FIRE Calculator: Find Your FIRE Number Now

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A FIRE number can set you free. What is yours?

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In the Financial Independence, Retire Early (FIRE) culture, you are working on what is known as yours Number of FIRE — the amount of money with which you can adopt a work-optional lifestyle. A napkin math calculation for this number is to multiply your annual expenses by 25, sometimes known as the 4% rule.

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Use the slider below to see what your FIRE number would be based on various monthly expense numbers, based on the 4% rule.

Approximate your FIRE number

The FIRE number: what to watch out for

The numbers above may seem intimidating at first. Let’s all get on the same page about what they mean.

First, it’s important to remember that a FIRE number is different from the money you need to retire. Here we play big.

Your FIRE number is the money you’ll need in investments, whether in your 401(k), Roth IRA, brokerage, or other accounts, to live off the income those investments generate and never touch principal. In theory, you could be retired for 100 years, and it wouldn’t matter: your manager, intact, would still be the same.

Even if you don’t want to retire early, your FIRE number can help you plan for your financial future. Many people only want to partially retire or move in and out of the workforce throughout their careers. The FIRE number is a way to estimate how much passive income will come from your investments, so you know exactly how much you need to earn to close the gap.

Professional advice

For most, the FIRE number is… a lot of money. It can feel intimidating at first.

Remember, at its core, a FIRE number calculation helps you determine roughly how much passive income will be generated from your retirement savings and investments. at any time

The FIRE number is not just a destination. Think of it as a planning tool to project how your wealth will grow as you enter your 30s, 40s, 50s and beyond, based on your current saving and spending habits.

Whatever your reason for finding it, the FIRE number is one of the most exciting calculations you’ll ever make on your personal finance journey. But in order to get an accurate FIRE number and an action plan to make it work optional, there are other factors you need to consider, factors that many influencers and personal finance enthusiasts miss.

Here are some other factors to know that aren’t included in the above calculations.

a woman in a wheelchair smiling, next to images of dollar bills

Factors in the number of fires that may be missing

inflation

The most important factor that gets lost in the calculations of the FIRE number is year-over-year inflation.

“The dollar has inflated an average of 2.51% between 1995 and 2022”

Inflation has been frequently in the news recently due to record highs, the highest year-on-year increases in 40 years. But inflation is not inherently bad. A small year-on-year inflation of around 2% is considered normal and healthy.

Let’s say you calculated your FIRE number in 1995, when the cost of a liter of milk was $2.50, not the $4.41 it is today. You calculate all of your expected retirement expenses in 1995 prices and invest over the next 27 years to produce enough passive income to make you financially independent.

You would fall short, a lot. This is because the dollar has inflated an average of 2.51% between 1995 and 2022, resulting in an overall increase of 95.55%. If you planned your retirement based on 1995 prices, you’d be only a little more than halfway to your goal in 2022. Good.

It’s a risk to calculate your FIRE number in today’s dollars and then assume that number will remain constant.

Pensions and Social Security

That last one was a bit of a bummer, so let’s talk about another factor that could cause your number to FIRE easier reach.

When you reach a certain retirement age, you may have new sources of income that become unlocked, such as Social Security or workplace pensions. Having these additional income streams means you won’t need your investments to generate as much passive income each month, which will lower your FIRE number.

Americans are not eligible to take Social Security until they are at least 59.5 years old. The Social Security Administration has a program on its website that will let you see how much you can expect in Social Security payments, based on the taxes you’ve paid so far in the program. If you’ve been paying taxes for years, know that you’ve gone into the Social Security fund, and you’ll be able to get benefits from that fund later.

The property of the house

If you own a home, you are creating wealth. While your home may not be a source of income, unless you sublet or rent out part of your home, having your mortgage paid off will change your expected monthly expenses in retirement.

When possible, your repayment schedule can and should be factored into the overall FIRE number calculations, as it will count when you have extra money released after the mortgage is paid off.

Don’t retire early

Many FIRE enthusiasts do not want to retire early. They just want peace of mind that they are making the right personal finance decisions in early and middle age.

“There are variations of FIRE, like Coast FIRE and Barista FIRE, that require much less money.”

There are variations of FIRE, such as Coast FIRE and Barista FIRE, that require much less money. In reality, you will meet and pass these wealth benchmarks on the way to your FIRE number. Whatever your lifestyle aspirations, making sure you’re on track to achieve your money goals is time well spent.

You can have a great life in Coast FI or Barista FI. You know you’ll have enough money as you get older, and you’re financially free to do only the work you really want, which for some is more appealing than ever.

Creping of the lifestyle

be honest Will your expenses increase as you age?

Here’s an important distinction: The FIRE number is based on the expenses you’ll have when you’re no longer working, not the expenses you have today. These numbers can be similar or markedly different.

You may have a mortgage now that will be paid off when you leave the workforce. Or maybe your three children, who are in elementary school right now, will be adults when you retire. And almost everyone should be aware of the fact that health care costs go up as you get older.

It’s hard to predict what your expenses will be years or decades from now. But if you know that some of your expenses today won’t be expenses in the future, you should factor that into your FIRE number calculations accordingly.

an old man dancing

Next steps for a better FIRE number

Want all these factors and more in one convenient and easy-to-use tool?

NextAdvisor is developing a downloadable financial independence calculator — Be the first to know when it’s published.

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