The FIRE movement is based on a key insight: When you can retire is not based on your chronological age, but rather on a different number.courtneyk/iStockPhoto / Getty Images
When can I retire? It’s the number one question people have in the personal finance space and unfortunately, there’s no single answer.
The government believes that your retirement age is based on just that: your age. And 65 is the commonly accepted “default” retirement age when public pension systems like the CPP start paying out.
However, the Financial Independence, Retire Early – or FIRE – movement has another answer. FIRE is often depicted as a cult of frugality, but the real heart of the movement is based on a key insight: When you can retire is not based on your chronological age, but rather on a different number. We call this “the gap.”
Shorthand for “the savings gap,” the gap is the percentage of your take-home pay that you save each month. So, if you earn $5,000 a month and you consistently save $1,000 of that $5,000, you have a 20-per-cent savings gap.
That gap is the key to your retirement journey. The more you save, the faster you can retire. In our book Quit Like a Millionaire, we graphed the relationship between your savings gap and your time to retirement. Here’s what it looks like.
Along the horizontal axis are all the possible savings gaps you can have, from 0 per cent, in which you spend every last cent of your take-home, all the way to a theoretical 100 per cent, in which you save everything and somehow spend nothing.
Along the vertical axis is the number of years it takes to become financially independent. Lower is better, since that means you’d retire sooner.
And finally, the multiple lines represent different investment returns you’re getting on the money you’ve saved, ranging from a savings account paying 1 per cent all the way to an extremely aggressive stock-based portfolio earning 10 per cent. For a conservative investment portfolio built using low-cost index funds, it’s reasonable to use a 6-per-cent return.
There are a couple of interesting things to note about this relationship.
The first is that age does not appear in this chart - because it doesn’t matter. If you’re in your 50s but you’ve spent everything you’ve earned, you’ve made no progress toward retirement.
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Conversely, if you’re in your 20s and have a high savings rate of 50 per cent or more, you’re on track to retire decades earlier than the commonly accepted age of 65.
The second is that your income is also not on the chart. This means that having a high income is not the most important factor in when you can retire. Having a higher income definitely helps, but it’s only once piece of the puzzle.
We’ve met plenty of high-earning doctors who make more than $10,000 a month, but because their spending is so high, they still find themselves in financial trouble. Conversely, we’ve also met schoolteachers who have never made more than $50,000 a year yet are able to retire because they live in a low-cost city.
According to Statistics Canada, the median income for a couple with kids is $134,600, which translates to about $110,000 after taxes, and according to Wowa.ca, the monthly cost of living for a family of three in Toronto is $5,305 a month, or $63,660 a year.
This should translate to an average household savings gap of around 42 per cent. Yet in reality, the average Canadian household savings rate in 2025 is just 5.7 per cent.
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The main reason this happens is that as people earn more - they spend more. This may feel like a reasonable thing to do but this is why most people’s savings gap doesn’t get better even as they make more money.
That puts most Canadians on the side of this chart farthest to the left, where their retirement age is at minimum 40 years away. Assuming that these households start working at age 20, this puts their retirement age at 60 or older.
On the other hand, if you start early and you keep your savings rate high even as your career develops and your earnings increase, that’s when the math really starts to work in your favour. By keeping your expenses well-controlled, you are lowering how much money you need to have invested to support that spending.
At the same time, you’re socking away more money from each paycheque toward that goal. So, you’re moving the finish line closer while adding a tailwind to your back.
This can have a profound impact on your life. We live in Toronto, one of the most expensive cities in North America, but we made every spending decision with an eye toward maximizing our gap, like choosing to rent while others bought real estate, or choosing to ride the TTC instead of buying a car.
By doing this, our gap was around 70 per cent and we were able to retire by the time we hit 30. Our chronological age didn’t matter. The only thing that mattered was our gap.
The world of personal finance can seem confusing, but for those journeying toward financial independence, use the gap as your compass. It will never lead you astray.
Kristy Shen and Bryce Leung retired in their 30s and are authors of the bestselling book Quit Like a Millionaire.
