My priority is achieving financial independence rather than retiring early. The pace at which you pursue financial independence is your choice.
Use my interactive calculator below to find out your personal FIRE number!
(Investable assets needed to fund your retirement)
Breaking Down the Numbers #
Now that you have your FIRE number, let’s talk about what it means. The formula is based on the 4% rule, but we’ve made it flexible…
Understanding the 4% Rule (Might NOT be appropriate anymore) #
The 4% rule is a tried-and-tested withdrawal strategy developed by financial advisors William Bengen and later popularized by the Trinity Study. Here’s how it works:
- Starting withdrawal: You withdraw 4% of your invested portfolio in your first year of retirement.
- Adjustments: Each subsequent year, you adjust your withdrawal amount for inflation (typically 2-3% annually).
- Success rate: Historical data (1926-1995) showed this strategy had a 95% success rate of lasting 30+ years without depleting capital.
If your annual expenses are $60,000 and you withdraw 4% from your portfolio:
- Required portfolio = $60,000 ÷ 0.04 = $1,500,000
This is your FIRE number using the standard 4% rule.
The Math Behind Your FIRE Number #
The calculator uses this simple formula:
FIRE Number = Annual Expenses ÷ Withdrawal Rate
Annual Expenses #
Your total yearly spending. This should be realistic and based on:
| Category | Examples |
|---|---|
| Housing | Mortgage, rent, property tax, insurance, maintenance |
| Essentials | Utilities, food, transportation |
| Healthcare | Insurance, out-of-pocket costs |
| Lifestyle | Entertainment, travel, hobbies |
| Other | Miscellaneous and discretionary spending |
Many people overestimate their expenses in retirement. Consider tracking your current spending for 6-12 months to get an accurate baseline.
Withdrawal Rate #
The percentage of your portfolio you withdraw annually:
| Rate | Risk Level | Best For |
|---|---|---|
| 3% rule | Conservative | Early retirees (age 30-40); 96%+ historical success rate |
| 4% rule | Balanced | Standard retirement; 90-95% historical success rate |
| 5% rule | Aggressive | Those with other income sources or flexibility |
Personally I go for a rate around 3.5%. Check my SWR Calculator for more on this.
Additional Income #
If you have rental income, side business revenue, or pensions, you can reduce the portfolio withdrawal requirement accordingly.
Each $1 of additional annual income reduces your required FIRE number by $25 (using 4% rule).
Example: $30,000 rental income = $750,000 less needed in your portfolio!
Adjusting for Life Changes #
Your FIRE number isn’t static. Reassess it when:
| Life Event | Why Reassess |
|---|---|
| Major life events | Marriage, children, empty nest, health changes |
| Career changes | Significant income increase or decrease |
| Market conditions | Large market moves can affect your withdrawal rate sustainability |
| Expense changes | Relocating to a lower cost-of-living area, downsizing, or lifestyle shifts |
Beyond the 4% Rule: Advanced Considerations #
Sequence of Returns Risk #
One critical factor many investors overlook: the order of returns matters. You could have identical average returns but very different outcomes depending on when those returns occur.
Retiring right before a market crash is far riskier than retiring during a bull market, even if average returns are identical over 30 years.
Mitigation strategies:
- Build a 2-3 year cash buffer before retiring (especially critical for early retirees)
- Use a bond tent: Keep bonds/stable assets higher in early retirement years, gradually shifting to stocks
- Practice dynamic withdrawal rates: Reduce withdrawals in down market years, increase in strong years
Healthcare Costs in Early Retirement #
If you’re retiring before age 65, healthcare is a major expense often underestimated:
| Cost Type | Estimated Range |
|---|---|
| Individual/family health insurance | $400-$1,500+/month depending on age and coverage |
| Dental, vision, hearing aids | $2,000-$5,000 annually in later years (rarely covered) |
Get specific quotes from healthcare providers or brokers before locking in your FIRE number.
Inflation Adjustment #
The calculator shows nominal values, but inflation erodes purchasing power:
| Factor | Impact |
|---|---|
| Historical inflation | ~2-3% annually (recent years saw higher rates). Check for your country |
| Portfolio growth requirement | Over 30 years, 2.5% inflation means $60,000 → ~$125,000 needed |
| Real returns matter | 7% nominal return with 2.5% inflation = 4.5% real return |
When investing, focus on real returns (after inflation), not nominal returns.
Real-World FIRE Examples #
Example 1: Tech Professional, Age 35, Coast FIRE #
Profile:
- Current annual expenses: $80,000
- Current portfolio: $1,200,000
- Desired withdrawal rate: 3% (early retirement, conservative)
FIRE Number: $80,000 ÷ 0.03 = $2,666,667
Path to FIRE:
- Current portfolio can grow: $1.2M at 7% annual return = $2.4M in ~12 years (age 47)
- OR: stop working now, live on $36,000/year (3% of $1.2M), and work part-time/consulting to cover the gap
- OR: “coast” approach: invest for 10 more years without additional contributions; reassess at 45
Close to FI; coast FIRE or lean FIRE are realistic near-term options.
