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What Is the FIRE Movement?
FIRE stands for Financial Independence, Retire Early. The core principle is achieving a net worth large enough that investment returns can cover your living expenses indefinitely. This is typically defined as 25 times your annual expenses, based on the 4% safe withdrawal rate derived from the Trinity Study. FIRE adherents maximize savings rates and invest aggressively to reach this number as quickly as possible.
The 4% Rule Explained
The 4% rule states that you can withdraw 4% of your portfolio in the first year of retirement and adjust for inflation each subsequent year, with a very high probability of your money lasting 30+ years. Your FIRE number is therefore Annual Expenses × 25. For example, if you spend $50,000 per year, your target is $1,250,000.
Savings Rate Is Everything
Your savings rate — the percentage of income you save — is the most important factor in reaching FIRE. At a 50% savings rate, you can retire in roughly 17 years regardless of income level. At 70%, it drops to about 8-9 years. Increasing savings rate has a double effect: it reduces your expenses (lowering your FIRE number) and increases monthly contributions.
Frequently Asked Questions
Your FIRE number is your annual expenses multiplied by 25. This is based on the 4% safe withdrawal rate — if you withdraw 4% of your portfolio annually, it should last 30+ years. For example, $40,000 in annual expenses means a FIRE number of $1,000,000.
The 4% rule has been debated extensively. Some researchers suggest 3.5% is safer for early retirees with 40-50 year horizons. Others argue that a flexible withdrawal strategy (reducing spending in down markets) makes 4% or even higher viable. The rule is a solid starting guideline.
There are several variations: Lean FIRE (minimal expenses, typically under $40,000/year), Fat FIRE (comfortable lifestyle, $100,000+/year), Barista FIRE (semi-retirement with part-time income covering some expenses), and Coast FIRE (enough saved that you only need to cover current expenses, not save more).
The calculator uses your nominal return rate. For a more conservative estimate, subtract expected inflation (2-3%) from your return rate. For example, use 4-5% instead of 7% to see inflation-adjusted results. The 4% rule itself was designed with inflation adjustments built in.