked Questions

  • What is the 4% rule in FIRE?
  • Is retiring at 55 a good idea?

Jack Hauen

Jack Hauen is a freelance writer and journalist. He has talked to full-time dungeon masters about how they made D&D their full time job, and explained the "crushing sadness" of the downtown Toronto renting experience. His reporting has appeared in Canada's top publications, including the Globe and Mail, Toronto Star and National Post.

If you meet him at a party he might try to explain the ins and outs of credit card churning but will not be offended if you slowly back away. When he's not lurking r/PersonalFinanceCanada, he can often be found in the Algonquin backcountry, already gassed after the first portage of the day.