Plenty of people in the FIRE community can name their "number" in a heartbeat. Ask them to explain exactly how they got it, and the answers get a lot fuzzier. That fuzziness is the real problem: a target you can't defend is one you'll either chase forever out of anxiety or hit too early and regret. This is the actual method, plus the honest math on how long it will realistically take.
Step 1: Find your true annual spending
Your FI number is built entirely around what you spend, not what you earn. That feels backwards because most of us think in terms of salary. But once you stop working, your salary is irrelevant. What matters is the number of dollars flowing out the door every year.
Add up a full year of real spending: housing, food, insurance, transportation, subscriptions, travel, gifts, the occasional big one-off purchase averaged out. Use bank and card statements rather than guessing. Most people underestimate their own spending by a meaningful margin when they do it from memory.
Then adjust for how retirement will actually change that number. Some costs disappear (commuting, work clothes, retirement account contributions themselves). Others appear or grow (health insurance if you lose employer coverage, more travel, more hobby spending with all that free time). Don't just multiply your current spending by 25. Build a realistic post-work budget first.
Step 2: Apply a withdrawal-rate multiplier
Once you know your target annual spending, multiply it by a factor derived from your planned withdrawal rate. This comes directly from the 4% rule: if you plan to withdraw 4% of your portfolio in year one, your portfolio needs to be 25 times your spending, because 1 divided by 0.04 equals 25.
| Planned withdrawal rate | Multiplier | Notes |
|---|---|---|
| 4% | 25x | Standard starting point, based on historical 30-year research |
| 3.5% | ~28.5x | Common choice for early retirees with 40+ year horizons |
| 3.25% | ~30.8x | More conservative, more margin for bad early markets |
| 3% | ~33.3x | Very conservative; used by some Lean and Fat FIRE planners alike |
Worked example: Say your realistic post-work spending is $48,000 a year.
- At a 4% withdrawal rate: $48,000 × 25 = $1,200,000
- At a more conservative 3.5% rate: $48,000 × 28.5 = $1,368,000
That difference, $168,000, is the cost of buying extra safety margin. Neither number is "right"; it's a trade-off between a faster timeline and a larger cushion.
Calculator
FI number & timeline
Your FI number
$1,200,000
Estimated years to FI
22.8
The FI number is your annual spending divided by your withdrawal rate. The timeline assumes steady monthly contributions and a constant return — treat it as a rough compass, not a forecast.
Step 3: Turn the target into a timeline
A target number by itself doesn't tell you when you'll get there. That depends on how much you've already saved, how much you're adding each year, and what return you assume along the way. The rough formula uses the future value of a lump sum plus a growing series of contributions:
Future portfolio value = (current savings × growth factor) + (annual contribution × savings growth factor)
You don't need to solve this by hand (the calculator above does it), but it helps to understand the three inputs that actually move the outcome:
- Current invested assets. Money you already have working for you compounds without any further effort.
- Annual savings. The bigger the gap between income and spending, the faster the remaining distance closes. This is the same savings-rate lever discussed in what the FIRE movement actually means.
- Expected real return. A commonly used planning assumption is around 5% after inflation for a diversified stock-and-bond portfolio, though actual year-to-year returns will vary a lot more than that smooth number suggests.
A worked timeline example
Say someone has $60,000 already invested, saves $24,000 a year, and assumes a 5% real return. Their target, from Step 2, is $1,200,000.
| Year | Approx. portfolio value |
|---|---|
| 0 | $60,000 |
| 5 | ~$217,000 |
| 10 | ~$439,000 |
| 15 | ~$706,000 |
| 20 | ~$1,014,000 |
| 22 | ~$1,157,000 |
| 23 | ~$1,231,000 |
On these assumptions, this person crosses their $1.2 million target between years 22 and 23, a little over two decades, not the "retire by 35" headline the movement is sometimes known for. That's normal. The dramatic early-retirement stories usually involve either very high incomes, very aggressive savings rates above 60%, or both.
Tip
Notice how much of the later growth comes from the portfolio itself rather than new contributions. By year 20, the portfolio grows by roughly $50,000 in a single year from returns alone, more than double the annual contribution. This is why the first ten years usually feel like the slowest part of the journey: there's less money compounding, so contributions are doing almost all of the work.
Mistakes that quietly wreck this calculation
Using income instead of spending. This is the most common error by far, and it inflates the target dramatically, since most people spend well under what they earn once savings and taxes are removed.
Ignoring taxes on the way out. Money in traditional 401(k)s and IRAs is taxed as ordinary income when withdrawn. If a large share of your portfolio sits in pre-tax accounts, part of every withdrawal goes to taxes rather than spending. Your spending target should reflect that, or you'll come up short. Understanding the order you filled your accounts in and Roth vs. traditional treatment matters here.
Assuming a smooth, constant return. Markets don't move in a straight line, and a downturn early in retirement is far more damaging than the same downturn later. This is sequence-of-returns risk, and it's a real threat even to a technically "correct" FI number.
Forgetting the number moves. Your FI number isn't fixed forever. Lifestyle changes, kids, moving to a different cost-of-living area, or a change in expected retirement length can all shift it meaningfully. Revisit the calculation at least once a year.
Key takeaway
Your FI number is: realistic post-work annual spending, multiplied by a withdrawal-rate factor you're comfortable with (25x for 4%, higher for more safety margin). Your timeline is a function of what you've already saved, what you add each year, and an honest, non-cherry-picked return assumption. For most people, it's measured in decades, not years.
Where to go next
Once you have a target, the next practical question is where new savings should actually go. See the right order to fill 401(k), HSA, IRA, and brokerage accounts.
Frequently asked questions
Should I use my income or my spending to calculate my FI number?
Spending, not income. Your FI number only needs to replace the money you actually use to live, not the money you earned but saved or paid in taxes. Using income instead of spending will badly overstate your target.
What withdrawal rate should I use for the multiplier?
25x annual spending (a 4% withdrawal rate) is the standard starting point, based on historical research. Early retirees with very long time horizons often use a more conservative 28–33x (a 3–3.5% rate) for extra safety margin.
Does my FI number include taxes I'll owe in retirement?
It should. If a meaningful share of your portfolio sits in traditional (pre-tax) accounts, withdrawals will be taxed as income, so your spending target should account for that rather than assuming every withdrawn dollar is fully spendable.