1. What is the FIRE Number?

The FIRE (Financial Independence, Retire Early) number represents the total amount of money needed to achieve financial independence based on your annual expenses and safe withdrawal rate. It indicates the portfolio size required to sustain your lifestyle without needing employment income.

2. How Does the Calculator Work?

The calculator uses the FIRE formula:

Where:

• Annual Expenses — Your yearly living expenses in dollars
• Safe Withdrawal Rate — The percentage of your portfolio you can withdraw annually without depleting it (typically 3-4%)

Explanation: This calculation is based on the 4% rule, which suggests that you can safely withdraw 4% of your portfolio annually while maintaining the principal amount over a 30-year retirement period.

3. Importance of FIRE Number Calculation

Details: Calculating your FIRE number is crucial for retirement planning as it provides a clear financial target for achieving financial independence. It helps you understand how much you need to save and invest to maintain your desired lifestyle without traditional employment.

4. Using the Calculator

Tips: Enter your annual living expenses in dollars and your chosen safe withdrawal rate as a decimal (e.g., 0.04 for 4%). Both values must be positive numbers. The calculator will determine your required portfolio size for financial independence.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical safe withdrawal rate?
A: Most FIRE proponents use a 3-4% safe withdrawal rate, with 4% being the most common based on the Trinity Study.

Q2: Should I include taxes in my annual expenses?
A: Yes, you should include all expenses including income taxes, healthcare costs, and any other regular expenses you anticipate in retirement.

Q3: Does this account for inflation?
A: The 4% rule already accounts for inflation by increasing withdrawals annually to maintain purchasing power.

Q4: What if my expenses change in retirement?
A: It's important to regularly reassess your expenses and adjust your FIRE number accordingly as your lifestyle and needs change.

Q5: Should I consider other income sources?
A: Yes, if you have other income sources (pension, rental income, etc.), you can subtract those from your annual expenses before calculating your FIRE number.