FIRE Number, Savings Rate, and Years to FI

A FIRE (financial independence) number answers: how large a portfolio would cover this year’s spending at a chosen withdrawal rate?

FI number ≈ annual spend ÷ withdrawal rate

At 4%, $50,000 of spend implies a $1.25 million target. At 3.5%, the same spend needs about $1.43 million. The FIRE calculator also estimates years to get there from current invested assets, annual savings, and a constant real (after-inflation) return.

What 4% is and is not

Four percent is a common planning shortcut from historical US portfolio research (often associated with the “Trinity” study and related work). It is not a guarantee. Sequence-of-returns risk, fees, taxes, and a changing spend rate can move the date. A 4% withdrawal in a bad first decade of retirement is a different life than 4% in a long bull market.

Treat the return input as real so spend stays in today’s dollars. A 7% nominal return with 3% inflation is a 4% real claim, not a 7% claim.

The lever is usually savings rate

If years-to-FI looks long, raising the assumed return by 0.5% is a story. Raising savings (or cutting spend, which also lowers the FI number) is arithmetic you control.

Sketch: $50,000 spend, 4% → $1.25 million target. $200,000 invested, $25,000/year savings. Without growth the gap is $1.05 million ÷ $25,000 = 42 years. Compounding shortens that; adding $10,000/year of savings usually moves the date more than bumping the return box.

Spend is the other half of the identity

People obsess over the portfolio and ignore the numerator. Cutting $5,000 of annual spend at 4% lowers the FI number by $125,000. That is often easier than earning another $125,000 of assets. The calculator will not scold you for a high spend; it will just show a larger pile and more years.

Healthcare before Medicare, housing if you move, and kids leaving home can all change spend. A single withdrawal rate on a single spend is a first cut.

When not to trust years-to-FI

• You typed a 10% real return (that is an aggressive claim).
• Current “invested assets” includes a house you will still live in.
• Savings rate assumes a bonus that is not recurring.

Pair the projection with investment growth for a contribution schedule, or net worth for a snapshot. Continue in the max the match playbook.