How to Calculate Your FIRE Number

How to Calculate Your FIRE Number

Your FIRE number is the amount you need invested to cover your living expenses without working. The math is straightforward: take your annual expenses and multiply by 25.

Spend $40,000 a year? You need $1,000,000. Spend $60,000? You need $1,500,000.

The 25x multiplier comes from the 4% withdrawal rate. If you withdraw 4% of your portfolio annually, a portfolio of 25 times your expenses should last indefinitely based on historical market data.

Where the 4% Rule Comes From

Financial advisor William Bengen analyzed US market data from 1926 to 1992 and published his findings in 1994. He wanted to know what withdrawal rate would have survived every 30-year retirement period in that dataset, including those starting before the Great Depression.

The answer was about 4%. A retiree withdrawing 4% initially and adjusting for inflation each year would not have run out of money in any historical 30-year period.

More recent research suggests slightly lower rates may be appropriate. A 2023 Morningstar study recommended 3.8% given current market conditions. For early retirees planning 40 or 50 year retirements, many financial planners suggest 3.25% to 3.5% for added safety.

Why Savings Rate Matters More Than Income

This surprises most people. Someone earning $200,000 but spending $180,000 saves $20,000 per year and needs $4.5 million to retire. Someone earning $80,000 and spending $40,000 saves $40,000 per year and only needs $1 million.

The lower earner reaches financial independence faster despite making less money. They save more in absolute terms and need less to cover their lifestyle.

At a 10% savings rate, reaching financial independence takes roughly 51 years. At 50%, it takes about 17 years. The math favors those who can keep expenses low relative to income.

Try the Numbers Yourself

Our FIRE calculator lets you plug in your own income, expenses, and savings to see your personal FIRE number and timeline. You can adjust variables to see how changes affect when you might reach financial independence.

The calculator shows your FIRE number, years until you reach it, projected FIRE age, current savings rate, and a chart of projected wealth over time.

What the Number Does Not Account For

Your FIRE number is a target based on assumptions. Real life includes market volatility, changing expenses, healthcare costs, and unexpected events. Many people who reach financial independence maintain some flexibility through part-time work, adjustable spending, or other income sources.

The number gives you something concrete to work toward. Progress becomes measurable, and decisions about spending and saving have clear implications.

Calculator results are estimates based on assumed returns. This is educational information, not financial advice.