Your FIRE Number: How to Calculate It

There’s a Number With Your Name on It

You’ve probably heard the term FIRE — Financial Independence, Retire Early. And somewhere along the way, you learned that it involves “a number.” Some dollar amount in an investment account that, once crossed, means you never have to work for money again.

Here’s the thing about that number: once you actually calculate yours, something shifts. The vague idea of “retire early someday” becomes a specific target with a specific timeline. You either accelerate toward it or consciously decide it’s not the priority — but the hand-wavy “maybe eventually” version of the plan disappears.

So let’s calculate yours.

The Formula Is Embarrassingly Simple

Your FIRE number = annual expenses × 25

That’s it. If you spend $60,000 per year, your FIRE number is $1.5 million. If you spend $100,000 per year, it’s $2.5 million. If you spend $40,000 per year and live in a low-cost city, congratulations — you’re a lean FIRE devotee at $1 million.

Multiply your annual spending by 25. Write it down. That’s the target.

Where 25x Comes From

The 25x rule isn’t arbitrary. It’s the inverse of the 4% safe withdrawal rate — the most cited finding in the history of personal finance research.

In 1994, a paper by William Bengen (later validated and popularized by the Trinity Study in 1998) analyzed historical US market data going back to 1926. The finding: a retiree who withdraws 4% of their portfolio in year one, then adjusts for inflation each year, had a very high probability of their portfolio lasting 30+ years across nearly every historical period — including some genuinely brutal stretches like the Great Depression and the stagflation of the 1970s.

The math: if you withdraw 4% of your portfolio annually, and 4% of X equals your annual expenses, then X equals your annual expenses divided by 4%, which is the same as multiplying by 25.

$$\text{Annual Expenses} \div 0.04 = \text{Annual Expenses} \times 25$$

So the 25x rule is just a shorthand version of “enough invested that 4% covers your expenses forever.” The word “forever” is doing a lot of work there — 30 years is the tested horizon, and most early retirees need the portfolio to last 40-50 years. (We’ll come back to that.)

What Actually Goes in “Annual Expenses”

This is where people lie to themselves.

Annual expenses means everything you actually spend, not your current base budget minus the stuff you figure you’ll cut back on. Here’s the full list:

• Housing — rent, mortgage P&I, property taxes, insurance, HOA, maintenance (budget 1-2% of home value annually for repairs)
• Food — groceries, restaurants, coffee, alcohol, the Doordash habit you pretend is occasional
• Healthcare — premiums, deductibles, prescriptions, dental, vision (more on this below)
• Transportation — car payment or lease, insurance, fuel, registration, parking, or transit passes
• Utilities — electric, gas, water, internet, phone
• Insurance — life, disability, umbrella, pet
• Subscriptions — streaming, software, gym, cloud storage, the app you forgot you subscribed to in 2021
• Travel — your actual travel spending, not “I’ll probably travel less in retirement” (you’ll probably travel more)
• Personal care — haircuts, clothing, toiletries
• Entertainment — concerts, sports, hobbies, gear
• Giving — charitable donations, gifts, family support
• Irregular expenses — car replacement every 10 years, new roof every 20 years, amortized into monthly averages

The mortgage line is tricky. If you plan to have it paid off by retirement, your housing cost drops significantly — but property taxes and maintenance don’t. If you still carry a mortgage, it’s in there. If you’re planning to downsize or move to a lower-cost area, adjust accordingly — but be honest about whether that plan is real or aspirational.

The kid line is also tricky. Children are expensive and their costs change dramatically by life stage. College tuition, extracurriculars, orthodontia, summer camps — model the years realistically rather than using a flat annual number.

Use your actual bank and credit card statements from the last 12-24 months. Not your budget. Your actual spending. There’s usually a gap.

The Healthcare Gotcha Nobody Wants to Talk About

If you retire before age 65, you lose employer-sponsored health insurance. Medicare doesn’t start until 65. That gap — potentially 20-30 years for an early retiree — is expensive, and it’s the most common thing people undercount.

Your options:

• ACA Marketplace plan — Available to anyone. Premiums depend on your income (since withdrawals from a traditional 401k count as ordinary income, you can sometimes optimize this), age, and location. A family of four in their 40s can easily pay $1,000-1,800/month in premiums, depending on the plan and how you manage income. That’s $12,000-21,600/year just in premiums before you hit the deductible.
• Spouse’s employer plan — If your partner still works, you may be covered. Great if it lasts; plan for the day it doesn’t.
• COBRA — Continues your current employer coverage for up to 18 months after leaving. Expensive (you pay the full premium the employer was covering) and temporary. A bridge, not a solution.

The key point: $500-1,500+/month for healthcare is a realistic budget line for a family in early retirement. If you’re building your FIRE number and healthcare isn’t explicitly in the annual expenses figure, recalculate.

