Use the Fire Calculator to estimate the number of years required to reach your Financial Independence, Retire Early (FIRE) goal, based on your current savings, annual contributions, and expected returns.
Financial Independence / Retire Early (FIRE) Calculator
Fire Calculator Formula: Iterative Approach
The time (n) required to reach a target investment goal ($F) from an initial portfolio ($P), with annual contributions ($S$) and an annual return rate ($r$) is typically modeled using a Future Value of Annuity formula. Solving for $n$ directly is complex, so we use an iterative approach to simulate year-by-year growth:
Where: \(P_{current}\) is the portfolio value at the start of the year, \(r\) is the annual return rate (as a decimal), and \(S\) is the annual savings/contribution.
Formula Source:
The core concept is based on Compound Annual Growth Rate (CAGR) and Future Value of a Series. You can find detailed explanations of this financial model on authoritative sites:
Variables: Understanding Your Inputs
- Current Portfolio Value ($P$): Your total current investments across all accounts (brokerage, retirement, etc.) that will be used for your FIRE goal.
- Annual Savings / Contribution ($S$): The total amount you plan to save and invest each year into your portfolio. Consistency is key here.
- Expected Annual Return ($r$): The average expected rate of growth, expressed as a percentage. Historically, a diversified stock portfolio has returned ~7% to 10% before inflation.
- Target FIRE Number ($F$): The total portfolio value required for retirement. This is typically 25 times your desired annual expenses (based on the 4% Rule).
Related Calculators
Explore other financial tools to refine your plan:
- Compound Interest Calculator
- Retirement Withdrawal Rate Tool
- Mortgage Payoff Analyzer
- Roth IRA Contribution Estimator
What is Fire Calculator?
A FIRE (Financial Independence, Retire Early) calculator is a specialized tool designed to model the growth of a savings portfolio over time until it reaches a user-defined retirement target. Its primary function is to estimate the years needed to achieve financial independence, allowing the user to plan and adjust their savings and investment strategies.
The calculator often uses inputs like current savings, annual contributions, and expected market returns to project future wealth. By providing this temporal clarity, it transforms the abstract goal of FIRE into a concrete, measurable plan. For instance, a small increase in your annual savings rate can shave years off your journey, a fact made immediately apparent by using this tool.
Crucially, the FIRE calculator underscores the power of compounding. The earlier and more aggressively one saves and invests, the sooner the portfolio transitions from being primarily funded by contributions to being primarily funded by market growth, significantly accelerating the path to financial freedom.
How to Calculate Fire Calculator (Example)
Let’s use an example to show how the calculation works:
- Define Variables: Start with $P = \$50,000$, $S = \$20,000$, $r = 8\%$, and Target $F = \$1,250,000$.
- Year 1: The portfolio grows by 8% (50,000 * 1.08 = 54,000). Add the annual contribution: 54,000 + 20,000 = \$74,000.
- Year 2: The new portfolio (\$74,000) grows by 8% (74,000 * 1.08 = 79,920). Add the contribution: 79,920 + 20,000 = \$99,920.
- Repeat Iteration: Continue this annual growth and contribution process. The calculator automates this step until the portfolio value exceeds the Target FIRE Number of \$1,250,000.
- Final Result: In this example, the years required would be approximately 24 years.
Frequently Asked Questions (FAQ)
How accurate is the fire calculator?
The calculation itself is mathematically accurate based on the inputs provided. However, its real-world accuracy depends entirely on your assumptions. If your Expected Annual Return and Annual Savings are met exactly, the result will be precise. Since market returns fluctuate, treat the result as a projection based on long-term averages.
What is the 4% Rule and how does it relate to the Target FIRE Number?
The 4% Rule suggests you can safely withdraw 4% of your total portfolio value each year (adjusted for inflation) without running out of money over a 30-year retirement. Therefore, your Target FIRE Number is calculated as (Annual Expenses / 0.04), or 25 times your Annual Expenses.
Should I include my house equity in the Current Portfolio Value?
Generally, no. A house is an asset but not a liquid investment that generates returns for withdrawals. Only include investment assets that you plan to sell and use to fund your retirement, such as stocks, bonds, and real estate investment trusts (REITs).
What return rate should I use?
Many FIRE communities use 5% to 8% (real, or inflation-adjusted) for conservative planning. An expected return of 7% is a common, balanced estimate reflecting long-term historical averages of a diversified index fund portfolio before accounting for inflation.