Your FIRE Number
Your FIRE number is the portfolio size needed for financial independence - calculated as annual expenses divided by safe withdrawal rate. With $50,000 annual expenses and 4% withdrawal rate, your FIRE number is $1.25 million. Once you reach this amount, portfolio generates $50,000 annually (4% of $1.25M) to cover expenses indefinitely.
The 4% rule is based on Trinity Study showing 4% initial withdrawal rate, adjusted for inflation annually, sustains portfolio 30+ years in 95% of historical scenarios. Conservative FIRE seekers use 3-3.5% for extra safety. Aggressive might use 4.5-5% for earlier retirement but higher risk of portfolio depletion.
Track progress toward FIRE number by calculating net worth quarterly. Reduce expenses to lower your FIRE number (cutting $10,000 annually reduces target by $250,000 at 4% rate). Increase income and savings to reach target faster. Many achieve FIRE in 10-20 years with focused effort and high savings rates.
Quick Tips
- Always compare APR, not just interest rates
- Use the Rule of 72 to estimate doubling time
- Extra payments dramatically reduce total interest
Frequently Asked Questions
Historical data shows 4% withdrawal rate sustained portfolios 30+ years in 95% of scenarios. It's conservative enough to weather market downturns but high enough to retire at reasonable age. Adjust based on risk tolerance and retirement length.
Usually no - FIRE number covers all expenses from portfolio alone. Social Security (if applicable) provides additional buffer, allowing lower withdrawal rate or increased spending. Conservative approach ignores Social Security entirely in planning.
Calculate net worth monthly (assets minus liabilities). Divide by FIRE number for FI percentage - $500,000 of $1.25M target is 40% FI. Track savings rate and years to FI. Celebrate milestones (25%, 50%, 75% FI).