Your FIRE number is your yearly spending × 25. Here's why

Your FIRE number is the amount of invested savings that could pay your yearly spending without running out. The short formula is yearly expenses ÷ safe withdrawal rate. At the classic 4% rate, that means yearly expenses × 25: spend $40,000 a year, and your target is $1,000,000.

The formula is simple. The hard part is choosing the withdrawal rate, and that choice depends on how long your money needs to last.

The formula, step by step

Your FI number (financial independence number) has two inputs:

1. Yearly expenses. What you actually spend in a year, including irregular costs like car repairs, travel and health.
2. A withdrawal rate. The share of your portfolio you take out in year one. After that, you raise the dollar amount each year with inflation.

Dividing by 4% is the same as multiplying by 25. Dividing by 3.5% is the same as multiplying by about 28.6.

Where the 4% rule comes from

In October 1994, financial planner William Bengen published a study in the Journal of Financial Planning. He tested withdrawals against US stock, bond and inflation data from 1926 onward. A first-year withdrawal of 4%, then raised with inflation, lasted at least 30 years in every historical case. In his words, it never exhausted a portfolio "before 33 years".

Bengen's base portfolio was 50% US stocks and 50% intermediate-term Treasury bonds. He suggested holding between 50% and 75% in stocks.

A few years later, three professors at Trinity University ran a similar test, now known as the Trinity study. They used monthly US returns from January 1926 to December 1997. A 4% inflation-adjusted withdrawal over 30 years succeeded 95% of the time with 50% stocks, and 100% of the time with 75% stocks.

The limits of the 4% rule

The 4% rule describes the past in one country. It's a useful starting point, not a guarantee.

Sequence risk

The order of returns matters once you start withdrawing. A crash in your first few years forces you to sell more shares at low prices. Those shares are gone when the market recovers. Two retirees with the same average return can end up in very different places.

Longer retirements

Bengen and the Trinity study tested 30-year periods. If you stop working at 40, your money may need to last 50 years or more.

• Early Retirement Now (Karsten Jeske's blog) found that a 4% rate with 50% stocks succeeded 95% of the time over 30 years, but only 65% over 60 years. The author concludes that "3.5% is the new 4%" for long retirements, and that it may need to be lower still.
• Morningstar's 2025 estimate, using market data as of 30 September 2024, puts the safe starting rate at 3.7% for 30 years, with a 90% chance of success. For a 40-year horizon, its highest safe starting rate in the base case is 3.1%.

At 3.1%, a $40,000 budget needs about $1,290,323, not $1,000,000.

Fees

Every 1% you pay in fees comes straight out of your return. At a 50% savings rate, a 5% real return gets you to FI in about 16.6 years. Knock 1% off for fees, and it takes about 17.7 years. Low-cost index funds are one way people keep this drag small.

Real vs nominal returns

A nominal return is the number your account shows. A real return is what's left after inflation. Your FI number is in today's dollars, so you should plan with real returns.

The exact formula is (1 + nominal) ÷ (1 + inflation) − 1. US inflation was 3.7% a year in September 2026. A 7% nominal return at that inflation rate is a real return of about 3.2%:

1.07 ÷ 1.037 − 1 = 3.2%

Subtracting (7% − 3.7% = 3.3%) gets you close, but the division is more accurate.

Savings rate vs years to FI

Your savings rate is the biggest lever you control. A higher rate does two things at once. You invest more, and you need less, because you've learned to live on less.

The table below assumes you start from zero, earn a 5% real return a year (an assumption, not a forecast), and save at the end of each year. Your spending is whatever you don't save, and your target is 25 × that spending.

Going from 20% to 30% cuts almost 9 years. Going from 50% to 60% cuts about 4. The early gains are the biggest.

Lean, Coast and Fat FIRE

People use labels for different versions of the same idea. The math is the same; the spending level changes.

How Coast FIRE works

With Coast FI, you stop adding to retirement savings and let compound growth do the rest. You still work, but only to cover today's spending.

The formula is target ÷ (1 + real return)^years. Say you're 30 and want $1,000,000 at 60. At an assumed 5% real return, you need about $231,377 invested today. If you want it by 50, you need about $376,889.

Try it with your numbersFreedom PointYour FIRE number and the year you can reach it.

Your plan

1. Track a full year of spending. Use bank statements, not guesses. Add irregular costs like insurance, gifts and repairs.
2. Adjust for retirement. Remove costs that will end, like commuting or a mortgage you'll pay off. Add new ones, like health insurance.
3. Pick a withdrawal rate that fits your horizon. 4% matches the 30-year studies. For 40 years or more, many people test 3% to 3.5%.
4. Divide. Yearly expenses ÷ withdrawal rate = your FI number.
5. Work out your savings rate. Savings ÷ take-home pay. Use the table above to see roughly how long the path is.
6. Find your biggest lever. Often that's housing, transport or a raise, not small daily spending.
7. Keep costs low and invest consistently. Automate monthly contributions and check what you pay in fees.
8. Recalculate once a year. Update your spending, your balance and your return assumption.

What to watch out for

• Treating 4% as a promise. It's a summary of past US data. Future returns, especially in your first years, may be worse.
• Mixing nominal and real numbers. If your target is in today's dollars, use a real return. Otherwise your plan will look rosier than it is.
• Forgetting taxes. Withdrawals from some accounts are taxed. Your FI number has to cover spending after tax.
• Underestimating spending. Health costs, home repairs and family needs tend to grow. A buffer of 10% or so on your expense estimate is cheap insurance.
• Ignoring flexibility. Being able to cut spending in a bad year, or earn a little, makes any withdrawal rate safer.