FIRE Basics: What It Takes to Retire Early

FIRE Basics: What It Takes to Retire Early

FIRE — Financial Independence, Retire Early — is less luck than math. At its core are three levers: spending, savings rate, and the 4% rule.

The 4% rule

The rule of thumb says a portfolio worth 25 times your annual expenses can support withdrawals of 4% a year, adjusted for inflation, with a high historical success rate over 30 years.

Your FIRE number

Multiply your annual expenses by 25 (or divide by your withdrawal rate). Spend $40,000 a year and your FIRE number is $1,000,000.

Shorten the timeline

Lower spending directly lowers the target. A higher savings rate gets you there faster than a higher return does. Starting from $50,000 and adding $20,000 a year at 7% reaches $1,000,000 in roughly 18 years.

The FIRE calculator works out your target number and the years to hit it from your current savings, contributions, return, and withdrawal rate.