Example 2: Dual Income Couple, Age 40, Traditional FIRE #
Profile:
- Combined annual expenses: $120,000
- Combined portfolio: $2,500,000
- Secondary income (rental properties): $30,000/year
- Desired withdrawal rate: 4%
FIRE Number: ($120,000 - $30,000) ÷ 0.04 = $2,250,000
$2.5M > $2.25M required
Next steps:
- Verify tax implications of rental income and capital gains
- Plan healthcare
- Consider one spouse continuing work part-time for benefits/social security boost
Example 3: High-Expense Household, Age 50, Phased Retirement #
Profile:
- Annual expenses: $250,000
- Portfolio: $5,000,000
- Desired withdrawal rate: 4%
FIRE Number: $250,000 ÷ 0.04 = $6,250,000
Options:
- Extend work 3-5 years: Let portfolio grow; $5M at 6% = $6.7M in 5 years
- Reduce expenses: Lower to $200,000/year → FIRE number drops to $5M (achievable now)
- Phased retirement: One spouse retires at 50; other works until 55; combined income bridges gap
- Rental/alternative income: Develop passive income streams to reduce portfolio withdrawal
Action Plan: From Calculator to Reality #
Step 1: Calculate Your FIRE Number (Done!) #
Use the interactive calculator above with realistic assumptions.
Step 2: Audit Your Current Position #
| Audit Item | Questions to Answer |
|---|---|
| Net worth snapshot | Assets minus debts |
| Portfolio allocation | What % stocks/bonds/real estate? |
| Annual savings rate | Can you increase it by 10-20%? |
Step 3: Stress-Test Your Plan and Verify Your SWR #
Based on historical figures (last 150 years), make sure you’ve got a Safe Withdrawal Rate you feel comfortable with.
Stress-test scenarios:
- Market downturns: How would a 30% stock market crash affect your 10-year timeline?
- Longevity: Plan for living to 95 or 100, not just 85
- Healthcare scenarios: What if you need $10k/year in out-of-pocket medical costs?
Step 4: Optimize Tax and Investment Strategy #
Check the tax situation in your own country.
Step 5: Build Your Transition Plan #
| Retirement Timing | Key Considerations |
|---|---|
| Early (before 55) | Understand your healthcare situation, plan for longer retirement (40+ years) |
| Traditional (60+) | Check your Social Security situation |
| Phased | Define your “work vs. coast” timeline and income bridge |
Common Pitfalls to Avoid #
1. Underestimating Expenses #
Many retirees discover they spend 10-20% more than planned. Travel, gifts to family, and home repairs often exceed expectations.
Track current spending for a full year; add a 15% buffer.
2. Ignoring Sequence of Returns Risk #
A market crash in years 1-5 of retirement can permanently reduce your portfolio.
Keep 2-3 years of expenses in cash/treasury bonds before retiring.
3. Neglecting Healthcare Costs #
Healthcare inflation is high. Make sure you cater for this.
Budget $300-$500k for healthcare costs in retirement.
4. Over-Withdrawing in Early Years #
Inflation means you must withdraw more each year; starting too high leaves nothing for later.
Use a constant withdrawal with inflation adjustment (from your initial portfolio), not a fixed percentage that resets.
5. Failing to Adjust for Lifestyle Changes #
Retiring at 50 with an expensive hobby (travel, golf, boating) is very different from retiring at 65.
Test your lifestyle assumptions; take a trial retirement month.
When to Revisit Your FIRE Number #
| Life Event | Action |
|---|---|
| Major market downturn (>20%) | Review in 6-12 months; don’t panic-sell |
| Significant expense change | Recalculate immediately |
| Major life event (marriage, kids, inheritance) | Adjust plan within 30 days |
| Job loss or career change | Reassess income and timeline |
| Health diagnosis | Update healthcare cost estimates and longevity assumptions |
| Significant portfolio growth (>25%) | Celebrate, but don’t inflate lifestyle (“lifestyle creep”) |
Conclusion: Your FIRE Number Is Just the Starting Point #
Calculating your FIRE number is empowering—it gives you a concrete target. But FIRE is about more than math; it’s about intentional living, spending aligned with your values, and building the freedom to choose your time.
- Your FIRE number = Annual Expenses ÷ Withdrawal Rate
- The 4% rule is a solid starting point; adjust for your risk tolerance and timeline
- Check my SWR-Safe Withdrawal Rate Calculator for your number
- Plan for healthcare, taxes, and sequence-of-returns risk
- Revisit your plan annually or after major life changes
- Start now: every year you delay costs you 7-10 years of compounding