FIRE stands for Financial Independence, Retire Early. Your FIRE number is the amount invested that could cover your yearly spending for good. You don't need to retire early to find it useful: it turns "save for the future" into a concrete target.
The 25× rule of thumb
The common first estimate is yearly spending × 25. It's the flip side of the "4% rule": withdrawing 4% of a portfolio in the first year, then adjusting for inflation. The 4% figure traces back to William Bengen's 1994 study of historical U.S. stock and bond returns, which looked for a withdrawal rate that would have lasted at least 30 years.
| Withdrawal rate | Multiple | FIRE number at $30,000/yr |
|---|---|---|
| 4.0% | ×25.0 | $750,000 |
| 3.5% | ×28.6 | $857,143 |
| 3.0% | ×33.3 | $1,000,000 |
Many people planning for a retirement longer than 30 years use a lower rate, such as 3.5% or 3%, which raises the target. Treat all of these as planning numbers, not promises.
Your savings rate decides the timeline
Here's the part that surprises people: how fast you reach FIRE depends mostly on the share of your take-home pay you save, not on your salary. Saving more does two things at once: it adds to the pot, and it lowers the spending the pot has to cover.
| Savings rate | Years to 25× spending |
|---|---|
| 10% | 50.3 |
| 20% | 35.9 |
| 30% | 27.4 |
| 40% | 21.2 |
| 50% | 16.3 |
| 60% | 12.2 |
| 70% | 8.7 |
Going from a 10% to a 20% savings rate cuts about 14 years from the timeline. Going from 50% to 60% cuts about 4. The first increases make the biggest difference.
What the number leaves out
- Taxes on withdrawals, which depend on your country and account type.
- Healthcare and big one-off costs that may rise before traditional retirement age.
- Sequence risk: a big market fall early in retirement hurts more than the same fall later.
- Pensions or part-time income, which lower the amount you need.
Find yours in three steps
- Add up a normal year of spending from your bank statements.
- Multiply by 25 (or 28.6 for 3.5%, or 33.3 for 3%).
- Use the FIRE calculator on the Pipwise homepage to see the timeline at your saving rate.
Assumptions: spending stays the same in real terms, returns are 5% a year after inflation and are reinvested, and you start from zero. Real returns vary and can be negative for years at a time.
Sources
- William P. Bengen, “Determining Withdrawal Rates Using Historical Data”, Journal of Financial Planning, October 1994.
This article is general education, not personal financial advice. Figures in worked examples are calculated from the assumptions stated with them and are not forecasts.
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