How the result is calculated
Financial independence, the FI in FIRE, means having invested enough that withdrawals from the portfolio can pay for your spending for the rest of your life, so that work becomes optional. Two questions follow: how large the portfolio has to be, and how long it takes to build.
The first answer depends on how much you plan to spend each year and on the share of the portfolio you are prepared to withdraw. That share is the withdrawal rate, and dividing spending by it gives the target.
FI numberS ÷ w
- S
- the yearly spending the portfolio must cover, in today's money
- w
- the withdrawal rate: the share of the portfolio spent in the first year, then raised with prices
The second answer depends on how much you save and how fast it grows. The calculator takes your take-home income less your spending as the yearly saving, adds a twelfth of it each month to what you already have invested, and grows the balance at a real return, the return left after inflation, converted to a monthly rate as (1 + r)^(1/12) − 1. It finds the month in which the balance first reaches the target, which is the spreadsheet function NPER on monthly figures.
Worked example
| Item | Amount | How it is obtained |
|---|---|---|
| FI number | $1,000,000 | 40,000 ÷ 0.04 |
| Saved a year | $30,000 | 70,000 − 40,000, a 43% savings rate |
| Saved a month | $2,500 | 30,000 ÷ 12 |
| Growth a month | 0.4074% | 1.051 ÷ 12 − 1 |
| Months to 1,000,000 | 218.5 | NPER(0.004074, −2,500, −50,000, 1,000,000) |
| Years to FI | 18.2 | at age 48, from 30 today |
At a 3.25% withdrawal rate the target rises to 1,230,769 and the time to about 21 years.
| Item | Amount | How it is obtained |
|---|---|---|
| FI number | $750,000 | 30,000 ÷ 0.04 |
| Saved a year | $30,000 | a 50% savings rate |
| Years to FI | 16.4 | the same at any income, as long as half is saved |
Because spending and saving scale together, the time to independence depends on the savings rate and the return, not on the size of the salary.
Reading the result
The headline is the years until your portfolio reaches the FI number, with the target and the age at which you would reach it underneath. The tiles show the target as a multiple of your spending, your savings rate, and what your current portfolio could already pay each year at the same withdrawal rate, which is a useful measure of progress in its own right.
The chart traces the portfolio by age against a line at the target. The table shows how long the same income takes at savings rates from 10% to 70%, starting from nothing. It is the clearest picture of why people pursuing early retirement concentrate on spending: from 20% to 50% the time falls from about 36 years to about 16.
What changes the result
The withdrawal rate sets the target, and it is the least certain input. The 4% figure comes from studies of United States history. William Bengen's 1994 paper and the Trinity study by Cooley, Hubbard and Walz, published in 1998, tested inflation-adjusted withdrawals against US share and bond returns since 1926; the Trinity study reported that a 4% withdrawal from a half-shares, half-bonds portfolio lasted 30 years in about 95% of historical periods. Those studies looked at 30-year retirements in one, unusually successful, market. Wade Pfau's 2010 study of 17 countries found 4% would have been safe in only four of them, and a 2025 paper by Anarkulova, Cederburg, O'Doherty and Sias, using 38 developed markets and realistic lifespans, put the rate a 65-year-old couple could take with a 5% chance of running out at 2.31%. The research is indicative, not a guarantee; a lower rate buys safety with more years of work.
The real return sets the pace. Between 3% and 5% the time to independence in the opening example moves from 21.6 years to 18.2; the difference compounds over a long accumulation.
The savings rate moves both the target and the pace, which is why it matters most of all.
What is not included
Tax on withdrawals is not deducted, so the spending you enter should include the tax you expect to pay in retirement. Income that starts later, a state pension or a part-time job, is not added, though it lowers the portfolio you need. The return is steady, while real markets are not: a fall in the first years after you stop work does far more damage than the same fall later, which is the main reason withdrawal studies find failures at all. Spending is assumed constant in today's money; in practice it changes with health, housing and family.
Using the result
Use the FI number as a target and the savings rate as the lever. Lowering spending raises the savings rate and lowers the target at once, which is why it shortens the timetable more than any other change. Run the calculator at a cautious withdrawal rate as well as at 4%, and treat the gap as the margin of safety you are choosing. Before acting on a date, add the tax and the later income the calculator leaves out, and revisit the figures as your spending becomes clearer.