How to Calculate Your FIRE Number

Your FIRE number is the amount of money you need invested to cover your annual expenses indefinitely. Once you reach this number, work becomes optional. The math is simpler than most people think. We will preface though, these are of course only some standard opinions on the subject. Everything is a work in progress, may require reviews and revision, but is a good back of the envelope starting point.

Examples at Different Spending Levels

If you spend $40,000 per year, your FIRE number is $1,000,000 (i.e. $40k x 25yrs). At $60,000 per year, you need $1,500,000 (i.e. 60k x 25yrs). For $80,000 annual spending, the target becomes $2,000,000 ($80k x 25yrs).

The multiplier of 25 comes from the idea that you can safely withdraw about 4% of a diversified portfolio each year without running out of money over a 30-year retirement. More on that in our post about the 4% rule. (Again, this is a starting point. 4% may or may not be enough depending on market conditions, your lifestyle, your life events and other factors).

Why Expenses Matter More Than Income

Your income determines how fast you can save. But your expenses determine how much you actually need. Someone earning $150,000 but spending $100,000 needs $2.5 million to retire. Someone earning $80,000 but spending $40,000 only needs $1 million.

This is why the FIRE community focuses so heavily on spending optimization. Every dollar you cut from annual expenses reduces your FIRE number by $25 in the case of the rule of 25.

Of course it is important to note that these are guidelines. Your expenses may be higher or lower in retirement. One can do everything possible to get as close to this estimate as possible, but best to consider possible outcomes as best as possible.

Adjustments to Consider

Early retirement may need a lower withdrawal rate. If you plan to retire at 35 instead of 65, your money needs to last 50+ years, not 30. Bill Bengen's 2025 research suggests withdrawal rates of 4.7% remain safe historically, but Morningstar's forward-looking 2025 analysis recommends 3.9% for new retirees. Some early retirees use 3.5% to be conservative, which means multiplying expenses by roughly 29 instead of 25.

Healthcare costs before Medicare eligibility. If you retire before 65 in the US, you need to budget for health insurance. This can add $500 to $2,000+ per month depending on your situation and location.

Social Security impact. If you plan to claim Social Security eventually, it reduces how much your portfolio needs to cover. Some people calculate separate FIRE numbers for pre and post Social Security phases.

Flexibility matters. Morningstar's 2025 research shows that retirees willing to adjust spending during market downturns can safely withdraw 5.7% or higher. Building flexibility into your plan provides significant margin.

How to Calculate Your Personal Number

1. Track your spending for at least 3 months, ideally 12 months
2. Identify your baseline annual expenses
3. Add expected changes (healthcare, housing, lifestyle adjustments)
4. Multiply by 25 for a standard calculation, or by 28 to 33 for more conservative estimates

The key is using real spending data, not guesses. Most people underestimate their actual expenses by 20% or more when they first start tracking. And once again, like most things, reality can change a lot from projections. So it is important to consider that that this is a guide, work with a professional, and be mindful for all outcomes.