1. What is the Simple FIRE Calculation?

The Simple FIRE (Financial Independence, Retire Early) calculation uses the 4% rule to determine how much money you need to achieve financial independence. It estimates the portfolio size needed to support your annual expenses indefinitely.

2. How Does the Calculator Work?

The calculator uses the Simple FIRE formula:

Where:

• \( expenses \) — Your annual expenses in dollars
• 25 — The multiplier based on the 4% safe withdrawal rate

Explanation: The 4% rule suggests that you can safely withdraw 4% of your portfolio annually without depleting it over a 30-year retirement. Multiplying your expenses by 25 (the inverse of 4%) gives you your target FIRE number.

3. Importance of FIRE Calculation

Details: Calculating your FIRE number is crucial for financial planning and setting retirement goals. It provides a clear target for how much you need to save and invest to achieve financial independence.

4. Using the Calculator

Tips: Enter your annual expenses in dollars. The calculator will compute your FIRE number - the amount you need to save to support your lifestyle at a 4% withdrawal rate.

5. Frequently Asked Questions (FAQ)

Q1: What is the 4% rule?
A: The 4% rule is a retirement planning guideline that suggests you can withdraw 4% of your portfolio annually, adjusted for inflation, without running out of money for at least 30 years.

Q2: Is the 4% rule still valid today?
A: While debated, the 4% rule remains a popular benchmark. Some experts suggest a more conservative 3-3.5% withdrawal rate in today's economic environment.

Q3: Does this calculation account for taxes?
A: No, this simple calculation uses pre-tax expenses. You should factor in taxes when determining your actual annual spending needs.

Q4: What about other income sources?
A: This calculation assumes your investment portfolio is your primary income source. If you have other income (pensions, Social Security, etc.), you would subtract those from your expenses before calculating.

Q5: How should I invest my FIRE portfolio?
A: Most FIRE practitioners recommend a diversified portfolio of low-cost index funds, typically with a stock/bond allocation between 60/40 and 80/20.