FIRE Strategy Using SIP
Definition
FIRE (Financial Independence, Retire Early) is a movement focused on extreme saving and investing (50-70% of income) to accumulate enough wealth to retire decades earlier than traditional retirement age. SIP is the primary tool used by FIRE aspirants in India to build this early retirement corpus systematically.
In Simple Words
The FIRE equation is simple: save aggressively, invest wisely (SIP), build a corpus of 25-30x your annual expenses, and live off the returns. If you spend ₹6L/year, you need ₹1.5-1.8 Crore to be financially independent. The higher your savings rate, the earlier you reach FIRE. At 50% savings rate, you could achieve FIRE in 15-17 years.
Real-Life Scenario
Kiran (28) earns ₹1.5L/month, expenses ₹60K/month. Savings rate: 60% (₹90,000/month) SIP allocation: ₹90,000/month in diversified equity Expected return: 12% CAGR Annual expenses: ₹7.2L → FIRE target (25x): ₹1.8 Crore (inflation-adjusted: ₹4.2 Crore at age 45) SIP of ₹90,000/month with 10% step-up at 12% return: By age 38 (10 years): ₹2.06 Crore By age 40 (12 years): ₹3.05 Crore By age 43 (15 years): ₹5.25 Crore Kiran can potentially achieve FIRE by age 42-43, retiring 17+ years early.
Key Points to Remember
Frequently Asked Questions
Test Your Knowledge
1 questions to check your understanding
What is the "25x rule" in FIRE?
Summary Notes
FIRE = Aggressive saving + disciplined SIP investing
25-30x annual expenses is the FIRE target corpus
High savings rate is more important than high returns
Multiple FIRE variants exist — choose what fits your lifestyle
Post-FIRE, use SWP for systematic income generation