Your FIRE number is the amount of money you need invested to live off the returns forever—without ever touching the principal. Once you hit this number, work becomes optional. Let's calculate yours.
The Magic Formula
Also known as the 4% Rule or 25x Rule
Why 25x?
The Trinity Study (1998) found that withdrawing 4% of your portfolio per year has a 95%+ success rate of lasting 30+ years. The inverse of 4% is 25 (1 ÷ 0.04 = 25).
At $1M invested, withdrawing 4% ($40K) should last indefinitely while your portfolio continues to grow.
In This Guide
Step-by-Step Calculation
Calculate Your Annual Expenses
Not your income—your actual spending. Be honest and thorough.
Multiply by 25
This is your FIRE number.
Subtract What You Already Have
Calculate your gap to FIRE.
⚠️ Don't Forget These Expenses
- •Health insurance (no employer coverage!)
- •Property taxes
- •Home/car repairs
- •Taxes on withdrawals
- •Inflation over time
- •Kids' education (if applicable)
Real-World Examples
| Annual Spending | FIRE Number (×25) | 4% Withdrawal |
|---|---|---|
| $30,000 (Lean FIRE) | $750,000 | $30K/year |
| $40,000 | $1,000,000 | $40K/year |
| $60,000 | $1,500,000 | $60K/year |
| $80,000 | $2,000,000 | $80K/year |
| $100,000 | $2,500,000 | $100K/year |
| $150,000 (Fat FIRE) | $3,750,000 | $150K/year |
💡 The Power of Cutting Expenses
Reducing expenses by just $10,000/year lowers your FIRE number by $250,000. This makes reaching FIRE dramatically faster. Every dollar you cut from spending is worth $25 less you need to save.
Lean FIRE vs. Fat FIRE vs. Barista FIRE
Lean FIRE
Minimal expenses, frugal lifestyle. Typically $25K-$40K/year spending.
- • Reach FIRE in 10-15 years
- • Lower barrier to entry
- • Forces intentional spending
- • Little room for error
- • May feel restrictive
- • Healthcare is expensive in US
Fat FIRE
Comfortable lifestyle, no budget constraints. Typically $100K+/year spending.
- • Large margin of safety
- • Travel, hobbies, experiences
- • Can handle unexpected costs
- • Requires high income
- • May take 20+ years
- • Lifestyle inflation risk
Barista FIRE / Coast FIRE
Semi-retirement: Investments cover future retirement, part-time work covers current expenses.
- • Achievable much faster
- • Keeps you active/social
- • Health insurance through employer
- • Still need to work
- • Income required indefinitely
- • Not true retirement
When to Adjust the 4% Rule
The 4% Rule Isn't Perfect
The original Trinity Study assumed a 30-year retirement. If you're retiring early (40+ year retirement), you may want to use a more conservative withdrawal rate:
Use Higher Rate (4%+) If:
- ✓You have a pension or Social Security coming
- ✓You're flexible about spending in down markets
- ✓You can work part-time if needed
- ✓You have a traditional 30-year retirement
Use Lower Rate (3-3.5%) If:
- ⚠️Retiring early (40+ years of retirement)
- ⚠️No backup income sources
- ⚠️Worried about market returns
- ⚠️Want maximum safety margin
How to Reach Your Number
Reduce Expenses
Every $1 you cut from spending reduces your FIRE number by $25. Housing, cars, and food are the biggest levers.
Increase Income
Side hustles, career growth, job hopping for raises. More income = higher savings rate = faster FIRE.
Save Aggressively
Target 50%+ savings rate. The math: 50% savings rate = ~17 years to FIRE. 75% = ~7 years.
Invest Wisely
Low-cost index funds (S&P 500, total market). Avoid fees, avoid timing the market, stay invested.
Automate Everything
Max 401k, max IRA, max HSA. Set up automatic investments so you never have to think about it.
Track Your Progress
Update your net worth monthly. Celebrate milestones. The journey is long—stay motivated.
🔥 The FIRE Formula
Years to FIRE ≈ (Net Worth Gap) ÷ (Annual Savings × Growth)
At $50K/year savings with 7% returns, $1M gap takes ~12 years. Use a compound interest calculator for exact projections.
📌 Key Takeaways
- ✓FIRE Number = Annual Expenses × 25 (based on 4% withdrawal rate)
- ✓Cutting $10K from expenses reduces your FIRE number by $250K
- ✓Choose your FIRE style: Lean ($750K), Regular ($1-1.5M), or Fat ($2.5M+)
- ✓For early retirement (40+ years), consider 3-3.5% withdrawal rate instead
- ✓Reach FIRE faster with high savings rate + low-cost index investing
Calculate Your FIRE Timeline
Use our calculators to project when you'll reach financial independence.
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