Healthcare cost inflation also runs hotter than general CPI. Factor that in.

Inflation: The 4% Rule Does Account for It (Mostly)

The good news: the original Bengen/Trinity research accounted for inflation. The 4% withdrawal is inflation-adjusted — you increase your annual withdrawal by CPI each year, and the portfolio still held up historically.

The nuance: the research used historical US CPI, which has averaged around 3%. If your personal inflation rate runs higher — because healthcare, housing in a high-cost city, or travel prices are growing faster than average — your real withdrawal rate is quietly higher than 4% even if the nominal dollars look right.

This isn’t a reason to panic; it’s a reason to:

1. Build a slight buffer into your number (more on this below)
2. Maintain some income flexibility so you’re not 100% dependent on the portfolio in the first years of retirement

Social Security: The Floor You Keep Forgetting

If you retire at 40 and don’t plan to touch Social Security until 67 (full retirement age for most younger workers), you have a 27-year window where you’re fully self-funding. But after that, Social Security kicks in — and it can meaningfully reduce the portfolio withdrawals you need for decades 3, 4, and 5 of retirement.

The Social Security Administration’s online estimator lets you model your projected benefit based on your actual earnings history. For someone who worked 20 years as a software engineer before retiring at 40, it might be $1,500-2,500/month at full retirement age.

That’s $18,000-30,000/year in income you don’t have to pull from your portfolio. At a 4% withdrawal rate, that’s equivalent to having $450,000-750,000 extra in your portfolio.

The practical implication: your “true” FIRE number for the first 27 years might be higher, but the long-term portfolio pressure is lower. Many FIRE calculators (like cFIREsim and FIRECalc) let you model Social Security as an income floor that starts at a specific age. Use them.

”One More Year” vs. “Close Enough”

Here’s the dirty secret of the FIRE community: almost nobody hits their number exactly before pulling the trigger. And the two failure modes are opposite each other.

One More Year Syndrome: You hit your number, then decide you need a 10% buffer. Then you hit that, and decide maybe the market is overvalued, so you want another year. Then your team gets a great project and you figure one more year won’t hurt. Suddenly it’s been five years and you’ve blown past your number by 40% while quietly discovering that work wasn’t all bad.

Going Too Early: You retire at 90% of your number during a bull market, the market drops 40% in year two, and you’re facing sequence-of-returns risk at exactly the wrong moment.

The evidence-based answer is: the number is a target, not a cliff edge. The 4% rule has a high success rate, not a perfect one. A 3.5% withdrawal rate has a near-perfect historical success rate and gives you meaningful cushion — your number at 3.5% is 28.5x expenses instead of 25x.

Most FIRE practitioners build in flexibility:

• Part-time consulting work in the early years
• A small side project that generates a few thousand dollars a year
• Willingness to cut discretionary spending in a down market year
• A small cash buffer (1-2 years of expenses) so they’re not selling equities at the worst time

These small flexibilities are worth more than grinding for two extra years. The 95% funded + flexible plan often outperforms the 100% funded + rigid plan.

Different FIRE Flavors, Different Numbers

Not everyone wants the same thing, which means the target moves:

• Lean FIRE (~$1M): Extremely low-cost lifestyle, often requires geographic arbitrage (lower-cost city or country). $40,000/year or less in expenses. Every dollar of spending counts.
• Regular FIRE (~$1.5-2.5M): The “standard” target for someone spending $60,000-100,000/year. Most FIRE calculators default to this range.
• Fat FIRE ($3M+): High-spending early retirement. $120,000/year or more, often with international travel, private schools, or maintaining a high-cost-of-living location.
• Coast FIRE: You’ve saved enough that you can stop contributing and let compound growth do the work. You still work (or work part-time) to cover current expenses, but you’re not adding to the portfolio. We cover this separately in the Coast FIRE article.

The right number depends on what you actually want retirement to look like — not what the community’s median answer is.

The Actual First Step

You don’t need a spreadsheet with 47 tabs. You need three numbers:

1. Your annual expenses — Pull 12 months of actual bank/credit card statements. Total it up. Don’t guess.
2. Multiply by 25 — That’s your baseline FIRE number.
3. Add healthcare — If it’s not already in your expenses, add a realistic line. For a family, add $12,000-20,000/year to your annual expenses figure before multiplying.

If the number scares you, good. That’s useful information. You either need to increase your savings rate, reduce your target spending, or adjust your timeline. Those are all tractable problems once you have a real number to work against.

If the number is smaller than you expected, also good. You might be closer than you think.

Either way, you now know. And once you know, the number follows you everywhere — quietly recalculating in the background every time you get a raise, make a big purchase, or watch your portfolio tick up another month.

That’s not a bad thing. That’s the whole point.

The 4% rule and 25x are starting points, not commandments. For a deeper look at whether 4% still holds in today’s market conditions, see The 4% Rule: Does It Still Hold?.