GLOSSARY · FIRE & EARLY RETIREMENT

FIRE number

The portfolio at which withdrawing your chosen percentage each year covers your annual spending. At a 4% withdrawal rate it is 25 times your yearly spending; at 3.5% it is about 28.6 times.

Also called: financial independence number, retirement number, 25 times spending

FORMULA

FIRE number = annual spending ÷ withdrawal rate

COMPUTE IT WITH YOUR NUMBERS

FIRE Calculator →Given savings and spending, when can I stop working?Lean FIRE →What is my FIRE number on a frugal essentials-only budget?

LEARN IT PROPERLY

CHAPTER · SAVINGS FOUNDATIONS & EMERGENCY FUNDS · FOUNDATIONSHow Much to Save CHAPTER · RETIREMENT PLANNING FUNDAMENTALS · FOUNDATIONSYour Retirement Number QUICK ANSWERWhat is the 4% rule?The 4% rule says that if you withdraw 4% of your portfolio in the first year of retirement and raise that amount with inflation each year, your money lasted at least 30 years in every period of US market history that its author tested from 1926. It is a finding about the past, built for 30-year retirements, not a guarantee.

SOURCES

Determining Withdrawal Rates Using Historical Data. Bengen, Journal of Financial Planning, 1994.
Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable. Cooley, Hubbard & Walz (Trinity study), AAII Journal, 1998.

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