How to Calculate Your FIRE Number (Step-by-Step Guide)
Your FIRE number is the most important calculation in your journey to financial independence and early retirement. It’s the magic number that, once reached, means you never have to work for money again.
In this comprehensive guide, we’ll walk you through calculating your exact FIRE number, understanding the assumptions behind it, and adjusting it for your specific situation.
What is a FIRE Number?
Your FIRE number is the total amount of money you need invested to generate enough passive income to cover your living expenses indefinitely without working.
Key Concept: Your investments generate returns that cover your spending while the principal remains intact — or even grows.
The Foundation: The 4% Rule
The 4% rule is the bedrock of FIRE calculations. It comes from the Trinity Study (1925–1995).
The Trinity Study Findings
The study found that retirees could withdraw 4% of their portfolio in the first year, adjust for inflation each year, and have a 95%+ success rate of not running out of money over 30 years.
Assumptions:
- 50–75% stocks
- 25–50% bonds
- 30-year retirement horizon
- 95%+ historical success rates
The 4% Rule Formula
FIRE Number = Annual Expenses × 25
The multiplier of 25 comes from: 1 ÷ 0.04 = 25
Example:
- Annual expenses: $50,000
- FIRE number: $1,250,000
With $1.25M invested, you can withdraw $50,000 in year one, then adjust for inflation.
Step 1: Calculate Your Annual Expenses
This requires honest accounting.
Method 1: Track Historical Spending
Review your last 12 months:
- Check bank + credit card statements
- Categorize all spending
- Sum it up
- Remove expenses that disappear in retirement
Categories to track:
- Housing
- Transportation
- Food
- Healthcare
- Entertainment
- Personal
- Miscellaneous
Method 2: Future Budget Projection
Project retirement spending:
Expenses that decrease:
- No commute
- No work wardrobe
- No retirement contributions
- Potential downsize
Expenses that increase:
- Healthcare
- Travel
- Home maintenance
Example:
- Current spending: $75,000
- Minus work/retirement costs
- Plus travel + healthcare
- Retirement spending: $75,000
Step 2: Apply the Basic FIRE Formula
FIRE Number = Annual Expenses × 25
Examples by Lifestyle:
| Lifestyle | Annual Spending | FIRE Number |
|---|---|---|
| Lean FIRE | $30,000 | $750,000 |
| Regular FIRE | $50,000 | $1,250,000 |
| Fat FIRE | $100,000 | $2,500,000 |
| Very Fat FIRE | $200,000 | $5,000,000 |
Step 3: Adjust for Your Situation
The 4% rule is based on a 30-year retirement. If you retire earlier, use a lower withdrawal rate.
Adjustment: Retirement Length
| Age | Years | Rate | Multiplier |
|---|---|---|---|
| 65 | 30 | 4.0% | 25x |
| 60 | 35 | 3.75% | 26.7x |
| 55 | 40 | 3.5% | 28.6x |
| 50 | 45 | 3.5% | 28.6x |
| 45 | 50 | 3.25% | 30.8x |
| 40 | 55 | 3.0% | 33.3x |
Example:
- Retiring at 45
- Expenses: $60,000
- Adjusted FIRE: $60,000 × 30.8 = $1,848,000
Conclusion
Your FIRE number is not fixed — it evolves as your life changes. The 4% rule is a great baseline, but adjust it for healthcare, taxes, and early retirement.
Ready to calculate your FIRE timeline?
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Frequently Asked Questions
What is a FIRE number?
Your FIRE number is the total amount of money you need invested to achieve financial independence. It's calculated by multiplying your annual expenses by 25 (using the 4% rule). For example, if you spend $50,000/year, your FIRE number is $1,250,000.
What is the 4% rule?
The 4% rule states that you can safely withdraw 4% of your investment portfolio in your first year of retirement, then adjust for inflation annually, without running out of money for 30 years. This rule is based on the Trinity Study analyzing historical market returns.
Is the 4% rule still valid in 2025?
The 4% rule remains a reasonable starting point, but many experts now recommend 3-3.5% for early retirement due to longer retirement periods, lower expected returns, and higher valuations. Conservative early retirees often use 3.25-3.5% withdrawal rates.
How long does it take to reach FIRE?
The time to FIRE depends on your savings rate. At 50% savings rate, it takes about 17 years. At 65% savings rate, about 10.5 years. The higher your savings rate, the exponentially faster you reach FIRE.