FIRE stands for Financial Independence, Retire Early. The math behind it is simple: figure out how much you need invested so that a small, safe annual withdrawal covers your living expenses forever, then work out how long it takes to get there.
How your FIRE number is calculated
Your FIRE number is your annual expenses divided by your withdrawal rate. At a 4% withdrawal rate, $40,000 a year in expenses means you need $1,000,000 invested — because withdrawing 4% of $1,000,000 is $40,000. A lower withdrawal rate is more conservative but requires a bigger number.
Why your savings rate matters more than your return
Two people earning the same salary can reach FIRE decades apart, purely based on how much they save. A higher return helps, but a higher savings rate compounds the benefit — it means more money invested earlier, which then has more time to grow.
Common mistakes
People often underestimate future expenses (healthcare especially) or assume an overly aggressive withdrawal rate. Many FIRE planners today use 3.5% instead of the classic 4% for extra safety over multi-decade retirements.