Your FIRE number is equal to your annual expenses multiplied by 25. For example, if your annual spending is $40,000 yearly, your FIRE number would be $1 million.

This is assuming you will be using a 4% withdrawal strategy.

FIRE Number = (Annual Expenses) x 25

Knowing your FIRE number is one of the first steps to Financial Independence (FI).

Most people who achieve FI do so with careful financial planning.

This is why they are successful and are even more prepared for surprises along the way.

What Is Your FIRE Number?

You can determine your FIRE number by multiplying your annual spending by 25.

Once you have your FIRE number, you can calculate how long it will take to reach financial independence based on your savings rate.

You can use a budgeting resource if you have trouble tracking your annual expenses.

I recommend Personal Capital to help you track your expenses. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)

I started my FIRE Journey using Personal Capital to calculate my annual expenses.

This made it easy to see that I spend about $35,000 annually.

Using A FIRE Number Calculator

Using a FIRE Number calculator is easy once you know your annual expenses.

You plug your annual expense into the formula.

(Annual Expenses) x 25 = FIRE Number

So, calculating my FIRE number would look like this ($35,000) x 25 = $875,000.

To make it easy, I created a FIRE calculator that displays the potential growth of all your investments.

It helps to predict precisely when you will reach financial independence and how much money will be in each account.

It's completely free; all you have to do is plug in your numbers.

JL Collins FIRE Calculator

Calculate Your FI Number With My Free FIRE Calculator

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I believe it can be a fantastic tool.

How you can add money from different accounts makes this spreadsheet different.

This allows you to estimate better how and when you can access your money once you reach financial independence.

Early Retirement Tax Planning

Using the FIRE Calculator gives you a breakdown of all your accounts.

Each account likely has different rules dictating how and when you can withdraw funds.

So you can't treat your HSA money like the money in your Roth account.

Another example is that you might be contributing to both your 401k & 457 plan, but they have very different rules regarding withdrawals.

Using my FIRE calculator, you know exactly how much will be in each account.

That can help you pay fewer taxes because you can tax plan before early retirement.

Tax planning helps you keep more of your money throughout your FIRE journey.

Example Of Calculating Your FIRE Number

The FIRE calculator gives you several key pieces of information:

FIRE Number
FIRE Date
Account Balances

If you are planning for financial independence and know that your yearly expenses are $35,000/ year.

You can calculate your FIRE number: ($35,000) x 25 = $875,000

This is based on a withdrawal rate of 4% ($875,000 x 0.04) = $35,000

This calculator will also estimate a FIRE date by showing you how long your portfolio will take to grow to this amount.

This is how it looks:

FIRE Number Example

We reach our FIRE Number of $875,000 in Year 10.

Based on the 4% rule, that gives us $35,000 a year to cover our expenses.

The spreadsheet also gives you a breakdown of how much is in each account.

You can later strategize how to access those funds efficiently, paying the fewest taxes possible.

Money in your 401k or 403b will be available once you are 59 ½ or earlier using the Roth Conversion Ladder.

This example gives you a more accurate and responsible picture of your FIRE journey.

Tax planning allows you to be confident in your early retirement and avoid penalties from the IRS.

As mentioned earlier, I highly recommend using my FIRE Calculator to keep track of each account in real-time.

FIRE Number and Retirement

The last part is making sure your FIRE Number will last throughout retirement.

Since we are planning an early retirement, our money must last a long time!

Luckily I found the best Post-Retirement Calculator.

It's a simulator that tells you how safe your withdrawal strategy is, based on the stock market's past performance.

This is the final tool for projecting your FIRE journey from start to finish.

With the Post-Retirement Calculator, you can confirm that your money will last well into retirement.

Along the way, you will likely make more money through a side hustle or social security benefits.

So this is sort of like a worst-case scenario.

To use the post-retirement calculator, input your savings of $875,000 and your annual spending of $35,000, which is 4% of $875,000 (total nest egg).

I ran a scenario for illustration. The assumptions are:

Withdrawals Start At Age 45
25% Flexibility During Bear Markets
10% Average Tax Rate

This is what it looks like:

This scenario accounts for all 60-year periods in the stock market from 1871 through 2016.

The results show we have a 99% success rate!

Without earning money after age 45, there is a 99% chance this person will still have money at age 100.

Now it makes sense why they say compound interest is the 8th wonder of the world!

Knowing the stats allows your mind to be at ease and focus on enjoying early retirement.

This exercise helped me visualize my early retirement plan and thoroughly evaluate my withdrawal strategy.

I recommend everyone use the FIRE calculator and then the Post Retirement Calculator to do the same and crush it!

What’s My FIRE Number? Easy Way To Find Out (With Calculator)