How to use the FIRE Number
- Work out your actual annual spending, including irregular costs.
- Choose a withdrawal rate — 4% is the common baseline, 3.5% more conservative.
- Read the target portfolio value.
- Enter current savings and contributions to estimate the timeline.
How the calculation works
The 4% rule comes from the Trinity study, which tested historical US portfolios over 30-year retirements and found that withdrawing 4% of the initial value, adjusted annually for inflation, rarely exhausted a balanced portfolio. Inverting it gives a target of 25 times annual spending. Longer retirements, which early retirees face by definition, argue for 3.25 to 3.5% — a multiple of roughly 29 to 31 times.
Because the target is a multiple of spending, cutting expenses works twice: it lowers the number and raises the surplus available to invest. Reducing annual spending by 4,000 removes 100,000 from a 4% target. The main risk to the plan is sequence-of-returns — a market fall in the first few years of drawdown does disproportionate damage — which is why flexible spending, a cash buffer of one to two years, and part-time income all materially improve the odds.
FIRE number = annual spending / withdrawal rate ; at 4% that is annual spending × 25Source: Trinity study safe withdrawal rate research; lower rates commonly applied for retirement horizons beyond 30 years.
Worked example
Annual spending of 42,000, currently 210,000 invested, adding 2,600 a month at an assumed 6% real return.
- At 4%: target = 42,000 / 0.04 = 1,050,000.
- At 3.5%: target = 1,200,000.
- Existing 210,000 growing at 6% real, plus 31,200 a year contributed.
- The balance reaches 1,050,000 in roughly 16 years.
About 1.05 million at a 4% rate, or 1.2 million at 3.5% — roughly 16 to 18 years at current contributions.
Frequently asked questions
Is 4% still a safe withdrawal rate?+
It held up across historical 30-year US retirements, but early retirement implies a longer horizon. Many people use 3.25 to 3.5% and add flexibility to cut spending in poor years.
Why does cutting spending help so much?+
It lowers the target by 25 times the cut while simultaneously increasing what you can invest. Few levers act on both sides of the equation at once.
What is sequence-of-returns risk?+
The danger that poor returns early in drawdown permanently deplete the portfolio, because you are selling assets at depressed prices. A cash buffer and flexible spending are the usual defences.
Should the target include my home?+
Not unless you plan to sell it, since it generates no income. Owning outright does help by reducing the annual spending the portfolio must cover.
Last reviewed August 31, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.