Ultimate FIRE (Financial Independence / Retire Early) Calculator

Ultimate FIRE (Financial Independence / Retire Early) Calculator

Adjust the inputs below based on your situation to find out how many years you'll need to reach Financial Independence (where you no longer have to work if you don't wish to, i.e. you can Retire Early) plus visualize the growth of your expenses, withdrawals and portfolio over time.

Note: See below for key assumptions and input definitions. You might also want to read why I built this FIRE calculator. No information you enter in the calculator is stored anywhere.

NOTE: This is not financial advice. Results are hypothetical, do not indicate future results, and do not represent returns any investor actually attained. Please read the Disclaimer page for more information.

Key assumptions

This calculator assumes the following:

  • You will not draw down any of the capital in your investment portfolio when you stop working. Your investment returns should cover your expenses forever.
  • Your current annual expenses equal your inflation-adjusted annual expenses in retirement.
  • Your investment returns are a constant percentage, i.e. your investment returns compound at a fixed rate. Note that this is unrealistic as the market is volatile, and does not take into account sequence risk (e.g. the risk that the market does badly in the early years of your retirement and thus puts the amount you can withdraw safely at risk).

Input definitions and explanations

[1] Current annual earnings (post tax)

Your total after tax earnings from your job(s), business(es) etc. over an entire year. These should be relatively stable and consistent sources of income. If they are sporadic, it's best to be conservative and exclude them.

[2] Annual savings rate

The amount of money you can save over an entire year, expressed as a percentage of your annual earnings [1].

Annual savings rate = Current annual savings / Current annual earnings

From [1] and [2] we can calculate the following additional items:

Current monthly savings = Current annual savings / 12
Current annual expenses = Current annual earnings - Current annual savings
Current monthly expenses = Current annual expenses / 12

[3] Current investment portfolio (i.e. your nest egg)

The amount of money you can use to invest for your "retirement". This should exclude assets that do not generate returns such as your car, home you live in, and emergency funds.

[4] Annual return (post-tax)

The yearly after tax rate of return you can get on your investments, expressed as a percentage.

Many people use 8% here, as that has been the long term return of the S&P500, but that assumes that you are willing and able to put 100% of your retirement funds into an index fund and keep adding to it year in and year out regardless of what's happening in the market (most people can't).

So you should use either the long term compounded return you have been able to achieve on your portfolio, or the return profile of a more conservative (and realistic) 50/50 equity/bonds split, which at the time of writing will be ~5% per year for US-market investors.

We use after tax returns as everyone's tax situation is different, hence input what is applicable to you.

[5] Annual withdrawal rate

The percentage of your nest egg you will withdraw ever year when you retire. The "safe withdrawal rate" (i.e. the long term sustainable percentage most people can take out in most market conditions without running out out money) is a controversial topic, and many people use 4%. But I think that's risky as you'd have a significant chance of going broke before you die.

To be conservative, I'd use 3% or less. The trade-off is that the lower the withdrawal rate, the longer you'd need to reach Financial Independence. I get that everybody wants to retire earlier, but the whole point of FI is that you no longer need to worry about money. If you use a higher withdrawal rate, you might very well have to worry about it when you can least afford to.

Your withdrawal rate is one of the key inputs. We use it to calculate the following:

Annual withdrawal amount = Year-end portfolio * Annual withdrawal rate
Target portfolio size = Next Year's Expenses / Annual withdrawal rate

My definition of reaching Financial Independence is when your annual year-end withdrawals can sustainably cover Next Year's Expenses (see definition below). This means that you do not experience any drawdown in your portfolio even if you stop working.

Note that post-retirement we subtract Next Year's Expenses rather than the annual withdrawal amount from your investment port each year.

[6] Your age

How old you are this year.

[7] Annual income growth

The percentage rate you expect your income to sustainably grow ever year. Income growth tends to be lumpy (e.g. you get a larger bump when you are promoted), but note that both salary increases and promotions tend to slow the longer you stay in a job, unless you make it to senior management.

[8] Annual inflation rate

Inflation is your enemy when you stop working. While we've been fortunate to have been in a multi-decade low inflation environment, I wouldn't count on it lasting forever. I'd use at least a 2% annual inflation rate – higher if you're more bearing about all the money printing that central bankers are doing.

We use the inflation rate you input to calculate the following:

Inflation-adjusted return = (1 + post-tax annual return) / (1 + annual inflation rate) - 1
Next Year's Expenses = This Year's Expenses * (1 + annual inflation rate)

[9] Stop working once Withdrawal > Next Year's Expenses?

What will happen to your cash flows once you stop working? AFAIK this is the only FIRE calculator out there that models this. Select "Yes" if you plan to stop working once you reach Financial Independence, "No" if you believe you will keep working even once you have reached this state.

When you stop working, we assume that you withdraw the entire amount you need to cover Next Year's Expenses at the end of the year from your investment portfolio.

Of course, you may still have other sources of income once you retire (e.g. part time work, side hustles etc.), but to be conservative we are excluding those.

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