How the FIRE number formula works
Your FIRE number is the portfolio size at which you can sustain your spending indefinitely using only investment returns, never touching the principal.
FIRE Number = Annual expenses ÷ Safe Withdrawal Rate (SWR)
At 4% SWR: spend $50,000/yr → FIRE Number = $1,250,000. The 4% rule comes from the Trinity Study (1998, updated 2021), which found a 4% withdrawal rate survived 95%+ of historical 30-year periods.
Years to FIRE is calculated by simulating annual portfolio growth (current savings × return rate + annual savings added each year) until the balance crosses your FIRE number.
Worked example with real numbers
Age: 30 | Annual income: $85,000 | Annual expenses: $48,000 | Current savings: $35,000 | Return rate: 7% | SWR: 4%
| Step | Calculation | Result |
|---|
| Annual savings | $85,000 − $48,000 | $37,000/yr |
| Savings rate | $37,000 ÷ $85,000 | 43.5% |
| FIRE number | $48,000 ÷ 0.04 | $1,200,000 |
| Shortfall | $1,200,000 − $35,000 | $1,165,000 |
| Years to FIRE (est.) | Simulation at 7% return | ~16 years |
| FIRE age | 30 + 16 | Age 46 |
Common mistakes to avoid
- Using nominal returns without inflation adjustment. A 7% return with 3% inflation is 4% real. For a more conservative projection, use 5% nominal or increase your SWR denominator.
- Ignoring healthcare costs. Before Medicare at 65, a couple retiring early can face $1,000–$2,000/month in health insurance premiums. Add this to your annual expense figure.
- Forgetting sequence of returns risk. A major market crash in year 1–5 of retirement is far more damaging than one in year 15. The 4% rule assumes a globally diversified portfolio — concentrated positions carry higher risk.
- Not planning for lifestyle inflation. Your current $48,000/yr expenses may grow with travel, family, or health needs. Many FIRE planners budget for 10–15% more than current spending.
- Setting the SWR too high. At a 5% SWR, historical survival drops to around 80% of 30-year periods. For very early retirement (30–40 years), 3.5% SWR is more conservative.
Related tools and reading
Use the Retirement Planner to project your exact portfolio at different contribution rates. The Compound Interest Calculator models a lump sum investment in isolation. The Budget Planner helps you find spending cuts that accelerate your FIRE date. Read our detailed FIRE: Retire at 45 Guide and the 401(k) Limits 2026 article for tax-efficient accumulation strategies.
Your FIRE number = annual expenses x 25. If you spend $45,000/year, you need $1,125,000 invested to retire safely using the 4% withdrawal rule.