How to calculate your FIRE number

Everyone in the FIRE community talks about "the number." It's the amount you need invested before you can walk away from work forever. The basic formula is dead simple:

Spend $40,000 a year? You need $1,000,000. Spend $80,000? You need $2,000,000. Done.

Except… not really. That formula skips some important things. Here's how to calculate a FIRE number you can actually trust.

Step 1: Figure out your real annual expenses

This is where most people mess up. They look at their current spending and say "that's my number." But retirement spending is different from working-life spending:

• Healthcare. If you retire before 65, you lose employer insurance. Budget $500-$1,500/month for ACA marketplace plans depending on your age and location.
• Taxes. You still pay taxes in retirement. Capital gains on withdrawals, income tax on traditional 401k/IRA distributions. Add 10-15% to your spending estimate.
• No more savings. You can subtract the amount you're currently investing — that goes away when you FIRE.
• Lifestyle changes. More travel? Less commuting? Think about what changes when you're not working 40+ hours a week.

For most people, real retirement expenses land between 70-100% of pre-retirement spending (minus savings contributions).

Step 2: Pick your withdrawal rate

The "× 25" in the formula assumes a 4% withdrawal rate. That's the classic safe withdrawal rate from the Trinity Study. But you have options:

If you're retiring at 35 with a 50-year retirement horizon, 4% might be too aggressive. Consider 3.5% (28.6× expenses) for extra safety. Retiring at 55 with Social Security starting at 67? You might be fine at 4.5%.

Step 3: Account for income sources

Your FIRE number only needs to cover the gap between your expenses and guaranteed income:

Guaranteed income might include:

• Social Security — if you're willing to wait for it (starting at 62-67)
• Pension — becoming rare but still relevant for some
• Rental income — if you have reliable rental properties
• Part-time work — Barista FIRE style

Example: If you spend $50k/year and expect $20k/year from Social Security (starting at 67), your FIRE number for age 67+ is only ($50k − $20k) × 25 = $750k. But you still need to bridge the gap from early retirement until Social Security kicks in.

Step 4: Run a real calculation

The formula gives you a target. But a proper calculation also answers: when do you hit that target given your current savings, contribution rate, and expected returns?

The variables that matter most:

• Current invested assets — what you have today
• Annual contributions — what you're adding each year
• Expected real return — historically ~7% for a stock-heavy portfolio (after inflation)
• Time — how many years until you hit the number

Use the retirement calculator to model this — it runs Monte Carlo simulations showing not just the average case, but the range of possible outcomes.

Quick reference: FIRE numbers by spending level

Common mistakes

• Forgetting healthcare. This alone can add $200-400k to your FIRE number if you retire before 65.
• Using gross income instead of expenses. Your FIRE number is based on what you spend, not what you earn.
• Ignoring taxes on withdrawals. A $1M traditional 401k isn't $1M after taxes.
• Assuming 0% inflation. Always use real (inflation-adjusted) returns when projecting growth.
• Not adding a buffer. Life surprises you. A 10-15% buffer above your calculated number reduces stress.

The bottom line

Your FIRE number isn't a single fixed target — it's a range depending on your risk tolerance, flexibility, and income sources. The simple "25× expenses" gets you 80% of the way there. The remaining 20% comes from being honest about healthcare costs, taxes, and whether you'd actually be happy spending $30k/year for the rest of your life.

Calculate yours: Free FIRE Calculator →