How to Calculate Your FIRE Number
Complete guide to calculating your Financial Independence, Retire Early (FIRE) number using proven methodologies and real-world examples.
What is a FIRE Number?
Your FIRE number is the total amount of money you need saved to generate enough passive income to cover your annual expenses without working. It's the key metric that determines when you can achieve financial independence.
FIRE Number Formula
Based on the 4% safe withdrawal rate from the Trinity Study
The 4% Rule Explained
How the 4% Rule Works
- • Withdraw 4% of portfolio value annually
- • Adjust for inflation each year
- • Designed to last 30+ years
- • Based on historical market data
4% Rule Assumptions
- • 7% average annual return
- • 3% average inflation
- • Conservative withdrawal rate
- • 60/40 stock/bond allocation
Trinity Study Results
The Trinity Study analysed 30-year retirement periods from 1926-1995 and found that a 4% initial withdrawal rate succeeded 95% of the time, even in the worst market conditions.
- • 3%: 100% success rate
- • 4%: 95% success rate
- • 5%: 73% success rate
- • 6%: 53% success rate
- • 7%: 37% success rate
Step-by-Step FIRE Number Calculation
Calculate Your Annual Expenses
Track your spending for 3-6 months to determine your true annual expenses. Include housing, food, transportation, insurance, and discretionary spending. Don't forget irregular expenses like car maintenance or holidays.
Adjust for Post-FIRE Lifestyle
Your expenses may change in FIRE. Consider lower transportation costs, elimination of work-related expenses, but potential increases in healthcare, hobbies, and travel. Use 80-90% of current expenses as a starting point.
Apply the 4% Rule
Multiply your annual expenses by 25 to get your FIRE number. For example, if you need £40,000 per year, you'll need £1,000,000 saved (£40,000 × 25 = £1,000,000).
Add Safety Margins
Consider using 3.5% or 3% rule for extra conservatism, especially if you expect to live longer than average or face higher healthcare costs. Add 10-20% contingency for unexpected expenses.
Alternative FIRE Calculation Methods
Coast FIRE
Save enough so that your investments grow to your FIRE number by retirement age, allowing you to "coast" without additional contributions.
Barista FIRE
Aim for 50% of your FIRE number to cover essentials, then earn the rest through part-time work you enjoy.
Lean FIRE vs Fat FIRE
Lean FIRE focuses on minimal expenses (often £25,000-£35,000/year) while Fat FIRE allows for a more luxurious lifestyle (£60,000+/year). Choose based on your desired lifestyle and risk tolerance.
Calculate Your FIRE Number
Use our free FIRE calculator to determine your financial independence target and create a personalized savings plan.