Frequently Asked Questions
Everything you need to know about retirement planning, the FIRE movement, and using this calculator.
What is the FIRE number and how is it calculated?
Your FIRE number is the total investment portfolio value you need to retire and live off your investments indefinitely. It is calculated by dividing your annual expenses by your safe withdrawal rate. With the standard 4% rule, your FIRE number = Annual Expenses x 25. For example, if you spend $40,000 per year, your FIRE number is $1,000,000.
The 4% rule is based on historical research showing that a 4% withdrawal rate from a diversified portfolio has survived 30+ year retirement periods with a very high success rate.
How does compound interest work in retirement planning?
Compound interest means you earn returns not just on your original investment, but also on the returns you have already earned. Over long time horizons, this creates exponential growth. The core formula is FV = PV x (1+r)^n + PMT x ((1+r)^n - 1) / r, where FV is future value, PV is present value, r is the periodic interest rate, n is the number of periods, and PMT is the regular contribution.
Starting early is critical. Someone who invests $500/month from age 25 at 7% returns will accumulate far more than someone starting at 35, even if the late starter invests more per month.
What is the 4% rule and is it still valid?
The 4% rule states that you can withdraw 4% of your portfolio in year 1 of retirement, then adjust for inflation each subsequent year, with a high probability your portfolio lasts 30+ years. It was derived from historical US market data going back to 1926.
In today's environment of lower expected returns and longer life spans, some financial planners recommend a more conservative 3% or 3.5% withdrawal rate, especially for early retirees who may need the portfolio to last 40-50 years. You can adjust the withdrawal rate in this calculator to model different scenarios.
What is FIRE and what are the different types?
FIRE (Financial Independence, Retire Early) is a movement centered on aggressive saving and investing to achieve financial independence decades before traditional retirement age. The main variations include:
- Lean FIRE - Retiring on a minimal budget (FIRE number around $500K-$750K, spending under $30K/year)
- Fat FIRE - Retiring with a comfortable, high spending budget (FIRE number $2M+, spending $80K+/year)
- Barista FIRE - Partially retired, with part-time work covering some expenses
- Coast FIRE - You have invested enough that compound interest alone will grow your portfolio to the FIRE number by traditional retirement age
How do I calculate my savings rate?
Your savings rate is the percentage of your take-home income that you save and invest each month. Formula: Savings Rate = (Monthly Savings / Monthly Income) x 100.
Research shows that your savings rate is the single biggest driver of early retirement. A 50% savings rate can allow you to retire in roughly 17 years from scratch; a 75% rate can get you there in about 7 years.
How does inflation affect my retirement plan?
Inflation erodes purchasing power over time. This calculator uses real (inflation-adjusted) returns, calculated as: Real Return = ((1 + Nominal Return) / (1 + Inflation Rate)) - 1. This gives you conservative, realistic projections in today's dollars so you can see exactly what your future portfolio is worth in current purchasing power.
Historically, US inflation has averaged about 3% per year. We recommend keeping your inflation assumption between 2.5% and 4% for realistic planning.
What investments should I use to reach FIRE?
Most FIRE practitioners invest in low-cost, broadly diversified index funds. A common strategy is a simple three-fund portfolio: US total market index, international index, and a bond index. The key principles are: keep costs low (expense ratios under 0.1%), diversify broadly, invest consistently, and avoid trying to time the market.
This calculator assumes a blended annual return; 7% is a common historical estimate for a stock-heavy portfolio in real (inflation-adjusted) terms.
Is this retirement calculator free to use?
Yes - 100% free. No account required, no email, no data collected. All calculations run entirely in your browser. We at FinHits believe everyone deserves access to powerful financial planning tools.
This tool is for educational and informational purposes only and does not constitute financial advice. Please consult a qualified financial advisor before making major investment decisions.