The path to financial independence is clear. It can be calculated mathematically. This allows us to build confidence that our actions are moving us closer to our desired financial outcomes. So, how do you calculate financial independence?
You can calculate financial independence manually by understanding what your desired income is in retirement and multiplying that number by 25 or you can use our financial independence calculator. For example, if you want to pay yourself $50,000 per year in retirement, you will need $1.25 million in retirement.
This Financial Independence Retire Early (FIRE) Calculator is intended to give you a visual of your current and projected retirement situation. By understanding where we are presently at compared to where we would like to be, we can make more intelligent, data-driven financial decisions to get there.
The FIRE Calculator
Total Contribution: $0
Future Value: $0
FIRE Number: $0
Understanding the financial calculator results
As with any calculator, your outputs are only as good as your inputs. In the case of this financial calculator, your potential retirement situation is determined by the investment actions you’re taking today.
A) If your “Future Value” number is lower than your “FIRE Number,” then you’re not meeting your financial retirement goals. If that’s the case, I recommend visiting our page HOW TO FIRE.
B) If your “Future Value” number is higher than your “FIRE Number,” then you’re likely on track to meet your financial retirement goals and you may be able to decrease your time to retirement. If that’s the case, I recommend you sharing this FIRE Calculator with someone you know. You might change their life.
+ Total Contributions
This result is the amount of money you will have contributed/invested towards your financial independence goal. For example, If you contribute $10,000 per year, in 10-years you will have contributed $100,000.
+ Future Value
This result is the amount of money you may have at the FIRE age you selected. For example, it’s the result of your current investments + annual contributions compounded at your selected interest rate each year until the FIRE Age you chose.
+ FIRE Number
This result is the amount of money you would need to have in retirement savings to be able to pay yourself an annual salary each year. It’s dependent on the annual expenses you expect to have in retirement. For example, if you expect to have $60,000 a year in annual expenses during retirement, you would need about $1,500,000. The FIRE Number is based on your annual retirement expenses x 25
+ If You Retire Today
This result is based 100% on your “Current Investments” and “Safe Withdrawal Rate” inputs. It provides a picture of what you may be able to pay yourself in retirement if you were to retire and begin withdrawing today. The intention is to get your thinking in this manner about your retirement accounts. The more money you have currently invested, the more money you can pay yourself in retirement.
+ If You Retire at FIRE Number
This result is based on your “Annual Retirement Expenses” and “Safe Withdrawal Rate” inputs. It provides a picture of what you may be able to pay yourself in retirement if you were to retire at your FIRE Number.
FIRE Calculator FAQ’s
+ Current investments?
The total amount of money you currently have invested today.
The total amount of money you invest (or intend to invest) each year until you reach your FIRE Age.
+ Current age?
How old are you right now?
+ FIRE age?
Your target financial independence (FI) age. The age you would like to achieve financial independence.
+ Investment returns?
The percent return you expect to achieve from investing. The historical market average is about 8% for reference.
+ Retirement expenses?
The annual salary you will need in retirement to cover your expenses. For example, if you will need $5,000 per month in retirement, you will need roughly $60,000 per year or $1,500,000 total.
+ Safe withdrawal rate?
The percentage of your investment total that you can withdrawal each year in retirement. 3% or 4% is typical and has been shown to last on average for about 30-years.
Disclaimer: This financial independence retire early (FIRE) calculator is for educational purposes only. It’s not intended to prescribe advice or influence your financial decision making in any way. We at firethefamily.com always advise speaking with a certified financial planner prior to making any investment, financial planning, or retirement decisions.