Using the FIRE Calculator
The fire calculator is a powerful tool designed for the Financial Independence, Retire Early community. It helps you determine exactly how much capital you need to accumulate to live off your investments indefinitely. By calculating your "FIRE Number," you can set a clear financial target and estimate the timeline required to achieve professional freedom.
To get the most accurate results, consider the following inputs:
- Annual Expenses
- This is the total amount you plan to spend per year once retired. Include housing, healthcare, food, travel, and taxes.
- Current Net Worth
- The total value of your investable assets today (brokerage accounts, IRAs, 401ks, cash).
- Annual Savings
- The amount you contribute to your investments every year before you retire.
- Expected Return
- The annual percentage growth of your portfolio. A standard "inflation-adjusted" market return is often cited between 5% and 7%.
How the FIRE Formula Works
The fundamental math behind the fire calculator is based on the "Rule of 25," derived from the Trinity Study. This study suggests that a 4% safe withdrawal rate allows a portfolio to last 30+ years.
FIRE Number = Annual Expenses ÷ Safe Withdrawal Rate
For example, if you spend $40,000 per year, your FIRE number would be $40,000 / 0.04 = $1,000,000. Once you reach this target, you are theoretically financially independent.
FIRE Strategy Variations
Different lifestyles require different financial targets. This fire calculator allows you to toggle between popular movements:
- Standard FIRE: Based on the 4% rule, aiming for a portfolio 25 times your annual expenses.
- Lean FIRE: Aimed at those with a minimalist lifestyle, usually with annual expenses below $40,000.
- Fat FIRE: For those who want a more luxurious retirement, often involving expenses over $100,000 and a more conservative withdrawal rate (3%).
- Barista FIRE: Achieving a portfolio large enough to cover basic costs, but still working a part-time job for "extras" or health insurance.
Calculation Example
Scenario: Sarah wants to retire early. She spends $50,000 a year, has $100,000 saved, and can invest $2,000 a month ($24,000/year).
Step-by-step solution:
- Determine FIRE Target: $50,000 / 0.04 = $1,250,000.
- Calculate Gap: $1,250,000 – $100,000 = $1,150,000.
- Apply Compound Interest Formula: Using a 7% return and $24,000 annual contributions.
- Result: Sarah will reach her FIRE number in approximately 19.5 years.
Common Questions
Does the calculator account for inflation?
Yes, if you use an "inflation-adjusted" expected return. Most experts use a 7% return (which is roughly 10% market average minus 3% inflation) to keep all calculations in today's purchasing power.
What is a Safe Withdrawal Rate (SWR)?
SWR is the percentage of your total portfolio you take out each year. The 4% rule is the gold standard, though some early retirees prefer a 3% or 3.5% rate to be safer against market downturns.
How can I reach FIRE faster?
To accelerate your timeline in the fire calculator, you have three primary levers: Increase your income, decrease your expenses (the most effective way), or increase your investment returns through asset allocation.