Where the 25× rule comes from
The familiar “multiply spending by 25” rule is simply the inverse of a 4% withdrawal rate: 1 ÷ 0.04 = 25. The 4% figure traces to financial planner William Bengen’s 1994 research using historical U.S. market returns, which looked for a starting withdrawal that, raised with inflation each year, would have lasted at least 30 years in the periods he studied. Morningstar, which re-runs the question each year with forward-looking return assumptions, published a 3.9% safe starting rate in its latest estimate for a balanced portfolio over 30 years with a 90% probability of success. Our safe withdrawal rate guide covers both.
How to use the calculator well
Start with real spending. Use your actual annual spending from bank and card statements, not a guess. Include irregular costs such as car replacement, home repairs and travel by averaging them per year. If you plan to retire before Medicare eligibility, add an estimate for health-insurance premiums and out-of-pocket costs; our health insurance guide explains where to find them.
Subtract reliable other income. A pension, an annuity, rental income or Social Security reduces what the portfolio must cover. Enter it in today’s dollars. If a benefit starts later than your retirement date, the simple FIRE number overstates your needs later and understates them earlier; a year-by-year planner handles that better.
Choose a withdrawal rate deliberately. Longer retirements generally call for lower starting rates, because the money has to last more years. The comparison table under your result shows how much the target moves: for $42,000 of portfolio-funded spending, a 3% rate needs $1,400,000 while 4.5% needs about $933,333.
FIRE number variants
People in the FIRE community use informal labels. Lean FIRE describes a frugal budget, Fat FIRE a generous one, and Barista FIRE a smaller portfolio supplemented by part-time work. They all use the same arithmetic with different spending inputs. See the Barista FIRE calculator and the comparison guide.
A quick example
Suppose you spend $60,000 a year and expect $18,000 of Social Security in today’s dollars. The portfolio covers $42,000. At 3.9% that is about $1,076,923; at 4% it is $1,050,000; at 3.5% it is $1,200,000. The $150,000 spread between 4% and 3.5% is roughly three to five extra years of saving for many households, which is why the choice deserves thought.
Limits of a single number
A FIRE number is a target, not a plan. It ignores taxes on withdrawals unless you include them in spending, assumes spending stays flat in real terms, and treats the withdrawal rate as reliable when it is really a probability statement based on past or modelled returns. Many people add a buffer, plan to cut spending in poor markets, or keep some part-time income. Re-check the number each year.