Imagine being able to retire early.
Sounds terrific, right?
But then think of it a year later, when all those home or personal projects are done, and now you have nothing to do and no one to talk to during the day.
Not so wonderful now.
Enter Barista FIRE—another lifestyle variation from the Financial Independence Retire Early (FIRE) community.
Achieving FIRE is when when you achieve financial independence (FI) or when you’ve got enough passive investment income to cover your living expenses. Then you get to retire early (RE).
What is Barista FIRE?
Barista FIRE refers to a lifestyle where you’ve hit a version of your FIRE number, but you continue to work part-time.
The Best Barista FIRE Version
In this version, you’ve hit your FIRE number, and your portfolio can cover all your living expenses. You work for social reasons to get out of the house and into the world. Or you work for fun, for that next beachfront rental. The money you earn is over and above what you need—for the luxuries in life.
The Original Barista FIRE Version
The original concept was that even when you hit FIRE, you’d want to get a part-time job to cover health insurance (until Medicare kicks in) because it’s so expensive. It’s called Barista FIRE because Starbucks was one of the top employers who offered health insurance to part-time workers.
The Basics Buffer Version
You’ve hit a FIRE number that pays for your basic living expenses, and then you work part-time for the discretionary costs. Passive income pays for the necessities in life, like housing and food. You work for the comforts, or the wants in life, like streaming video services and restaurant meals.
The Halfway Version
You haven’t yet hit FIRE, and your passive income only pays for half your living expenses. You need to work part-time to earn the second half. There’s a vast difference here. I’d only consider this a temporary solution since this path may mean you could never fully retire.
Who Is Barista FIRE For?
The best version of Barista FIRE is for people who’ve reached FIRE. They want to work part-time to cover extras or build extra financial padding against the risks in life.
You could also use Barista FIRE as a temporary measure. For example, you could draw down your portfolio to cover a part of your living expenses while you look for a better job or build a small business.
How Do I Calculate My Barista FIRE Number?
Your FIRE number is equal to your Current (or Expected) Expenses x (1/”safe withdrawal rate,” which is between 3-4%,)
If your annual living expenses are $45,000 and you use a 3% withdrawal rate, your FIRE number would be $1,500,000.
$1,500,000 = $45,000 x (1/.03)
The lower the safe withdrawal rate you use, the more conservative your FIRE number is.
The number you use for living expenses would depend on how much you plan on working. For example, if you planned on working part-time to qualify for employer-paid health insurance, you wouldn’t include health insurance in your living expense number.
You can see how for every $1,000 less in expenses, or every $1,000 more in income, you need $25,000 less in your FIRE number! (using a 4% withdrawal rate). That’s the appeal of earning some income or lowering your expenses—it reduces the portfolio you need.
What Are the Risks of Barista FIRE?
If you’ve hit FIRE and can cover all your living expenses, there are no real risks here, instead only benefits.
Working for health insurance isn’t ideal, but far better than the danger of going without!
If you are Coast FI, then plan on Barista FIRE, you’ll start to draw down your portfolio. But taking money out will reduce your return and will mess up your Coast FI number. Remember, in Coast FI, the magic happens when you let the money grow without touching it.
This approach done wrong could put you on a treadmill of having to earn part-time income forever or until you reduce your cost of living. Even if you can live off your portfolio with part-time work, you won’t be growing that portfolio. FI is just another way of saying able to retire, and please give yourself that option.
Another significant risk is thinking that a part-time job you rely on for your living expenses will be fun. Jobs are still…jobs. Anything that you have to do will have a different “flavor” than something you want to do.
What Are the Benefits of Barista FIRE?
Instead of waiting for “official” FIRE, this is a more accessible version. You could begin to live off your portfolio and work part-time for health insurance until Medicare kicks in. Then once you’re eligible for Social Security (if it’s still there for us), it’s a bonus.
If you hate your job or have a super-stressful job, knowing you could leave your job and have your portfolio cover part of your living expenses could be a huge relief. Using Barista FIRE as a temporary measure makes sense here.
The benefits of working part-time are incredible. You get flexibility. When the money part isn’t essential, work can be fun.
Plus, every bit of money you earn part-time reduces how much you need to withdraw from your portfolio, saving more for later.
I’ve written more about the benefits of semi-retirement (same concept as Barista FIRE) if you want more.
Barista FIRE Serves Up a Great Lifestyle if You’ve Got the Beans
Barista FIRE or working part-time avoids the lack of purpose or sense of isolation that can ruin early retirement.
Like semi-retirement, it’s a middle ground that’s healthy for you mentally and emotionally. It gives you more opportunities for social interactions.
If this sounds interesting to you, here’s the top 5 things to explore for a successful semi-retirement.