What Is a FIRE Number? How to Calculate Your Path to Financial Independence

The FIRE Number Formula

Your FIRE number is calculated with a simple formula: Annual Expenses ÷ Safe Withdrawal Rate = FIRE Number. Using the standard 4% withdrawal rate, this simplifies to: Annual Expenses × 25.

For example, if you spend $50,000 per year, your FIRE number is $50,000 × 25 = $1,250,000. Once your investment portfolio reaches $1.25 million, you can withdraw $50,000 per year (4% of the portfolio) with a high probability of never running out of money.

Understanding the 4% Rule

The 4% rule comes from the Trinity Study (1998), which analyzed US stock and bond market data from 1926-1995. The research found that a 4% initial withdrawal rate, adjusted annually for inflation, sustained a diversified portfolio for 30 years in approximately 95% of historical periods. This became the foundation of the FIRE movement.

The Power of Compound Growth

Reaching your FIRE number may seem daunting, but compound interest does the heavy lifting. Someone investing $1,500 per month at an average 8% annual return would accumulate over $1.25 million in approximately 25 years. Importantly, over half of that total comes from compound growth — not from the money you contributed.

Reducing Expenses vs. Increasing Income

Every dollar you cut from annual expenses reduces your FIRE number by $25 (at 4% SWR). Cutting $200/month from expenses ($2,400/year) lowers your target by $60,000. This double benefit — lower target plus more money to invest — is why frugality is central to the FIRE approach. But earning more and investing the difference works too; the best path combines both.