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What is a FIRE number? How to calculate yours (formula, example, and FIRE number calculator)
The FIRE number formula
Dividing by a rate is the same as multiplying by its inverse:
| Withdrawal rate | Multiple of annual spending |
|---|---|
| 4% | 25× |
| 3.5% | ≈ 28.6× |
| 3% | ≈ 33.3× |
That's why people say "multiply your spending by 25." It's the 4% case of the general formula, not a separate rule.
Where the 4% rule and 25× come from
The 25× shortcut comes from research on sustainable withdrawal rates, meaning how much you can take from a portfolio each year without running out too soon.
- William Bengen (1994). In "Determining Withdrawal Rates Using Historical Data" (Journal of Financial Planning, October 1994), Bengen tested withdrawal rates against historical U.S. market returns. He assumed the first year's withdrawal was a percentage of the starting portfolio and that later withdrawals rose with inflation. On that data, a starting rate of about 4% held up over 30-year retirements. The inverse of 4% is 25.
- The Trinity Study (1998). Philip Cooley, Carl Hubbard, and Daniel Walz, three professors at Trinity University, published "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable" (AAII Journal, February 1998). They tested a range of withdrawal rates across different payout periods and stock/bond mixes, and reported how often each combination lasted. Their main point: whether a withdrawal rate works depends on how long it has to last and what the portfolio holds. No single number is right for everyone.
The takeaway: 25× is a planning shortcut drawn from historical U.S. data and roughly 30-year horizons. Neither study promises future results. An early retirement can last longer than 30 years, which is why some plans use a lower rate and end up with a bigger number.
How to calculate your FIRE number, step by step
- Estimate your annual spending once work is optional, in today's dollars. Use what you would actually spend, not your income.
- Choose a planning withdrawal rate. 4% is the common starting point. A lower rate is the more conservative choice.
- Divide: annual spending ÷ withdrawal rate. At 4%, multiply by 25.
- Compare with what you have invested today. Current invested assets ÷ FIRE number is your progress, and FIRE number − invested assets is your gap.
- Recalculate when your spending changes. Your FIRE number moves with your spending.
Worked example (illustrative only)
These assumptions are labels for the math, not predictions.
| Step | Calculation | Result |
|---|---|---|
| Monthly spending | given | $5,000 |
| Annual spending | $5,000 × 12 | $60,000 |
| Withdrawal rate | assumption | 4% |
| FIRE number | $60,000 ÷ 0.04 (= $60,000 × 25) | $1,500,000 |
| Check | $1,500,000 × 4% | $60,000 a year |
| Current invested assets | given | $300,000 |
| Progress | $300,000 ÷ $1,500,000 | 20% |
| Gap | $1,500,000 − $300,000 | $1,200,000 |
To see how long a gap like this could take to close, and what monthly investment that would need, enter your own figures in the FIRE number calculator. It shows the return assumption it uses alongside your result.
FIRE number by monthly spending (at 4%)
At a 4% rate, every extra $1 of annual spending needs $25 invested behind it.
| Monthly spending | Annual spending | FIRE number at 4% (×25) |
|---|---|---|
| $3,000 | $36,000 | $900,000 |
| $4,000 | $48,000 | $1,200,000 |
| $5,000 | $60,000 | $1,500,000 |
| $6,000 | $72,000 | $1,800,000 |
| $8,000 | $96,000 | $2,400,000 |
| $10,000 | $120,000 | $3,000,000 |
How the withdrawal rate changes your number
Same $60,000 of annual spending, three illustrative planning rates:
| Planning rate | Calculation | FIRE number |
|---|---|---|
| 4% | $60,000 ÷ 0.04 | $1,500,000 |
| 3.5% | $60,000 ÷ 0.035 | ≈ $1,714,286 |
| 3% | $60,000 ÷ 0.03 | $2,000,000 |
Lowering the rate by one percentage point, from 4% to 3%, raises this example's number by $500,000. The rate you choose matters as much as the spending figure.
Common mistakes
- Using salary instead of spending. Your FIRE number is based on what you spend, not what you earn.
- Counting your home as invested assets. A house you live in isn't a portfolio you can withdraw from.
- Treating 4% as a guarantee. The research behind it is historical and mostly covers about 30 years. Longer horizons and different conditions can change the answer.
- Ignoring other costs and income. Taxes, healthcare, housing changes, part-time work, and retirement benefits can all move your real number. A simple formula leaves them out.
- Calculating once and never again. When spending changes, the number changes.
Use a FIRE number calculator
The formula takes one line. A plan takes more: how far you are from the number, what monthly investment could close the gap, and roughly how long that might take.
Open the FIRE number calculator →
It's free, about seven questions, and runs in your browser. It uses the same formula as this article (monthly spending × 12 × 25 at a 4% withdrawal rate) and shows its return assumption with your result.
To test different return, contribution, and spending assumptions in more detail, try the retirement simulator.
FAQ
What is a FIRE number?
It's the invested portfolio that could cover your annual spending when work becomes optional. You get it by dividing annual spending by a planned withdrawal rate.
How do I calculate my FIRE number?
Divide your annual spending by your withdrawal rate. At 4%, multiply annual spending by 25. For example, $60,000 × 25 = $1,500,000.
Why 25 times spending?
Because 1 ÷ 0.04 = 25. The 4% figure comes from withdrawal-rate research such as Bengen (1994) and the Trinity Study (1998), which used historical U.S. data.
Is the 4% rule right for early retirement?
Not necessarily. Both studies looked at retirements of up to about 30 years. A longer horizon is one reason some people plan with a lower rate, which gives a higher FIRE number.
Sources
- William P. Bengen, "Determining Withdrawal Rates Using Historical Data," Journal of Financial Planning, October 1994.
- Philip L. Cooley, Carl M. Hubbard, and Daniel T. Walz, "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable," AAII Journal, February 1998 (the "Trinity Study").
Educational only. Historical withdrawal studies are not forecasts. This page doesn't recommend any investment, portfolio, or strategy. Meridian Studio LLC / Apogee.
Not financial advice.