The FIRE number โ your Financial Independence, Retire Early target โ is the savings amount at which your investment portfolio can sustain your lifestyle indefinitely. Once you hit it, work becomes optional.
The Core Formula
The most widely used FIRE formula comes from the Trinity Study (1998), which found that a portfolio invested in stocks and bonds can sustain a 4% annual withdrawal for 30+ years without running out of money.
FIRE Number = Annual Expenses ร 25
This is simply the inverse of the 4% rule (1 รท 0.04 = 25).
Example: If you spend $50,000 per year:
- FIRE Number = $50,000 ร 25 = $1,250,000
Step 1: Calculate Your Annual Expenses
Start with what you actually spend โ not what you earn. Track 3โ6 months of spending across all categories:
| Category | Monthly | Annual |
|---|---|---|
| Housing (rent/mortgage) | $1,500 | $18,000 |
| Food | $600 | $7,200 |
| Transport | $400 | $4,800 |
| Healthcare | $250 | $3,000 |
| Utilities | $200 | $2,400 |
| Entertainment | $300 | $3,600 |
| Misc / buffer | $300 | $3,600 |
| Total | $3,550 | $42,600 |
FIRE Number at $42,600/year = $42,600 ร 25 = $1,065,000
Step 2: Choose Your FIRE Variant
Different lifestyles call for different targets:
Lean FIRE โ Minimal spending, typically under $40k/year. Lower target but less cushion.
Lean FIRE Number = Expenses ร 25 (with very low annual spend)
Fat FIRE โ Comfortable or luxury lifestyle, typically $80kโ$150k+/year.
Fat FIRE Number = Expenses ร 25 (high annual spend)
Barista FIRE / Coast FIRE โ Semi-retirement. You have enough invested that it grows to your full FIRE number without additional contributions, while part-time work covers current expenses.
Coast FIRE Number = FIRE Number รท (1 + growth rate)^years to full retirement
Example: Need $1M at 60, currently 40, assuming 7% growth:
- Coast FIRE = $1,000,000 รท (1.07)^20 = $258,419
Step 3: Account for Inflation
The 4% rule already accounts for inflation in most research, but if your expenses will change significantly (e.g., mortgage paid off, kids grown), model two scenarios:
- Conservative: Use 3.5% withdrawal rate โ multiply by 28.6
- Standard: Use 4% withdrawal rate โ multiply by 25
- Aggressive: Use 5% withdrawal rate โ multiply by 20
For most people targeting early retirement spanning 40โ50 years, the conservative approach (3.5% / ร28.6) is worth considering.
Step 4: Calculate Your Savings Rate and Timeline
Your savings rate determines how quickly you reach your FIRE number:
| Savings Rate | Years to FIRE (from zero) |
|---|---|
| 10% | ~43 years |
| 25% | ~32 years |
| 50% | ~17 years |
| 75% | ~7 years |
(Assumes 5% real investment return after inflation)
Formula to estimate years to FIRE:
Years = ln(FIRE Number / Current Savings ร r + 1) รท ln(1 + r)
Where r = annual investment return rate.
Step 5: Factor in Other Income
Reduce your required portfolio by capitalising any other income streams:
- Social Security at 62โ70: Subtract expected annual benefit ร 25 from your target
- Pension: Same โ annual pension ร 25 off your FIRE number
- Rental income: Annual net rent ร 25 reduces required portfolio
Example: You expect $12,000/year in Social Security:
- Reduce FIRE target by $12,000 ร 25 = $300,000
- New target: $1,065,000 โ $300,000 = $765,000
Tracking Progress to FIRE
Calculate your FI percentage:
FI% = (Current Net Worth ร Safe Withdrawal Rate) รท Annual Expenses ร 100
FI% = (Current Investable Assets ร 0.04) รท Annual Expenses ร 100
Example: $400,000 invested, $50,000 annual expenses:
- FI% = ($400,000 ร 0.04) รท $50,000 = 32% financially independent
Common Mistakes
Underestimating healthcare costs. Pre-Medicare healthcare is the biggest FIRE budget wildcard in the US โ budget $500โ$1,000/month per person as a conservative estimate.
Ignoring sequence of returns risk. A market crash in years 1โ5 of retirement is far more damaging than one in years 15โ20. Keep 1โ2 years of expenses in cash or bonds as a buffer.
Forgetting taxes on withdrawals. Traditional 401(k) and IRA withdrawals are taxed as ordinary income. Factor in effective tax rate when calculating sustainable spend.
Lifestyle creep after retirement. Travel, hobbies, and home projects often increase spending in early retirement. Build a 10โ15% buffer into your target.
Calculate Your FIRE Number Now
Use our compound interest calculator to model your portfolio growth path to FIRE, or our savings calculator to find how long it takes to reach your target.