FIRE FAQs | FIRE and investing basics

Frequently Asked Questions

FI/RE Basics

Is FI/RE for Me?

Investing FAQs

What is FI?

Financial Independence (FI) is the moment when you can cover your living expenses with your investment income. Most people invest through taxable brokerage or tax-advantaged retirement accounts. Some also invest in real estate and other assets.

What is the difference between FI and FI/RE?

FI/RE is just Finanical Independence with Retire Early included. While the concept of FI and FI/RE are the same (see definition above), FI/RE is the chosen acronym for those who are saving and investing towards the specific goal of early retirement.

What is a Savings Rate? How do I calculate it?

The Savings Rate is the percentage of your income that you don't spend. Think of your savings rate as your speed to Financial Independence (FI). Depending on your needs, you can go pedal to the metal or ease off the gas. You're still on the path even if you need to slow down. You can figure out your Savings Rate by using the Savings Rate Quiz.

What is a FI number? How do I figure that out?

This is your money goal - While there is no guarantee, your FI number can you a starting point to consider how much you may need to save and when you may be able to reach FI. You can figure out your FI Number by using the FI Number Calculator.

How much do I need to reach FI/RE?

People in the FI/RE community often set a goal amount of money by calculating their FI number. We can help you crunch the numbers here.

If I don't want to live on rice and beans, is FI/RE for me?

Everyone's version of FI/RE is different. This is not about living an obsessively frugal lifestyle; it's about making the right spending cuts for you. You can keep your expenses low without sacrificing your happiness! The key is to be mindful about what's essential and what's not. How you define those terms is up to you.

I live in a high cost of living city, is FI/RE for me?

It could be! FI/RE is about spending less and earning more (where you can). While housing is often one of the biggest challenges in a high cost of living city, earning power is often high as well. You may want to figure out if you want to live with roommates or find a a less expensive place to live. Check out our Spend Less or Earn More pages to see what else you can do.

I have a lot of debt, is FI/RE for me?

Debt can make you feel hopeless, but it doesn't have to stop you from achieving FI/RE. In fact, the tactics of FI/RE (spending less and earning more) can be quite effective for getting you out of debt. Check out our Tackle Debt page to learn more about strategies that could help knock out debt and work towards Financial Independence.

I have a family, is FI/RE for me?

Having a family doesn't mean you can't FI/RE. You might have higher expenses, but you can get there. Setting a family budget is a great way to ensure that everyone has what they need.

What is investing?

Investing is putting your money into something which you believe will increase in value. In the world of finance, it’s common to invest in stocks, bonds, cash equivalents—or funds that include these things. The value of your investments goes up and down for many reasons. In the last 50 years (based on historical data*) the stock market has grown at an average of 7% per year. If you are looking at a shorter-term investment, dips could have a much bigger impact on you because there is also risk of loss.

Do you have a 401(k) through your employer? If so, you're already an investor!

Where do I even start?

Head to the Invest Well page to see learn about some steps to consider!

Do I need to have a lot of money to start?

Absolutely not. Did you know that Fidelity offers investment funds and accounts with no minimum? Account minimums may apply to certain account types (e.g., managed accounts).

What are brokerage accounts?

Taxable brokerage accounts are general-purpose investment accounts. Once you have put money after taxes into this type of account, you can use that money to invest in a wide range of options with different risk and return profiles.

What are retirement accounts?

Retirement accounts—such as the workplace-based accounts 401(k) and 403(b), or the personal accounts IRA and Roth IRA—are types of investment accounts. But unlike non-retirment (taxable) investment accounts, these are tax-advantaged, meaning you can get a tax advantage when you put money in or take it out. (The details depend on the type of account.)

The hitch? Your money is generally not accessible until the age of 59½, unless you pay a penalty (usually 10% of what you remove). You’ll need to do the math to determine if a tax penalty is worth it for your situation.

What are the different types of retirement accounts?

Common types of retirement accounts are:

• Employer retirement accounts: In workplace savings accounts like a 401(k) or 403(b) you can contribute pre-tax dollars from your paycheck, and generally you pay taxes only when you withdraw money from the account. 401(k)s are offered by for-profit companies, and 403(b)s are from nonprofit or government employers. Often, the company you work for will provide an employer match (that's free money you don’t want to miss) for what you contribute.

• Individual retirement accounts (IRAs): This type of retirement account is one that you open for yourself outside of work. You can have an IRA in addition to, or instead of, an employer retirement account. Contributions to a Traditional IRA are not taxed on the way in (in the year that money is contributed) but are taxed when you take money out, whereas contributions to Roth IRA are made after tax but withdrawals are typically not taxed. Choosing which one is better for you comes down to eligibility and determining when you think your tax rate will be higher, now or when you will be withdrawing money.

Investing involves risk, including risk of loss.

Zero account minimums apply to retail brokerage accounts only. Account minimums may apply to certain account types (e.g., managed accounts).

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

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