The formula, and why it’s about expenses
FIRE number = annual expenses ÷ withdrawal rate. At the classic 4% rule, that’s 25 times your annual spending; at a more conservative 3.5%, about 28.5 times. Notice what’s not in the formula: your income. Two people earning $150,000 can be decades apart in reaching financial independence if one needs $80,000 a year to live and the other $40,000. This is why the FIRE community obsesses over the savings rate — it captures both sides of the equation at once.
Reading your “years to FIRE” honestly
The projection assumes a constant return, but markets deliver their average in lurches — a decade of boom, a brutal correction, sideways years. Treat the year shown as a central estimate with a margin of several years either way. Two habits make the estimate more robust: use a real return (nominal minus inflation) with today’s expenses, and rerun the numbers once a year rather than steering by a date fixed years ago. And for the largest expense shock — housing — a paid-off home effectively cuts your required expenses, which cuts the target by 25× the saving: see the rent vs. buy calculator and early payoff options.
Frequently asked questions
What is a FIRE number?
The size of the investment portfolio at which withdrawals can cover your living expenses indefinitely — the point where work becomes optional. The standard formula is annual expenses divided by your safe withdrawal rate: at the classic 4%, that’s 25× annual spending. Spend $40,000 a year, and your FIRE number is $1,000,000.
Where does the 4% rule come from?
From the Trinity study (1998) and William Bengen’s earlier work: historically, a portfolio of stocks and bonds survived at least 30 years of inflation-adjusted 4% withdrawals in the vast majority of historical periods. It’s a planning benchmark, not a guarantee — early retirees with 50-year horizons often use 3.5% (about 28.5× expenses) for extra margin.
Why do expenses matter more than income?
Cutting spending works twice: it increases what you save each month AND shrinks the target itself. Every permanent $100/month you cut from expenses removes $30,000 from your FIRE number at 4% — while adding $100 to your monthly investing. No raise works that hard.
What is Coast FIRE?
The point where your existing portfolio, left alone with zero new contributions, would compound to your FIRE number by traditional retirement age. Reaching Coast FIRE means you only need to earn enough to cover current expenses — a popular midpoint goal that removes most career pressure decades early.
Does this account for inflation?
Use a real (inflation-adjusted) return — 7% nominal minus ~3% inflation ≈ 4–5% real is a common conservative choice, though this calculator defaults to 7% as many planners use nominal figures with today’s expenses. If you use a nominal return, remember your expenses (and thus the target) will inflate too. Real return + today’s expenses is the cleaner mental model.