The Beginner's Guide to FIRE: How to Calculate Your Financial Independence Number

The **FIRE (Financial Independence, Retire Early)** movement has swept the globe, inspiring thousands of people to aggressively save and invest so they can leave the 9-to-5 workforce decades ahead of traditional retirement age.

But early retirement isn't about luck; it's about simple math. Here is how you calculate your "FIRE Number" and how the **4% Rule** keeps it secure.

1. The 4% Rule Explained

Originating from the famous Trinity Study, the **4% Rule** states that you can safely withdraw 4% of your investment portfolio during your first year of retirement, and adjust that amount for inflation each subsequent year, with a near-100% probability that your money will last at least 30 years.

2. Calculating Your FIRE Number

Because of the 4% Rule, your target portfolio size (your **FIRE Number**) is simply **25 times your annual living expenses**.

**FIRE Number = Annual Expenses × 25**

Example If you need **$40,000 per year** to cover housing, food, travel, and health insurance:

**FIRE Number = $40,000 × 25 = $1,000,000**

Once your stock and bond portfolio reaches $1 million, you can stop working and live off your investments indefinitely by withdrawing $40,000 annually.

Variations of FIRE

• **Lean FIRE**: Retiring on a tight budget (typically under $40,000/year in expenses).
• **Fat FIRE**: Retiring with a luxurious lifestyle (typically over $100,000/year).
• **Coast FIRE**: Having enough invested at an early age so that you don't need to save another dollar; you can let compound interest "coast" your portfolio to your target retirement size, working only to cover current living expenses.

Try the calculator

Determine your early retirement timeline. Use our FIRE Retirement Calculator to project your savings rate, Coast FIRE status, and compound interest growth instantly.