TLDR
- Your FIRE number is the amount you need invested to cover your spending without working: yearly spending divided by your withdrawal rate.
- At a 4% withdrawal rate, that’s spending times 25. At 3.5%, about 28.6 times. At 3%, about 33 times.
- Spending of $72,000 a year gives a FIRE number of $1.8 million at 4%.
- Three things can shrink it: spending that ends (like a mortgage), income that continues without you (a business or part-time work), and money that arrives later (a pension).
- In one example, a $2,000 monthly mortgage that ends plus $2,000 a month of income that doesn’t need you takes the number from $1.8 million to $600,000.
Most people work out their FIRE number once, look at it, and feel slightly sick. It’s usually a seven-figure number, and it usually looks further away than it is.
That’s because the standard formula treats all your spending as permanent and all your income as stopping. Neither is usually true.
The formula
FIRE number = yearly spending ÷ withdrawal rate.
| Yearly spending | At 4% (×25) | At 3.5% (×28.6) | At 3% (×33.3) |
|---|---|---|---|
| $48,000 | $1.2 million | About $1.37 million | $1.6 million |
| $72,000 | $1.8 million | About $2.06 million | $2.4 million |
| $100,000 | $2.5 million | About $2.86 million | About $3.33 million |
The withdrawal rate is the dial people argue about most. A lower rate is more cautious and needs a bigger pot. It’s one of four assumptions that make calculators disagree.
Shrink it one: spending that ends
Your FIRE number should cover the spending you’ll have forever, not the spending you have today. A mortgage that ends in eight years, school fees that stop, a car loan: none of these needs 25 times its yearly cost.
Take $72,000 a year, including a $2,000 monthly mortgage that ends soon. Without the mortgage, the forever spending is $48,000, and the number drops from $1.8 million to $1.2 million. I’ve worked this through in detail here.
Shrink it two: income that continues without you
Your investments only have to cover what nothing else covers. If $2,000 a month keeps arriving without your daily work, from part-time work you enjoy or a business that runs without you, that’s $24,000 a year the pot doesn’t need to fund.
From $48,000 of forever spending, that leaves $24,000, and the number drops again to $600,000.
| Step | Spending the pot covers | Number at 4% |
|---|---|---|
| Everything, forever | $72,000 | $1.8 million |
| Mortgage removed | $48,000 | $1.2 million |
| Plus $2,000 a month that doesn’t need you | $24,000 | $600,000 |
The biggest number in FIRE is the one you never had to save.
The catch is the word “without”. Income from a job you still go to doesn’t shrink the number; it just funds the saving. Barista FIRE is the version built on part-time work. A business only counts once it runs without you.
Shrink it three: money that arrives later
A pension that starts at 65 covers part of your spending from then on. You still need the full number to get from your FI date to 65, but less after. A calculator that lets you add a pension from a set age will show the difference.
Run your own
The Freedom Date calculator works out your number from your real spending, lets you add a pension from the age it starts, and shows what income from a business does to your date. If you’re closer than you think, coast FIRE may already be in reach.
Illustrative numbers, not advice. I’m not a licensed adviser; I show the maths, and you run yours.