FIRE number calculation
Key takeaways
04 · ideas- Your FIRE number = annual expenses × 25
- The 4% safe withdrawal rate is the foundation
- Cutting expenses is twice as powerful as earning more
- Coast FIRE lets you stop contributing early
Basic level
The essentials · 1 min
FIRE = Financial Independence, Retire Early. Your FIRE number is the portfolio size where you can live off investment returns forever — without touching the principal.
The formula is simple:
FIRE Number = Annual Expenses × 25
Examples:- Spend $40,000/year → need $1,000,000
- Spend $60,000/year → need $1,500,000
- Spend $80,000/year → need $2,000,000
The 25x rule comes from the 4% withdrawal rate — historically, withdrawing 4% per year from a diversified portfolio has lasted 30+ years in 95% of historical scenarios.
Intermediate level
How it applies · 2 min
How long will it take?
Your timeline depends on your savings rate — the percentage of income you save and invest:
| Savings rate | Years to FIRE |
|---|---|
| 10% | ~43 years |
| 20% | ~37 years |
| 30% | ~28 years |
| 40% | ~22 years |
| 50% | ~17 years |
| 60% | ~12 years |
| 70% | ~8.5 years |
Assumes 7% real return and current expenses = retirement expenses.
The cutting expenses lever: If you reduce annual expenses by $10,000, you (a) need $250,000 less in your portfolio AND (b) can save more each year. This is why FIRE practitioners focus more on spending than on income.
Coast FIRE: The point where your current savings, left to grow without additional contributions, will reach your FIRE number by traditional retirement age. Once you hit Coast FIRE, you only need to cover current expenses — no more aggressive saving required.
Advanced level
The math, step by step · 1 min
The math behind the 4% rule
The 4% rule comes from the Trinity Study (1998), which analyzed 30-year retirement periods from 1926–1995. A 50/50 stock-bond portfolio had a 95%+ success rate with 4% annual withdrawals.
Safe withdrawal rate formula:
For a 4% SWR: \text{Portfolio needed} = \frac{\text{Annual expenses}}{0.04} = \text{Annual expenses} \times 25
Sequence of returns risk: The order of returns matters more than the average. A market crash in year 1 of retirement is far more damaging than the same crash in year 15. This is why many FIRE adherents use a 3.5% or 3% rate for longer retirements (40–50 years).
Variable withdrawal strategies like Guyton-Klinger adjust withdrawals based on portfolio performance, allowing a higher initial rate (~4.5–5%) with guardrails that cut spending if the portfolio drops significantly.