How to Calculate Your FIRE Number for Early Retirement
A step-by-step guide to determining your annual living expenses, applying the 25x rule, adjusting for different withdrawal rates, and calculating your timeline to FIRE.
Start With Your Annual Living Expenses
Your FIRE number is based entirely on how much you need to spend each year in retirement. This makes your annual living expenses the most important input — and the one most within your control.
Review your last 12 months of actual spending across all categories: housing, food, transportation, healthcare, insurance, entertainment, travel, subscriptions, and everything else. Use bank and credit card statements to get real numbers rather than estimates.
Adjust this baseline for how your spending in retirement will differ from today. You may eliminate commuting costs. Children may be financially independent. You might increase travel spending. You may relocate to a lower-cost area. Build your retirement spending budget around the life you actually plan to live, not a generic percentage of current income.
Apply the 25x Rule
Multiply your estimated annual retirement spending by 25. This gives you your FIRE number — the portfolio size needed to sustain indefinite withdrawals at the 4% safe withdrawal rate.
The math: a 25x portfolio at 4% annual withdrawals equals 100% of annual expenses covered each year. The 4% rate has historically sustained portfolios for 30 or more years based on diversified stock and bond portfolio returns over the entire history of the US market.
Write this number down clearly. It is your target. Everything in your financial life between now and that number is working toward this goal.
Adjust for Different Safe Withdrawal Rates
The 25x multiplier corresponds to a 4% withdrawal rate. If you are planning an early retirement and expect to be retired for 40 or 50 years rather than 30, consider using a more conservative rate. A 3.5% withdrawal rate corresponds to multiplying expenses by 29. A 3% rate corresponds to multiplying by 33.
The difference is significant but not insurmountable. If your annual expenses are $50,000, the 4% FIRE number is $1.25 million. At 3.5%, it is $1.43 million. At 3%, it is $1.67 million. Deciding which rate to use involves honest self-assessment of your risk tolerance, flexibility, and expected retirement length.
Some FIRE planners use a variable spending approach — spending less in down market years and more in good years — which makes the 4% rule more robust even for long retirements. If you can be flexible with spending by 10% to 15%, a 4% baseline withdrawal rate is reasonably sustainable over very long periods.
Calculate How Long Until You Hit Your Number
Use a compound interest or retirement calculator to project when your current portfolio will reach your FIRE number. Input your current savings balance, monthly contributions, and expected annual return. The tool will show you the projected date when your balance reaches the target.
Savings rate is the most powerful lever. Someone saving 50% of a $60,000 income reaches FIRE far faster than someone saving 10% of a $120,000 income. Increasing your savings rate by reducing expenses or increasing income accelerates the timeline more directly than trying to optimize investment returns.
Run the calculation at multiple savings rates to see the impact. The difference between saving 20% and 30% of income might mean retiring 5 to 10 years earlier. Seeing this clearly often motivates specific spending reductions that feel worthwhile given the timeline impact.
What to Do While You Are Working Toward It
Track your savings rate and net worth monthly or quarterly. Watching both numbers grow is motivating and helps you catch any drift from your target. Many FIRE community members track their progress as a percentage of their FIRE number, which makes the goal feel tangible as it climbs toward 100%.
Invest your savings in low-cost, diversified index funds. The FIRE community broadly recommends keeping investment costs low, since high fund fees can meaningfully reduce long-term returns. A three-fund portfolio (total US stock market, total international stock market, and total bond market) in low-cost index funds from major providers is a common approach.
Consider Coast FIRE as an intermediate milestone. Once you have saved enough that compound growth alone will carry you to your FIRE number by a traditional retirement age without additional contributions, you have reached Coast FIRE. At that point, you could choose to work a lower-stress job, reduce hours, or simply feel more financial security while continuing toward full FIRE.