How to Calculate Your FIRE Number: A Step-by-Step Guide

The formula, in one paragraph

Your FIRE number is your annual expenses divided by your withdrawal rate. At the classic 4% rate, $60,000 a year needs $1,500,000.00. The years to FI come from monthly compounding: the monthly rate is the annual return divided by 12, and the months are the logarithm of the growth needed, divided by the logarithm of the monthly growth factor. See the formula in the box below.

Step 1: Your annual expenses

Start with what you spend in a year. The example uses $60,000. Be honest: count the rent, the food, the car, the holidays, and the small spending you forget. The FIRE number is built on this figure, so a wrong expense figure gives a wrong number. If your expenses are $40,000 instead, your FIRE number is $1,000,000.00, not $1,500,000.00, and it takes 15.89 years to reach it.

Step 2: The FIRE number

Divide your annual expenses by your withdrawal rate. The example uses the classic 4% rate, so $60,000 divided by 4% is $1,500,000.00. That is the portfolio that can pay $60,000 a year forever at 4%. At a 3% rate the number is $2,000,000.00, and at 5% it is $1,200,000.00. The 4% rate comes from the Trinity study: a stock-and-bond portfolio, withdrawn at 4% a year and adjusted for inflation, survived 30 years in nearly every historical test.

Step 3: The months and years to FI

Take your savings, your monthly savings, and your return. The example uses $100,000 saved, $2,000 a month, and 7% a year. The monthly rate is 7% divided by 12, which is 0.5833% a month. The months to FI are the logarithm of the growth needed, divided by the logarithm of the monthly growth factor: 245.14 months, which is 20.43 years. Save $3,000 a month instead and it is 17.01 years. Earn 9% instead of 7% and it is 17.54 years.

Step 4: What you put in, and what growth adds

Your contributions are your monthly savings times the months: $2,000 times 245.14 is $490,278.80. The growth is the FIRE number minus your savings minus your contributions: $1,500,000.00 minus $100,000 minus $490,278.80 is $909,721.20. Growth does most of the work: almost two thirds of the FIRE number comes from compounding, not from your contributions. That is why starting early matters more than saving more.

Step 5: Coast FI

Coast FI is the savings that grow to your FIRE number on their own, with no more contributions. At 7% a year, $371,403.07 saved now grows to $1,500,000.00 in 20 years, and $746,394.40 does it in 10 years. Coast FI is the point where you can stop saving and still retire on schedule. It is the most liberating number in the FIRE plan.

Working backwards

The formula also runs backwards. To reach FI in 15 years you need $3,833.60 a month, and for 10 years you need $7,505.19 a month. At $2,000 a month, the most annual expenses that still reach FI in 15 years are $36,752.77, and for 10 years they are $21,885.43. The return needed for FI in 15 years is 11.4436% a year. At a 0% return the wait is linear: ($1,500,000 minus $100,000) divided by $2,000 is 700 months, which is 58.33 years.

What NOT to do

Do not judge by the FIRE number alone: a $1,500,000.00 number at 20.43 years is a plan, not a promise, and the return is the lever you control least. Do not trust a 9% return: it cuts the wait to 17.54 years, but a single bad decade can add years back. Do not forget the withdrawal rate: 5% needs only $1,200,000.00, but it is the riskier bet. Do not use expenses you wish you had: the number is built on what you actually spend.

That box is the whole formula.