What is the 4% rule for retirement?

The 4% rule states that you can withdraw 4% of your portfolio in year one of retirement, then adjust that dollar amount for inflation each subsequent year, and historically your portfolio will last 30+ years. It was derived from the Trinity Study (1998), which tested withdrawal rates across historical market cycles.

How much do I need to retire at 40?

To retire at 40, you need 25x your annual expenses invested in a diversified portfolio. If you spend $50,000/year, that's $1,250,000. However, because retirement at 40 may last 50+ years, many FIRE planners use a more conservative 3.5% withdrawal rate (28.5x rule), which would require $1,425,000 for a $50,000 annual spend.

Coast FIRE is when your invested assets are large enough that — without any additional contributions — they will compound to your full FIRE number by traditional retirement age (65). For example, if you need $1.5M at 65 and have $200,000 invested at age 35, your money will coast to roughly $1.5M at a 7% real return without any more contributions.

What Is FIRE? How to Calculate Your FIRE Number

What Is FIRE?

FIRE stands for Financial Independence, Retire Early. The core idea is to save and invest aggressively — typically 40–70% of your income — so your investment portfolio generates enough passive income to cover all your living expenses indefinitely. Once your portfolio can sustain your lifestyle, work becomes optional.

FIRE is not about being rich by traditional standards. It's about building enough invested assets that the returns outpace your spending. A person spending $40,000 per year needs far less than someone spending $120,000 per year.

How to Calculate Your FIRE Number (The 25x Rule)

Your FIRE number is the portfolio size at which you can retire safely. The most widely used formula is the 25x rule: multiply your annual expenses by 25. This is derived from the 4% safe withdrawal rate — research showing that withdrawing 4% of your portfolio in year one, then adjusting for inflation each year, has historically lasted 30+ years across a diversified stock/bond portfolio.

Annual spending $30,000 → FIRE number: $750,000
Annual spending $50,000 → FIRE number: $1,250,000
Annual spending $80,000 → FIRE number: $2,000,000

Use your current annual spending as the baseline. Include housing, food, healthcare, travel, and all other expenses. Many FIRE planners target 100–110% of current spending to account for healthcare costs rising in early retirement.

FIRE Variations: Lean, Fat, and Coast

The FIRE movement has branched into several variations to match different goals and lifestyles:

Lean FIRE: Retire on a minimal budget — typically under $40,000/year. Requires a FIRE number of $1,000,000 or less. Demands frugal living long-term.
Fat FIRE: Retire with a comfortable or luxurious budget — $80,000–$120,000+/year. Requires $2,000,000–$3,000,000+. More flexibility and cushion.
Coast FIRE: Save enough early in life that compounding alone grows your portfolio to your FIRE number by traditional retirement age, without any additional contributions. You still work, but only to cover current expenses.
Barista FIRE: Semi-retire with part-time work that covers basic expenses, while your portfolio continues to grow.

How Much to Save Monthly to Reach FIRE

Your savings rate is the most powerful lever in your FIRE timeline. At a 10% savings rate, reaching FIRE takes about 43 years. At a 50% savings rate, it takes roughly 17 years. At a 70% savings rate, it's about 8.5 years.

The math assumes your money earns a 7% real (inflation-adjusted) annual return, which is close to the historical average of a diversified index fund portfolio. To calculate your specific timeline, use the FIRE number calculator and input your current savings, monthly contribution, and expected return rate.

Practical Steps to Pursue FIRE

Track your spending to establish your true annual expenses
Max tax-advantaged accounts first: 401(k) to the match, then Roth IRA, then HSA, then back to 401(k)
Invest in low-cost index funds — high expense ratios dramatically slow FIRE timelines
Increase income — raises, side income, or career changes accelerate the path more than frugality alone