How this calculator works
Financial independence means your investments can cover your living costs without a salary. The FIRE number is the portfolio size needed: annual spending divided by a safe withdrawal rate. The 4% figure comes from William Bengen's 1994 study of US market history, which found that a 4% initial withdrawal, adjusted for inflation, lasted at least 30 years in the periods tested. Later work, including the Trinity study, reached similar conclusions for long retirements. That 4% is a planning guideline, not a guarantee: returns, inflation and the order of returns all vary, and a 40-year retirement or a high-fee portfolio needs a lower rate. The model works in real terms. Spending and savings are assumed to grow with inflation, so they cancel out, and the portfolio is compounded at the return after inflation. That keeps the target fixed in today's dollars and makes the arithmetic simple. Tax, pensions, government benefits and changes in spending are not modelled.
Formula
FIRE number = annual spending / safe withdrawal rate. Real return = (1 + nominal return) / (1 + inflation) - 1. Annual saving = take-home income x savings rate. Years to the target: n = ln((F + S/r)/(P + S/r)) / ln(1+r), where F is the FIRE number, P the current portfolio, S the annual saving and r the real return. Age at independence = current age + n.
Worked example
Spending $50,000 a year at a 4% withdrawal rate needs $1,250,000. Earning $90,000 and saving 25% puts aside $22,500 a year. With a 7% return and 2.5% inflation, the real return is about 4.39%, and the portfolio starting at $100,000 reaches the target in about 24.60 years, at age 59.6. Raising the savings rate to 40% cuts that to about 18.87 years.
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Frequently asked questions
Is the 4% rule still safe?
It is a reasonable starting point for a 30-year retirement in a diversified, low-cost portfolio, but it is not guaranteed. Longer retirements, higher fees and poor returns early in retirement all argue for a lower rate or a flexible withdrawal plan.
Why does the calculator use a real return?
Because the target and the savings are both in today's dollars. Dividing (1 + return) by (1 + inflation) converts a nominal return into a real one, so the arithmetic stays in constant purchasing power.
Should I count my home in the FIRE number?
Only if you plan to sell it or borrow against it. A home you live in does not produce income, though it does reduce housing costs, which lowers the spending figure you need to fund.
What about pensions and government benefits?
They reduce the portfolio you need, because they cover part of your spending. Subtract the annual benefit from your spending before dividing by the withdrawal rate, and note that benefits may not start until a later age.
What if my spending changes in retirement?
Many households spend less after the first few years, and some spend more on health care later. Run more than one spending figure to see how sensitive the FIRE number is.