Calculate exactly how much you need invested to retire early and live off 4% withdrawals
Your FIRE number is the amount you need invested to live off 4% withdrawals indefinitely. Reach it and work becomes optional.
Annual Expenses × 25 = FIRE Number. Spend $40K/year? You need $1M invested. Spend $80K? You need $2M.
Based on Trinity Study: portfolios of 60/40 stocks/bonds historically supported 4% annual withdrawals (inflation-adjusted) for 30+ years with 95%+ success.
Increase savings rate by 10% = ~5 years earlier retirement. Drop expenses by $1,000/month = $300K less needed.
The FIRE number is 25 times annual spending, and income appears nowhere in the formula. That is the part people find counter-intuitive and it is the most useful thing about it: cutting $500 a month from recurring costs lowers the target by $150,000, which is usually far more achievable than saving an extra $150,000. Every permanent spending reduction does double duty — it shrinks the number you are aiming at and increases the amount going towards it, which is why savings rate compresses timelines so violently.
It is the inverse of a 4% withdrawal rate, which comes from the Trinity Study's analysis of historical US market data: a portfolio of roughly 50-75% stocks with the rest in bonds survived thirty years of inflation-adjusted 4% withdrawals in the large majority of historical thirty-year periods. Prefer a 3.5% withdrawal rate and the multiplier becomes about 28.6×. Prefer 3% and it is 33×. The multiplier is a dial for how much margin you want, not a law.
| Withdrawal rate | Multiplier | Portfolio needed |
|---|---|---|
| 5.0% | 20× | $1,000,000 |
| 4.0% | 25× | $1,250,000 |
| 3.5% | 28.6× | $1,428,571 |
| 3.0% | 33.3× | $1,666,667 |
Three things, all of them large. Health insurance in the US before Medicare age is the biggest unbudgeted cost in early retirement and belongs in your annual spending figure, not as a footnote. Tax does not stop at retirement — where the money sits determines what you keep, and a taxable brokerage, a traditional retirement account and a Roth are three very different numbers for the same balance. And a paid-off house changes the spending figure so much that it is usually worth modelling both ways before deciding anything.
Two retirements with identical average returns can end very differently depending on when the bad years fall. A crash in year two, while you are withdrawing, does far more damage than the same crash in year twenty, because you sold shares cheaply to live on and they were not there for the recovery. The usual defences are a cash or bond buffer covering a few years of spending, a willingness to cut spending in a bad year, and some earned income early on. None of that is in the 25× figure, which is why treating it as the finish line rather than the target is the common mistake.
Most people pass two milestones long before full FIRE: Coast FIRE, when growth alone can finish the job, and Barista FIRE, when part-time income can cover the rest. Both calculators use the same 4% rule and adjust for inflation.
The how-long-will-my-money-last calculator runs the other direction: from a balance and a monthly withdrawal to the number of years, with the 4% rule alongside.
Compare a Traditional and a Roth IRA after tax using your tax rate now and in retirement.
If a large prize is part of the plan, see what the lump sum leaves after federal and state tax.
Next, read FIRE Movement Explained.
Annual spending multiplied by 25, which is the inverse of a 4% withdrawal rate. Spend $40,000 a year and the target is $1,000,000. It follows your spending, not your income.
4% is the standard planning anchor from thirty-year retirements. A retirement starting at 40 may run considerably longer, so many people use 3.5% (28.6×) or 3% (33×) for extra margin, or plan to reduce spending in bad market years instead of raising the multiplier.
Only if you put it in your annual spending figure, and you should. US health cover before Medicare age is the single largest cost people leave out of early retirement plans, and at 25× it changes the target substantially.
The risk that poor market returns arrive early in retirement, while you are withdrawing. Selling into a downturn permanently removes shares that would have recovered, so the same average return can succeed or fail depending on its order. A few years of spending held in cash or bonds is the usual defence.
Tax rules, limits and pay data change. Check the current figures with the primary source before acting on them.