How to calculate your FIRE number

The simple idea behind FIRE

Financial Independence, Retire Early — FIRE — is built on a single observation: if your investment portfolio is large enough that you can live indefinitely on its returns, you no longer need a paycheck to fund your life. Work becomes optional.

The math is unusually clean. Most personal finance questions are messy. This one isn’t.

The 4% rule and your FIRE number

The foundational result behind FIRE comes from the Trinity Study (1998), which examined how a retiree’s portfolio held up across many historical 30-year periods. The conclusion: a portfolio of 60% stocks and 40% bonds, drawn down at 4% per year (adjusted for inflation), survived nearly every 30-year window in the historical record.

That gives you a target:

FIRE number = annual expenses ÷ 4% = annual expenses × 25

If your annual expenses are $40,000, your FIRE number is $1,000,000. If your expenses are $80,000, it’s $2,000,000. The relationship is linear, and that linearity is the most important fact in FIRE planning: cutting your expenses moves your FIRE number more than almost anything else you can do.

Some FIRE planners use 3.5% as a more conservative target (which gives a 28× multiplier) — particularly for very long retirement horizons of 50+ years. Others use 4.5% if they’re willing to absorb more sequence-of-returns risk. The standard 4% rule remains the default.

Savings rate is the lever that matters

Most people instinctively think more income is the path to retirement. The math says otherwise. Your savings rate — the percentage of income you save and invest — does most of the work.

A simplified table of years to FIRE at a 5% real return, starting from zero:

• 10% savings rate: ~51 years
• 20% savings rate: ~37 years
• 30% savings rate: ~28 years
• 50% savings rate: ~17 years
• 70% savings rate: ~9 years

Doubling your savings rate roughly halves your years to FIRE. Doubling your income — without changing your spending — has the same effect, because saving rate is income minus expenses, divided by income. But raising income often comes with lifestyle inflation that cancels the gain, while increasing your savings rate is fully under your control.

What “early” means

FIRE doesn’t actually mean retiring early in the conventional “stop working forever” sense. Most FIRE-pursuers continue to work in some form after reaching their number — just on terms they choose. Common patterns:

• Lean FIRE: Reach financial independence quickly with a low expense base, and keep that lifestyle.
• Fat FIRE: Reach financial independence at a higher expense level — slower to achieve, more comfortable.
• Coast FIRE: Stop saving but keep working — the existing portfolio compounds into the FIRE number on its own. (More on this below.)
• Barista FIRE: Reach a smaller target where part-time work covers expenses, the portfolio covers everything else.

The unifying idea: choosing your work, rather than needing it.

Coast FIRE: the underrated shortcut

Coast FIRE is a powerful concept that’s worth understanding even if you’re not actively pursuing FIRE. It answers a different question:

How much would I need invested today so that, even if I stopped contributing entirely, my portfolio would grow into my FIRE number on time?

The math:

Coast FIRE number = FIRE number ÷ (1 + expected return)^years remaining

If your FIRE number is $1,000,000, your expected return is 7%, and you have 20 years until your target retirement age, the Coast FIRE number is $1,000,000 ÷ 1.07²⁰ ≈ $258,419.

In other words: if you accumulated $258,000 by age 40 and never contributed another dollar, compounding alone would deliver $1M by age 60. Once you cross the Coast FIRE threshold, you’ve fundamentally won — you can spend the rest of your career working on what interests you, rather than on what pays.

This insight reshapes the FIRE pursuit. Rather than racing to the full FIRE number, many people aim to hit Coast FIRE first — typically in their 30s or early 40s — and then transition to lower-stress, lower-paying work that just covers their expenses while compounding finishes the job.

The “one more year” trap

Many FIRE pursuers hit their target and then… keep working. The phenomenon has a name: “one more year syndrome.” The reasoning is always the same — I’ll just save one more year as a buffer. But each marginal year matters less than the previous.

If your portfolio is large enough to cover your expenses indefinitely, the marginal contribution from one more year of work is small relative to what compounding will deliver from your existing balance. The model can show you this directly: at the FIRE point, your portfolio generates more wealth per year than your job contributes to it.

That’s the moment when the financial argument flips. Once you’re FIRE, working for money is no longer the highest-value use of your time.

What the FIRE math doesn’t capture

A few critical considerations the headline numbers don’t address:

• Sequence-of-returns risk. A bad market in your first 5 years of retirement is far more damaging than a bad market 15 years in. The 4% rule survives most historical windows but not all of them, and the difference is when bad returns hit.
• Tax treatment. The 4% rule is a pre-tax framework. Your real spending capacity depends on the tax treatment of your portfolio’s withdrawals.
• Healthcare and major expenses. In some jurisdictions, healthcare costs in early retirement can be substantial. The “annual expenses” input has to honestly include this.
• Inflation in expenses. The 4% rule is inflation-adjusted by construction, but only if you’re drawing the 4% inflation-adjusted withdrawal each year. If your spending grows faster than inflation, the math degrades.
• Behavioural risk. The biggest risk to a FIRE retirement isn’t market volatility — it’s selling during a downturn. The 4% rule survives most market scenarios; it doesn’t survive the retiree who panics and sells in year 3.

How to use this in practice

1. Calculate your honest annual expenses — what you actually spend, not what you’d like to spend.
2. Multiply by 25 (or 28 for conservative, 22 for aggressive). That’s your FIRE number.
3. Compare against your current portfolio. The gap is the work ahead.
4. Calculate your savings rate. If it’s under 20%, increasing it is the highest-leverage move you can make.
5. Calculate your Coast FIRE number. It’s typically 25–40% of the full FIRE number depending on horizon.
6. Decide whether you’re optimising for full FIRE, Coast FIRE, or something in between.

The work is mathematical, but the decision is personal. The model gives you the levers; you choose which to pull.

Next steps

Use our FIRE calculator to model your FIRE number, years to FIRE, and Coast FIRE threshold with your own numbers. To explore the impact of different return assumptions over decades, the compound interest calculator shows how time and rate combine. To plan a specific savings target with a deadline, the savings goal calculator covers shorter-horizon goals.