TL;DR
Your FIRE number is annual expenses ÷ safe withdrawal rate. At 4% that's 25× expenses; at 3.5% it's 28.6×. For a 50-year retirement, plan around 28–30× to be robust.
The simple formula
The classic FIRE number is annual expenses ÷ safe withdrawal rate.
At a 4% withdrawal rate that's 25× annual expenses. Spend £40,000 a year? £1 million. At a 3.5% withdrawal rate that's 28.6× annual expenses. £40,000 × 28.6 = £1.14m. At 3%? 33.3× annual expenses. £1.33m.
The formula is a mathematical identity, not a guess: if the average safe rate over many historical cohorts is X%, then a portfolio of (1/X) × expenses can fund those expenses indefinitely in most starting cohorts.
Step 1: get your annual expenses right
This is where most people go wrong. Your FIRE expenses aren't your current expenses minus work-related costs. They're a forward-looking estimate that needs to include:
- Essentials — housing, food, utilities, transport, healthcare. Roughly stable across life stages.
- Discretionary — travel, hobbies, entertainment, gifts. Often higher in early retirement.
- Lumpy — car replacements, home repairs, family events. Amortise over their cycle.
- Healthcare — NHS in the UK is the easy case; US planners need to model exchange premiums or COBRA pre-Medicare.
- Inflation buffer — your real spending tends to rise gently over time even in real terms (lifestyle creep is real).
A practical approach: take last year's spend, remove genuinely work-related costs (commuting, work clothes, some lunches), add anything you'll do more of in retirement (travel, hobbies), and add a 10% buffer for unknown unknowns.
Step 2: pick your withdrawal rate
The shorter your retirement, the higher the rate that's safe. The honest table:
- 30-year retirement: 4–4.25% (Bengen / Trinity Study range)
- 40-year retirement: 3.75% (typical FIRE)
- 50-year retirement: 3.25–3.5% (early FIRE)
- 60-year retirement: 3.0–3.25% (very early FIRE)
If you'll be flexible — willing to cut 10–20% of discretionary spending in down markets — you can raise each of these by roughly 0.5%. If you're rigid, stay at the lower end.
Step 3: multiply
FIRE number = annual expenses ÷ withdrawal rate.
If you spend £40,000/year and plan for a 50-year retirement at 3.5%: £40,000 ÷ 0.035 = £1,142,857.
If you'll have a state pension or some part-time income, subtract that future stream from the calculation. A £10,000/year state pension starting at 67 has a present value of roughly £150,000 for a current 45-year-old — that comes off your FIRE number.
The adjustments most people forget
- Taxes. The 25× rule implicitly assumes after-tax expenses. If your withdrawals will be taxed (uncovered SIPP, US 401k), you need a bigger portfolio.
- Healthcare. UK retirees relying on NHS can ignore this; US retirees can't.
- One-off bridge costs. Are you funding a child's university? Replacing a car? Paying off the mortgage in lump? Add those.
- Sequence risk buffer. If you want extra safety beyond the historical worst case, add 5–10%.
What to do with the number
It's a target, not a wall. Two practical uses:
- Track your savings rate against it. Each year, your portfolio + savings rate determines how many years remain. Our savings rate article shows the chart.
- Stress-test it. Run the number through our withdrawal survival tool at your horizon and allocation. The survival rate should be 95%+ before you call it done.
Most importantly: recompute your FIRE number annually. Inflation, life changes, and revised expense estimates all shift it.
Frequently asked questions
- Is 25× really enough for early retirement?
- It's enough for a 30-year retirement at 4%. For 40–50 years, plan closer to 28× (3.5%). The extra 14% buffer is worth roughly 1–2 years of additional accumulation.
- Should I include my house in the FIRE number?
- If you own it outright, no — it produces no income but also no rent expense. If you're paying a mortgage that will be paid off before retirement, remove it from expenses. The house itself is a non-income asset.
- How often should I recalculate my FIRE number?
- Once a year, after you have a good handle on the prior year's spend. Big life events (kids, divorce, house move) warrant an immediate recalculation.
Stress-test your own FIRE plan
FIRE Wealth OS runs your savings rate and expenses against every historical market starting point since 1871. Free to use, no card required.