About This Tool
The FIRE (Financial Independence, Retire Early) calculator helps you determine when you can stop working for money and live off your investments. It factors in your current savings, annual expenses, savings rate, and expected investment returns. The goal is to reach a 'FI number'—typically 25 times your annual expenses (based on the 4% rule). This tool is popular among early retirement enthusiasts and anyone serious about financial independence.
How It Works
It calculates the FI number as annual expenses / 0.04 (the safe withdrawal rate). Then it projects your portfolio growth using the compound interest formula with annual contributions: FV = PV * (1+r)^t + PMT * [((1+r)^t - 1) / r], where PV is current savings, PMT is annual savings, r is the expected annual return, and t is years. It iterates to find when FV reaches the FI number.
Examples
- If you have $100,000 saved, save $30,000 per year, spend $40,000 annually, and expect 7% returns, you'll reach FI in about 12 years.
- With $50,000 saved, saving $20,000 per year, spending $35,000 annually, and 6% returns, FI arrives in roughly 18 years.
Pro Tips
- Use a conservative return rate (5-7%) and account for inflation by adjusting your expenses upward each year.
- The 4% rule is a guideline—consider a lower withdrawal rate (3-3.5%) for a longer retirement horizon.
- Include healthcare costs in your annual expenses, especially if retiring before Medicare eligibility at 65.