If you were to rank the different types of FIRE, Slow FI is the lowest ranked type of financial independence retire early there is. Slow FIRE is more of a mental trick to help keep you motivated in saving and investing more without feeling too bad about your progress.
If you're Slow FI, you're far away from retiring early and achieving financial independence. In addition, you're likely working at a job you dislike and are desperately searching for more meaning. After all, trying to achieve financial independence usually means you're looking for a better life.
Coast FIRE is one rank about Slow FI. Coast FIRE simply means you've saved enough money at your age where your investments will eventually grow large enough to take care of you once you reach the traditional retirement age of 60+.
For example, you could claim Coast FIRE if you have $100,000 in your 401(k) at age 30. Without contributing another penny, if your $100,000 compounds at 8% a year, you'll end up with $1 million by age 60. If you're happy living off a 4% withdrawal rate, then you're good to go!
Coast FI Formula = Financial Independence Amount / (1 + Expected Growth Rate)^ Number Of Years Until Traditional Retirement Age
But there's really no difference between someone who is Coast FIRE and someone who works a day job and regularly saves for retirement. Coast FIRE is another term that was created for those still far away from financial independence.
What's going on with the invention of all these different types of FIRE?
The Evolution Of FIRE Since 2009
In 2009, I helped kickstart the modern-day FIRE movement with the launch of Financial Samurai. Since 2009, I have helped tens of millions of people reimagine what their lives could be like if they saved and invested early.
The first three years of Financial Samurai was me figuring out how to retire early and achieve financial independence. Once I retired at age 34 in 2012, I spent the next eleven years so far writing about living our best lives with the passive investment income that we have.
Achieving true financial independence, where your passive investment income covers your living expenses, is hard and takes a long time. Therefore, new definitions of FIRE have popped up to accommodate a FIRE practitioner's progress.
By changing my original definition of FIRE, these new FIRE definitions provide motivation to people who are a long way off from financial independence. Therefore, Slow FI is a good thing to encourage people to save more, invest more, and pay more attention to their finances.
Identifying as Slow FIRE is likely helping more people who eagerly want to FIRE feel more included. Because goodness knows it takes a long time to save and invest enough money to be truly financially independent. And when you feel more included, you tend to continue participating.
What Is Slow FI?
Slow FI is a mindset to help people who are a long way off from achieving financial independence to feel included. Imagine you're 38 years old and only 40% of the way to your FIRE target. At the pace you're going, you'll be around 55 before you achieve Lean FIRE.
Your FIRE net worth target equals your annual expenses multiple by a multiple of usually between 25 and 50. In other words, if you spend $100,000 a year, your FIRE net worth target is between $2.5 – $5 million.
Achieving a $2.5 – $5 million net worth is not easy, which is why most Slow FI people have much lower annual expenses and net worth targets. And reading articles about how $3 million is the new $1 million may also create anxiety for those trying to achieve financial independence as well.
Therefore, a more common annual expense for someone seeking Slow FI may be $40,000 a year, for a FIRE net worth target of $1 million to $2 million. It's below real millionaire status, but it's a more reasonable net worth target to achieve for Slow FI.
Being 40% of the way to your FIRE target at 38 years old means you're really slow on your path to achieving financial independence retire early, which by definition is a faster way to achieve financial independence. On the other hand, you're right on track to achieving traditional retirement, which is perfectly fine.
However, because people have a tendency to compare themselves to other people, claiming Slow FI is a way of normalizing FIRE toward the traditional retirement pace. This way, Slow FI is a way to include people in the FIRE community without feeling left out.
Slow FI Is Closer To Traditional Retirement Than Early Retirement
So much about building wealth and feeling wealthy is psychological. If we can adopt a strong money mindset, there's a greater chance of achieving financial freedom at an earlier age. Even if we can't retire by 40, or whatever earlier-than-normal retirement age, we can still feel good about our progress by identifying as Slow FI.
However, may I make a suggestion?
