FIRE glossary

The FIRE world has more acronyms than a government agency and more nicknames than a sports team. Here are 48 terms, each with a silly one-liner (in italics, for people who like their definitions with a side of nonsense) followed by the straight definition (for people who actually need it).

Educational only, not advice. Tax and health-care rules change; verify current figures with the IRS, HealthCare.gov or a qualified professional.

4% rule: The bridge Captain Compound walks across daily, built for 30-year trips. A guideline from historical U.S. data: withdrawing 4% of a portfolio in year one and adjusting that amount for inflation lasted at least 30 years in past periods. A planning anchor, not a guarantee. Read more.
72(t) SEPP: A vending machine that dispenses one flavor, on schedule, for years. Substantially equal periodic payments from an IRA or eligible plan, calculated by an IRS-approved method, that avoid the 10% additional tax before 59 1/2 if continued for the longer of five years or until 59 1/2. Read more.
ACA marketplace: The store where early retirees shop for health insurance and subsidies. The health insurance exchange created under the Affordable Care Act, where premium tax credits based on income may be available. Rules change; check HealthCare.gov or your state exchange. Read more.
Annual fee: The cover charge for the card club. A yearly fee charged by some credit cards. Worth paying only if the rewards and benefits you'd actually use exceed it by more than a no-fee card would earn. Read more.
Asset allocation: Deciding how many eggs go in which basket. The split of a portfolio among asset classes such as stocks, bonds and cash. It drives most of a portfolio's long-run risk and return. Read more.
Asset location: Putting each investment in the account where the IRS bothers it least. Placing investments in taxable, tax-deferred or Roth accounts according to how each is taxed. Read more.
Balance sheet (personal): A selfie of your finances, taken on one date. A statement of assets, liabilities and net worth as of a specific date. Read more.
Barista FIRE: Retired, but with a part-time job and probably a name tag. Covering part of your spending with investments and the rest with part-time or flexible work. Read more.
Bucket strategy: A castle with a cash moat. Dividing a retirement portfolio into near-term (cash), medium-term (bonds) and long-term (stocks) buckets to avoid selling stocks in downturns. Read more.
Cap rate: A rental's return before the bank gets involved. Annual net operating income divided by a property's price. Read more.
Capital expenditures (capex): The roof's secret plan to cost $15,000 all at once. Large, infrequent property expenses such as roofs, HVAC and appliances, usually budgeted as a reserve. Read more.
Cash-flow statement (personal): The movie version of your balance sheet. A record of money in and money out over a period, including saving and debt payments. Read more.
Cash-on-cash return: How hard your actual dollars are working in a rental. Annual pre-tax cash flow divided by the cash you invested. Read more.
Cents per point (cpp): Converting airline money into actual money. The value you get per reward point: cash price avoided minus fees paid, divided by points used, times 100. Read more.
Coast FIRE: Captain Compound drives; you just pay for gas. Having enough invested that growth alone could reach your FIRE number by a target age, so you only need to cover current costs. Read more.
Coast number: The amount needed today to start coasting. FIRE number divided by (1 + real return) raised to the number of years until target age. Read more.
Compound interest: Captain Compound himself. Cape included. Earning returns on previous returns, so growth accelerates over time. Read more.
Expense ratio: A tiny fee that compounds into a not-so-tiny fee. The annual cost of a fund, expressed as a percentage of assets. Read more.
Fat FIRE: Financial independence with the good snacks. Financial independence on a comfortable or generous budget. Read more.
FI ratio: Your progress bar. Investable assets divided by your FIRE number. Read more.
FIRE: Financial Independence, Retire Early. Or Recharge Eventually. A movement focused on saving and investing enough that work becomes optional.
FIRE number: The finish line, measured in dollars. The portfolio size needed to cover your annual spending, often estimated as 25 times spending. Read more.
Flamingo FIRE: Halfway there, then stand on one leg and relax. Saving roughly half a FIRE number, then downshifting to part-time work while the portfolio grows.
Geographic arbitrage: Giving your money a change of address. Living where your money goes further, while working or in retirement. Read more.
Guardrails: Bumpers for the bowling lane of withdrawals. Rules that adjust spending up or down when your withdrawal rate drifts outside a set range. Read more.
HDHP: A health plan with a large deductible and a secret identity. A high-deductible health plan that meets IRS requirements, which can make you eligible to contribute to an HSA. Read more.
HSA: The retirement account disguised as a medical account. A health savings account: deductible or pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Read more.
Index fund: Buying the haystack instead of looking for the needle. A fund that holds the securities in a market index, usually at low cost. Read more.
Inflation: The slow leak in every dollar's tire. The general rise in prices over time, which reduces purchasing power. Read more.
Lean FIRE: Financial independence with a coupon in every pocket. Financial independence on a deliberately modest budget. Read more.
Leverage: A double-edged spatula. Using borrowed money to buy assets, which magnifies both gains and losses. Read more.
Lifestyle creep: When your spending sneaks up behind your raise. Spending that rises along with income, which raises your FIRE number. Read more.
MAGI: The income number the health marketplace actually looks at. Modified adjusted gross income; for ACA premium tax credits it has a specific definition. Check current rules. Read more.
Minimum spend: The hoop a card makes you jump through for the bonus. The amount you must spend within a set period to earn a credit card sign-up bonus. Read more.
Net operating income (NOI): What a rental earns before the mortgage takes its bite. Rental income minus operating expenses, before debt payments. Read more.
Net worth: Everything you own minus everything you owe. The scoreboard. Total assets minus total liabilities. Read more.
One-more-year syndrome: The finish line that keeps politely moving. Repeatedly delaying retirement after reaching your goal, often out of fear. Read more.
Real return: Your return after inflation takes its cut. Investment return adjusted for inflation; using it keeps projections in today's dollars. Read more.
Rebalancing: Trimming the hedge that grew too fast. Bringing a portfolio back to its target allocation by selling what's overweight or adding to what's underweight. Read more.
Roth conversion ladder: A patient staircase to your own money. Converting traditional IRA money to Roth each year and withdrawing each conversion's principal after its five-year period. Read more.
Roth IRA: Pay tax now, high-five yourself later. An individual retirement account funded with after-tax money; qualified withdrawals are tax-free, and direct contributions can be withdrawn anytime. Read more.
Rule of 55: A side door that opens only at the right birthday. Penalty-free withdrawals from an employer plan after leaving that job in or after the calendar year you turn 55 (50 for certain public safety workers). Read more.
Safe withdrawal rate: How fast you can sip without draining the glass. The withdrawal rate expected to sustain a portfolio for a planned period under stated assumptions. Read more.
Savings rate: The lever that's on both sides of the equation. The share of income you save and invest. Read more.
Sequence-of-returns risk: Doctor Drawdown's favorite trick: showing up early. The risk that poor returns early in retirement, combined with withdrawals, permanently shrink a portfolio. Read more.
Slow FIRE: FIRE, but you stop to smell the roses. And maybe buy some. Pursuing independence at a gentler pace while enjoying life and flexibility along the way.
Transferable points: Currency with eight arms and a passport. Credit card points that can be moved to multiple airline or hotel loyalty programs. Read more.
Withdrawal order: Which jar you raid first. The sequence in which you draw from taxable, pre-tax, Roth and HSA accounts, which affects lifetime taxes. Read more.

Missing a term? See the FAQ or browse the guides.