How Much Do You Need to Retire Early? The FIRE Number Explained
FIRE — Financial Independence, Retire Early — starts with one number: how much you need invested so the portfolio can pay your expenses indefinitely.
The 25× rule
Research on historical market returns found that withdrawing about 4% of a diversified portfolio in the first year, then adjusting for inflation, lasted at least 30 years in most historical periods. Flip it around and your target is yearly spending × 25.
Spend $40,000 a year? Your FI number is $1,000,000. At a more conservative 3.5% withdrawal rate it becomes about $1,143,000.
How long will it take?
In the FIRE calculator, take someone with $50,000 invested, adding $20,000 a year, earning a 5% real return:
- Target $1,000,000 → about 23 years.
- Raise savings to $30,000 a year → about 18 years and 3 months.
- Same $20,000 but a 3.5% withdrawal rate → about 25 years.
Notice that cutting spending works twice: it lowers the target and frees money to invest.
Why "real" returns
The calculator uses returns after inflation, so every figure is in today's money. A diversified stock-heavy portfolio has historically beaten inflation by roughly 4–7% a year, but sequences of bad years early in retirement are the main risk.
Making the plan sturdier
- Use 3–3.5% if you expect retirement to last 40+ years.
- Include health insurance and taxes on withdrawals in your spending.
- Stay flexible: spending a little less in bad market years improves the odds a lot.
- Count future pensions or part-time income separately; they reduce what the portfolio must cover.
To see how regular investing grows year by year, try the compound interest calculator.