Fire Calculator Mr Money Mustache

Financial Independence Retire Early (FIRE) is a movement that encourages people to save and invest aggressively to achieve financial independence and retire early. The FIRE number is the amount of money you need to save to achieve financial independence.

What is FIRE?

FIRE stands for Financial Independence Retire Early. The core idea is that if you save and invest enough money, you can stop working and live off your investments. The "FIRE number" is the amount of money you need to save to achieve financial independence.

FIRE is not about retiring at 30 or 40. It's about having the financial freedom to leave your job whenever you want. The exact number varies based on your lifestyle, location, and other factors.

Key Principles of FIRE

Aggressive saving: Save as much as possible, even if it means reducing your lifestyle.
Invest wisely: Invest in low-cost index funds or other diversified investments.
Live below your means: Spend less than you earn to accelerate savings.
Have an emergency fund: Keep 3-6 months of expenses in cash before starting FIRE.

FIRE vs. Traditional Retirement

FIRE	Traditional Retirement
Focus on financial independence first	Focus on Social Security and pension benefits
Aggressive saving and investing	Moderate saving and investing
Can retire early (30s, 40s, or 50s)	Retire at normal retirement age (65+)
Live off investments	Live off Social Security and pension

How to Calculate Your FIRE Number

The FIRE number is calculated by determining how much money you need to save to live off your investments. The formula is:

FIRE Number = Annual Expenses / Withdrawal Rate

Where:

Annual Expenses: Your total annual living expenses
Withdrawal Rate: The percentage of your portfolio you can safely withdraw each year (typically 4%)

Step-by-Step Calculation

Calculate your annual living expenses (including housing, food, transportation, etc.).
Choose a safe withdrawal rate (4% is common for conservative investors).
Divide your annual expenses by the withdrawal rate to get your FIRE number.

The 4% rule is a conservative estimate. More aggressive investors might use a higher withdrawal rate, but this increases the risk of running out of money.

Example Calculation

Let's say you have annual expenses of $60,000 and you want to use a 4% withdrawal rate.

FIRE Number = $60,000 / 0.04 = $1,500,000

This means you need to save $1,500,000 to achieve financial independence with this lifestyle.

Tracking Your Progress

Once you have your FIRE number, you can track your progress by calculating your FIRE percentage:

FIRE Percentage = (Current Savings / FIRE Number) × 100

For example, if you have $300,000 saved toward your $1,500,000 FIRE number, you're at 20% of your FIRE number.

FAQ

What is the 4% rule?: The 4% rule is a conservative estimate that suggests you can safely withdraw 4% of your portfolio each year without running out of money. This assumes a long investment horizon and proper asset allocation.
How do I calculate my FIRE number?: Divide your annual living expenses by your chosen withdrawal rate (typically 4%). For example, if your expenses are $60,000, your FIRE number would be $1,500,000.
Can I use a higher withdrawal rate?: Yes, but this increases the risk of running out of money. More aggressive investors might use a higher withdrawal rate, but they should be prepared for the possibility of running out of money.
What if my expenses change?: If your expenses change, you'll need to recalculate your FIRE number. For example, if you move to a cheaper location, your FIRE number will decrease.
How do I track my progress toward FIRE?: Calculate your FIRE percentage by dividing your current savings by your FIRE number and multiplying by 100. For example, if you have $300,000 saved toward a $1,500,000 FIRE number, you're at 20% of your FIRE number.