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Summary
Financial Independence, Retire Early (FIRE) is the goal of saving enough that investment returns cover your living expenses indefinitely, freeing you from the need to work. The core idea: accumulate 25× your annual expenses (the “FIRE number”), then withdraw 4% per year — a rate shown by William Bengen (1994) and the Trinity Study (1998) to survive every 30-year historical period using US market data.
How it works
The FIRE movement rests on two pillars: a high savings rate to build wealth quickly, and the safe withdrawal rate (SWR) to sustain it.
The 4% rule
In 1994, financial planner William Bengen analysed US stock and bond returns from 1926 onward. He found that a retiree with a 50/50 stock/bond portfolio could withdraw 4% of their initial portfolio in year one, then adjust that amount for inflation each year, and never run out of money over any 30-year historical period. He called this the “SAFEMAX.”
The Trinity Study (1998) by Cooley, Hubbard, and Walz confirmed this finding across different portfolio compositions and time horizons. Portfolios with ≥75% equities supported 4% withdrawals with success rates above 95%.
FIRE variants
| Variant | Target | Use case |
|---|---|---|
| Lean FIRE | 50% of current expenses / SWR | Minimal lifestyle — extreme frugality |
| Regular FIRE | Current expenses / SWR | Maintain your current standard of living |
| Fat FIRE | 2× current expenses / SWR | Comfortable or luxury retirement |
| Barista FIRE | (Expenses − part-time income) / SWR | Semi-retire with part-time work covering some costs |
| Coast FIRE | Present value of FIRE Number | Save enough now that compound growth alone reaches your FIRE Number by a target age — no further contributions needed |
Savings rate: the key lever
The single most important factor in reaching FIRE is savings rate — the percentage of after-tax income you save. A higher savings rate simultaneously:
- Increases the amount invested each year (building wealth faster)
- Demonstrates you can live on less (reducing your FIRE number)
The UK household savings ratio averages around 9–11% (ONS, 2023–2025). FIRE enthusiasts typically aim for 50%+.
| Savings Rate | Approx. Years to FIRE (7% return) |
|---|---|
| 10% | 51 years |
| 25% | 32 years |
| 50% | 17 years |
| 75% | 7 years |
The formulas
Where
At the standard 4% SWR, this simplifies to: FIRE Number = Annual Expenses × 25.
Where
The year-by-year portfolio simulation uses:
Where
Worked examples
Regular FIRE: £50k income, £30k expenses, £50k saved, 7% return
FIRE Number
= £750,000
Annual savings
= £20,000/year
Savings rate
= 40%
Years to FIRE (simulation)
= 17 years (age 47)
Coast FIRE (target age 60)
= £98,525
Result
Starting at age 30, you'd reach financial independence at age 47 — 13 years before the traditional UK retirement age
Lean FIRE: same inputs but targeting 50% of expenses
Effective expenses
= £15,000/year
Lean FIRE Number
= £375,000
Years to FIRE (simulation)
= 11 years (age 41)
Result
Lean FIRE cuts the target in half, shaving 6 years off the timeline — but requires living on £15,000/year
Inputs explained
- Annual income (after tax) — your net take-home pay. The calculator computes savings as income minus expenses.
- Annual expenses — your total yearly spending. This drives the FIRE Number.
- Current savings / investments — your existing portfolio. A larger starting balance means fewer years to FIRE.
- Expected annual return — the growth rate of your investments. 7% is a common nominal assumption for global equities. For inflation-adjusted projections, enter a real return (e.g. 4–5%).
- Safe withdrawal rate — the percentage of your portfolio you withdraw in year one of retirement, adjusted for inflation thereafter. 4% is the Bengen/Trinity standard; 3–3.5% is more conservative for very early retirees.
- FIRE type — choose your target lifestyle: Lean (50%), Regular (100%), Fat (200%), Barista (with part-time income), or Custom.
- Target retirement age — used for Coast FIRE calculations. This is the age at which compound growth alone would reach your FIRE Number.
Outputs explained
- Financially independent at age X — when your simulated portfolio first exceeds your FIRE Number.
- FIRE Number — the portfolio value needed so SWR covers your expenses.
- Annual saving — income minus expenses.
- Savings rate — annual saving as a percentage of income.
- Coast FIRE — the amount you’d need today so that compound growth alone (no further saving) reaches your FIRE Number by the target retirement age.
Assumptions & limitations
- Constant returns — the simulation uses a fixed annual return. Real markets are volatile; sequence-of-returns risk means poor early returns can deplete a portfolio even if the long-term average is fine.
- No inflation adjustment — the calculator uses nominal values. To model real (inflation-adjusted) returns, enter a real return rate (e.g. 4–5% instead of 7%).
- No tax modelling — investment gains are assumed untaxed. In practice, ISAs and pensions provide tax-free growth for most UK investors.
- Constant income and expenses — the simulation assumes income and expenses remain the same throughout. In reality, both tend to change.
- 4% rule limitations — Bengen’s research used US data from 1926–1992. UK equities have had somewhat lower historical returns. Some researchers suggest 3–3.5% for very long (40+ year) retirements.
- No State Pension — the UK State Pension (currently ~£11,500/year) would effectively reduce your FIRE number once you reach eligibility (age 66, rising to 67 by 2028), but is not modelled.
Verification
| Test case | Inputs | Expected | Source |
|---|---|---|---|
| Base case | Income £50k, expenses £30k, savings £50k, 7%, 4% SWR | FIRE Number: £750,000, Years: 17, Age: 47 | Year-by-year simulation verified manually |
| High saver | Income £80k, expenses £25k, savings £100k, 7%, 4% SWR | FIRE Number: £625,000, Years: 7, Age: 32 | Year-by-year simulation verified manually |
| Low saver | Income £40k, expenses £35k, savings £10k, 7%, 4% SWR | FIRE Number: £875,000, Years: 37, Age: 72 | Year-by-year simulation verified manually |
| FIRE identity | Any inputs | FIRE Number × SWR = Annual Expenses | Algebraic identity |
| Coast FIRE identity | Any inputs | Coast FIRE × (1+r)^n = FIRE Number | Present value identity |
| Lean FIRE | £30k expenses, lean mode | FIRE Number: £375,000 (50% of regular) | Half expenses / SWR |
| Fat FIRE | £30k expenses, fat mode | FIRE Number: £1,500,000 (200% of regular) | Double expenses / SWR |
| Already FIRE | Savings ≥ FIRE Number | Years: 0, immediate independence | Boundary condition |
Sources
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