How to calculate your FIRE number

A FIRE number converts an annual spending estimate into a portfolio target. It is a useful organizing figure, but its apparent precision can hide uncertain spending and market assumptions.

Start with annual spending

Estimate spending in financial independence rather than automatically using current income. Include taxes, healthcare, housing transitions, irregular replacements, and a margin for surprises.

Choose a withdrawal rate

Divide annual spending by a chosen withdrawal rate. A lower rate produces a larger target and may offer more resilience, but no single percentage works for every horizon and allocation.

Keep dollars consistent

Use real returns with today's-dollar spending or nominal returns with inflation-adjusted future spending. Mixing the two can materially distort a timeline.

Stress-test the target

Test higher spending, lower returns, longer horizons, and flexible withdrawal rules. Review the plan periodically rather than treating the first result as permanent.

Primary source

SEC Investor.gov: compound interest and planning tools