What Is a FIRE Number?

The Short Version

Take what you spend in a year. Multiply by 25. That's your FIRE number.

This is the Rule of 25. Why 25? Because 25 is the inverse of 4%. Withdraw 4% of $1.2M and you get $48,000. Whether 4% is actually safe over a long retirement is a separate question.

One thing people get wrong early on: this is based on spending, not income. You multiply what goes out the door, not what comes in. And don't forget taxes on withdrawals, which can add 10-20% depending on your account types.

Where the 4% Rule Comes From

The 4% rule is based on the Trinity Study, a 1998 paper by Philip Cooley, Carl Hubbard, and Daniel Walz at Trinity University. They looked at every rolling period from 1926 to 1995 and asked: if a retiree withdrew a fixed percentage each year (adjusted for inflation), how often would the portfolio survive 30 years?

At 4%, how the portfolio was split between stocks and bonds mattered a lot:

So with a stock-heavy portfolio, 4% worked about 95% of the time. The ~5% of failures were mostly people who retired right before a prolonged downturn. Getting hit with bad returns in your first few years of withdrawals is devastating in a way that bad returns later aren't. This is called sequence-of-returns risk, and it's the main thing that kills a 4% plan.

Some caveats worth knowing:

• The study tested 30-year periods, not indefinite ones. If you're 35 and planning for 50+ years, that's beyond what the original data covers.
• It used US market data only. The US had an exceptionally strong century of returns. Other countries fared worse.
• The bond allocation used long-term corporate bonds, not treasuries. Swapping in government bonds changes the numbers.
• It doesn't account for healthcare costs, which are the biggest wildcard for US early retirees who lose employer coverage before Medicare at 65.
• Wade Pfau has argued that given current market valuations and lower expected future returns, a 3-3.5% rate may be more realistic, especially for early retirees with 40-50 year horizons.
• For a much deeper dive, Big ERN's Safe Withdrawal Rate series is the most thorough modern analysis of this topic.

All of which is to say: 4% is a useful starting point, not gospel. If you're willing to cut spending in a downturn, 4% is probably fine. If you want to set it and never think about it again, 3.5% or lower gives you more room. And if you'll have Social Security or part-time income, you can afford to be more aggressive.

Different Flavors of FIRE

Your FIRE number depends on the life you want, and people want wildly different things. A few shorthand terms you'll see:

These boundaries are loose and people argue about them endlessly. The useful part is that they name different relationships with money and work.

It's Not All-or-Nothing

$1.2 million is a lot of money. When you're staring at a six- or seven-figure target that's decades away, it's hard not to feel stuck.

But your FIRE number is really just a bunch of smaller numbers added together. Groceries at $500/month? That's $150K. Utilities? Maybe $50K. You're not going to actually start withdrawing for groceries at $150K, but it helps to see the big number broken down into pieces you can wrap your head around.

That's what FIRE Unlocked does. You pick spending categories, set amounts, and it shows which ones your current savings could theoretically cover.