How to Calculate Your FIRE Number

What Is a FIRE Number?

Your FIRE number is the total invested portfolio value you need to live off indefinitely without working. When you hit this number, you are financially independent — optional work, not mandatory work.

The concept comes from the Financial Independence, Retire Early (FIRE) movement, popularized by Your Money or Your Life (1992) and the famous Trinity Study (1998) that gave us the 4% rule.

The Core Formula

The calculation is straightforward:

FIRE Number = Annual Expenses × 25

If you spend $40,000 per year, your FIRE number is $1,000,000. If you spend $60,000, it's $1,500,000.

The "times 25" multiplier comes directly from the 4% rule: a $1,000,000 portfolio at a 4% annual withdrawal rate gives you $40,000 per year. Multiply any annual expense figure by 25 and you get the portfolio size that generates it at 4%.

Where the 4% Rule Comes From

The 4% rule was derived from the Trinity Study, a 1998 paper by three professors at Trinity University. They backtested portfolios of stocks and bonds through historical market periods, including the Great Depression and the stagflation of the 1970s. Their conclusion: a portfolio invested 50–75% in stocks could sustain a 4% annual withdrawal (inflation-adjusted) for at least 30 years with a 95%+ success rate.

Important caveats that often get glossed over:

• The original study modeled 30-year retirements. If you retire at 40 and live to 90, you need to model 50 years — and the success rate at 4% drops.
• The study used US stock market returns. Global returns have historically been lower.
• It assumed a fairly aggressive stock allocation (50–75%). More conservative allocations require a lower withdrawal rate.

Adjusting for Early Retirement

If you plan to retire in your 30s or 40s, many FIRE planners use a 3.5% or 3.25% withdrawal rate to account for the longer time horizon and sequence-of-returns risk. This changes the multiplier:

• 4% withdrawal rate → multiply by 25
• 3.5% withdrawal rate → multiply by 28.6
• 3.25% withdrawal rate → multiply by 30.8
• 3% withdrawal rate → multiply by 33.3

The trade-off is real: at a 3% withdrawal rate, a $60,000/year lifestyle requires $2,000,000 instead of $1,500,000 — 33% more capital.

Step-by-Step: Calculating Your FIRE Number

Step 1: Calculate your real annual expenses

This is the part most people underestimate. Add up everything:

• Housing (rent or mortgage, property tax, insurance, maintenance)
• Food and groceries
• Transportation
• Healthcare (especially important pre-retirement — you lose employer coverage)
• Travel and leisure
• Subscriptions and services
• Clothing, personal care
• Gifts, charitable donations
• Emergency fund replenishment

Don't forget inflation. Your expenses today are not your expenses in 20 years. At 2.5% annual inflation, costs roughly double every 28 years.

Step 2: Adjust for income in retirement

If you'll receive any income in retirement — Canada Pension Plan (CPP), Old Age Security (OAS), part-time work, rental income — subtract it from your annual expense figure before multiplying. Only the gap you need to fill from your portfolio needs to be covered.

Example: $70,000 annual expenses, expecting $15,000/year CPP + OAS at 65. Gap = $55,000. FIRE number at 4%: $55,000 × 25 = $1,375,000.

Step 3: Choose your withdrawal rate

For a standard retirement age (60–65), 4% is reasonable. For early retirement under 50, consider 3.25–3.5%. Run multiple scenarios — the calculator will show you how each rate affects your target.

Step 4: Factor in taxes

In Canada, RRSP and pension withdrawals are taxable as ordinary income. TFSA withdrawals are tax-free. Your actual withdrawal need depends on your account mix and tax situation. A rough rule: if most of your savings are in registered accounts, gross up your expense figure by your expected marginal tax rate in retirement.

Common Mistakes That Cost Years

1. Using gross income instead of actual expenses. Many people "work backwards" from their salary without accounting for how much of it goes to taxes, savings, and work-related costs. Your spending is lower than your income. Build from actual expenses up.

2. Forgetting healthcare. Pre-Medicare (or before OAS/CPP) healthcare is expensive in Canada too — employer drug and dental plans disappear at retirement. Budget $3,000–$8,000/year for a couple depending on province and coverage needs.

3. Ignoring sequence-of-returns risk. A 20% market crash in year 1 of retirement is far more damaging than the same crash in year 10. A larger cash cushion (1–2 years of expenses in cash/GICs) reduces sequence risk significantly.

4. Treating the FIRE number as a finish line. Markets move. Your FIRE number should be reviewed annually. Many FIRE retirees use a flexible withdrawal strategy — spending less in down years, more in strong years — which dramatically improves portfolio longevity.

5. Not accounting for major one-time expenses. Roof replacement, car purchase, children's education, medical procedures — these irregular large costs need to be in the plan, not treated as surprises.

FIRE Variants and Their Different Numbers

Not everyone pursues the same version of FIRE:

• Lean FIRE — living on $25,000–$40,000/year. FIRE number: $625k–$1M. Requires significant lifestyle optimization.
• Regular FIRE — living on $40,000–$80,000/year. FIRE number: $1M–$2M. The most common target.
• Fat FIRE — living on $100,000+/year. FIRE number: $2.5M+. Comfortable lifestyle without compromise.
• Coast FIRE — accumulate enough that compound growth alone gets you to your FIRE number by traditional retirement age, without additional contributions. Allows stepping back from high-income work early.
• Barista FIRE — partial retirement: cover basic expenses through part-time work, let investments cover the rest.

How Long Will It Take?

The answer depends entirely on your savings rate. The math is brutal but honest:

• Saving 10% of income → ~46 years to FIRE
• Saving 25% of income → ~32 years
• Saving 50% of income → ~17 years
• Saving 75% of income → ~7 years

The most powerful lever isn't investment returns — it's how much you spend relative to what you earn. A higher savings rate compresses the timeline from both ends: you accumulate faster and you need less because you've demonstrated you can live on less.

Calculate Your Number Now

Every situation is different. Use our FIRE Retirement Calculator to enter your current savings, monthly contributions, expected return, and planned annual expenses. It will show you your FIRE number, how many years until you reach it, and what happens under different return scenarios.

If you're tracking net worth as you build toward FIRE, our Net Worth Tracker lets you log assets and liabilities monthly and watch your progress on an interactive chart.