Your FIRE number is the amount of invested money you need so that work becomes optional. The standard formula is annual retirement spending x 25, which is the same as dividing your spending by a 4% withdrawal rate. If you’ll spend $60,000 a year, your FIRE number is $1.5 million.
That’s the starting point. For an early retirement that could last 40 or 50 years, many people use a lower withdrawal rate and a bigger multiplier, and they subtract any pension or Social Security income first.
The core formula: the 25x rule and the 4% rule #
FIRE number = annual spending ÷ withdrawal rate
At a 4% withdrawal rate, that’s the same as spending x 25:
| Annual spending | FIRE number at 4% |
|---|---|
| $40,000 | $1,000,000 |
| $60,000 | $1,500,000 |
| $80,000 | $2,000,000 |
| $100,000 | $2,500,000 |
The 4% figure comes from research on U.S. market history. Financial planner William Bengen published it in 1994, and a 1998 study by three Trinity University professors, known as the Trinity Study, reached a similar conclusion. The idea: withdraw 4% of your starting portfolio in year one, raise that dollar amount with inflation every year after, and a stock-and-bond portfolio historically lasted at least 30 years in almost every period tested.
That 30-year horizon is the key limitation for early retirees.
Choosing your safe withdrawal rate #
A lower withdrawal rate means a larger multiplier and more safety. For $60,000 of annual spending:
| Withdrawal rate | Multiplier | FIRE number | Suits |
|---|---|---|---|
| 3.0% | 33.3x | $2,000,000 | Very long retirements, little flexibility |
| 3.5% | 28.6x | $1,714,286 | Typical early retirement |
| 4.0% | 25x | $1,500,000 | 30-year retirement or a flexible budget |
| 4.5% | 22.2x | $1,333,333 | Part-time income or easy spending cuts |
| 5.0% | 20x | $1,200,000 | Only with other reliable income |
If you retire at 40, your money might need to last 50 years. Many early retirees plan on 3.25% to 3.5%, or use 4% with a rule to cut spending after bad market years. Our deep dive on whether the 4% rule holds up for a 40-year retirement looks at the evidence.
Retire Goals has a FIRE Number calculator that works exactly like this: enter annual expenses and a withdrawal rate, and it returns your number. You can then turn it into a goal that tracks your progress with a projected finish date and the odds of reaching it.
FIRE number formulas for each type of FIRE #
Lean FIRE #
A minimalist budget, often under $40,000 to $45,000 a year.
- Example: $35,000 x 25 = $875,000
Fat FIRE #
A comfortable or luxury budget, usually $100,000 a year or more, often with a lower withdrawal rate.
- Example: $150,000 ÷ 3.5% = about $4,286,000
Barista FIRE #
Part-time income covers some spending, so the portfolio covers the rest.
- Formula: (spending − part-time income after tax) x 25
- Example: ($60,000 − $25,000) x 25 = $875,000
Coast FIRE #
The amount you need invested today to grow to your FIRE number by retirement age with no more contributions.
- Formula: FIRE number ÷ (1 + real return) ^ years to retirement
- Example: you’re 30, want $1.5 million at 60, and assume a 7% real return: $1,500,000 ÷ 1.07^30 = about $197,000. At a more cautious 5%, it’s about $347,000.
Our Coast FIRE number guide walks through choosing the return.
Subtract pensions and Social Security first #
Guaranteed income reduces what your portfolio has to cover:
FIRE number = (spending − guaranteed income) x 25
With $60,000 of spending and a $20,000 pension starting the day you retire, the number drops from $1.5 million to $1 million. If the income starts later, you need a bridge fund for the gap years. See how to calculate your FIRE number with a pension for the two-part version.
How to estimate your retirement spending #
The formula is only as good as the spending number you feed it.
- Start with a year of real spending. Bank and card statements beat a budget you hope to follow.
- Remove costs that end with work: commuting, work clothes, and your current retirement contributions.
- Adjust housing. A paid-off mortgage drops out, but property tax, insurance and maintenance stay.
- Add health insurance before Medicare. For U.S. early retirees this can be one of the largest costs, and it depends heavily on age, household size and income.
- Add taxes. Withdrawals from traditional 401(k)s and IRAs are taxed as ordinary income, and taxable accounts owe capital gains tax on sales.
- Add a buffer for irregular costs. Cars, roofs, appliances. Many people add 10% to 15%.
Work in today’s dollars and use an after-inflation return in your projections, so your FIRE number never needs inflating. Our guide on adjusting your FIRE number for inflation explains both approaches.
Frequently asked questions #
Does the 4% rule account for inflation? #
Yes, after you retire. The rule assumes you raise your withdrawal each year with inflation. Before retirement, keep your FIRE number in today’s dollars and project growth with a real return, typically 5% to 7% rather than a nominal 9% to 10%.
Should I include my home in my FIRE number? #
Usually not. Your FIRE number should include only assets you can draw from, like stocks, bonds and cash. Home equity counts only if you plan to sell, downsize or borrow against it.
How do Social Security and pensions change my FIRE number? #
They reduce it. Subtract the guaranteed income from your spending before multiplying by 25. If the income starts years after you retire, add a bridge fund to cover your full spending until it begins.
What if the market crashes right after I retire? #
That’s sequence-of-returns risk. Common defenses are a cash buffer of one to two years of spending, a lower starting withdrawal rate, and a willingness to trim discretionary spending in bad years.