How to Calculate Your FIRE Number

The Simple Formula

Your FIRE number is calculated using this formula:

FIRE Number = Annual Expenses ÷ Withdrawal Rate

Using the standard 4% withdrawal rate:

FIRE Number = Annual Expenses × 25

This is called the Rule of 25 — you need 25 times your annual expenses invested to retire.

For example: if your annual expenses are $50,000, your FIRE number is $50,000 × 25 = $1,250,000.

Step 1: Calculate Your Annual Expenses

The most important number in the FIRE formula is your expected annual expenses in retirement. This isn't necessarily what you spend today.

Track your current spending for 3-6 months to get a baseline. Then adjust for retirement:

Subtract work-related costs — commuting, work clothes, lunches out.

Add healthcare costs — health insurance premiums, out-of-pocket expenses (especially if retiring before Medicare eligibility at 65).

Add leisure and travel — you'll have more free time, which may mean more spending on hobbies and trips.

Consider housing changes — will you downsize, relocate to a lower-cost area, or pay off your mortgage before retiring?

A realistic range for most people is $30,000-$80,000 per year, depending on lifestyle and location.

Step 2: Choose Your Withdrawal Rate

Your withdrawal rate determines how much safety margin you have:

4% (Standard) — 30-year retirement, 95% historical success rate. Multiply expenses by 25.

3.5% (Conservative) — 40+ year retirement. Multiply expenses by ~28.6.

3% (Ultra-Safe) — 50+ year retirement, maximum safety. Multiply expenses by ~33.3.

The trade-off: a lower withdrawal rate means a higher FIRE number and more years of working. Each 0.5% reduction adds roughly 2-4 years to your working career.

For most early retirees in their 30s or 40s, 3.5% is a good balance between safety and achievability.

Step 3: Project Your Timeline

Once you have your FIRE number, the next question is: how long until you reach it?

The formula uses compound growth: given your current savings (S), annual contributions (A), and expected return rate (r), the years to reach your target (T) is:

years = ln((T × r + A) / (S × r + A)) / ln(1 + r)

For example, with $100,000 saved, contributing $24,000/year, earning 7% return, and targeting $1,250,000:

years = ln((1,250,000 × 0.07 + 24,000) / (100,000 × 0.07 + 24,000)) / ln(1.07) ≈ 22.4 years

That means retiring around age 52 if you start at 30.

The single biggest lever for shortening this timeline is your savings rate. Increasing it from 25% to 50% can cut your time to FIRE in half.

Common Mistakes When Calculating Your FIRE Number

1. Underestimating expenses — Most people spend more than they think. Track carefully and add a 10-20% buffer.

2. Ignoring inflation — Your expenses will grow over time. The 7% historical stock market return minus 3% inflation gives you ~4% real return. Our calculator uses real (inflation-adjusted) numbers.

3. Forgetting about taxes — If most of your savings are in pre-tax accounts (401k, traditional IRA), remember that withdrawals are taxable. Factor taxes into your expense estimate.

4. Not accounting for major one-time expenses — New roof, new car, kids' college — these don't fit neatly into annual expense estimates.

5. Getting too precise — FIRE calculations are estimates, not guarantees. Markets fluctuate, expenses change, and life throws curveballs. Use your FIRE number as a guideline, not a rigid target.

Use our FIRE Calculator to run your numbers and see projected savings growth year by year.