Instead of trying to make yourself feel better by saying you're Slow FI, just embrace the average worker in you! At least this way, you can accumulate more wealth and live a more comfortable traditional retirement lifestyle. There's no point trying to retire early to live in abject poverty.
If Slow FI can help you lead a more intentional life where you better maximize your time and optimize your money, then wonderful. If you feel left out and can find other like-minded people who also want to identify as Slow FI, then that's great too.
Just know that your financial independence journey is your own. And only you know the truth about whether you are truly financially independent or not.
Slow FI Financial Recommendation Chart
Below is a Slow FI chart I created to help motivate those to save more in their taxable and tax-advantaged retirement accounts. In other words, by age 40, a Slow FI practitioner will hopefully save $250,000 in their tax-advantaged accounts and $500,000 in their taxable accounts.
The guidelines below are also useful for those who what to be Coast FIRE or Barista FIRE. The idea is to build a larger taxable portfolio (including rental properties) to generate livable passive income before traditional retirement age.
Examples Of People Who Are Slow FI
Slow FI is almost like a euphemism to make you feel better about your financial progress. By adopting Slow FI, you give yourself permission to take the scenic route to financial freedom. Here are some people who consider themselves Slow FI.
Slow FI Example #1: Single Woman Escaping Trauma
At 35, Sherry quits her job and takes a long sabbatical. Three months later, she decides to relocate to Taiwan to teach English for $25,000 a year. Sherry has no significant other or children to leave behind.
Sherry wants to escape the trauma she experienced at work in America, and as a result, has adopted the Slow FI movement. See: Overcoming Money Trauma And Retiring Early With $600,000 To Live In Taiwan
Slow FI Example #2: Middle-Age Dad Who Is Exhausted
At 40, Bob is tired of saving more than 35% of his after-tax income. He's got $500,000, a wife, and a five-year-old. His dream of retiring by 45 to spend more time with his boy is not going to happen.
Bob is mentally fatigued and upset that he hasn't made more progress after discovering FIRE at 32. Instead, he lowers his saving rate to 20%, and finds a more flexible job that pays him 30% less.
Despite being an older parent, he can now spend more time with his son because he's found more balance. Slow FI has given him the permission to work less hard in his career for family. As a result, he's happier because his mental load is less.
Slow FI Example #3: Older Woman Who Discovered FIRE Late
At 52, Whitney discovers the entire FIRE movement late. Although she's always been frugal and saved for retirement, she read the WSJ bestseller, Buy This, Not That and realized she had much less wealth than the book's charts recommend for her age.
Whitney was initially feeling discouraged until she reached out to me for guidance. I told her that the charts in my book were to help motivate and not discourage. The figures are there to show you what you could have if you did “everything right” since a young age.
With decades left to go in her life, it was time for Whitney to get fired up to earn more, explore new opportunities, and save more. By adopting Slow FI and Coast FIRE, Whitney felt excited to start on her new FIRE journey.
Adopt A Healthy Relationship With Your Financial Independence Journey
By adopting Slow FI, you give yourself permission to take things easier, not work as hard, not save as much, and take your time finding what you really want to do. With less pressure to achieve financial independence, you feel mentally healthier. You are not retiring early and that’s OK!
If Slow FI can help you feel better about your financial journey, then great! Not everybody has the same tenacity or desire to achieve FI ASAP.
Just know that only you know the truth about your financial situation. If you can stop comparing your progress so much to others, you will find more peace and happiness on your FIRE journey.
Best of luck!
Recommendations To Achieve Financial Independence
Sign up with Empower, the best free tool to help you manage your finances better. With Empower, you can track your investments, see your asset allocation, x-ray your portfolios for excessive fees, and more. Staying on top of your investments during times of uncertainty is a must.
Pick up a copy of Buy This, Not That, my instant Wall Street Journal bestseller. The book helps you make more optimal investment decisions so you can live a better, more fulfilling life. You can pick up a copy on sale at Amazon today.
For more FIRE content, join 60,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009.Â