FIRE Calculator — Methodology

How This Calculator Works

The FIRE (Financial Independence, Retire Early) Calculator combines deterministic projections with Monte Carlo simulations to estimate when your portfolio could reach your FIRE number and how often, in the simulations, it would last to age 95. Neither is a promise: both depend on the returns and inflation you assume. It models four withdrawal strategies and includes variants (Lean FIRE, Fat FIRE, Coast FIRE, Barista FIRE).

Inputs and Assumptions

• Annual expenses: Your current annual spending in today's dollars.
• Current invested assets: Total portfolio across all investment accounts.
• Annual savings: How much you save/invest per year, in today's dollars. Everywhere in the calculator it is assumed to rise with inflation, so it buys the same each year.
• Part-time income: Optional income in retirement for Barista FIRE calculations.
• Expected annual return: Default 7%, before inflation. Used for deterministic projections.
• Inflation rate: Default 2.5%. Your FIRE number is in today's dollars, so years to FIRE and Coast FIRE use the real return (the return after inflation), with your savings held constant in today's dollars. The year-by-year projection and the Monte Carlo work in future dollars instead: your savings and your spending are both raised by inflation from today, so the first year of retirement already pays your spending at the prices of that year.
• Safe Withdrawal Rate (SWR): Default 4%. Determines FIRE number.

Formula

// FIRE Number
FIRE_Number = Annual_Expenses / SWR

// Lean FIRE (70% of expenses)
Lean_FIRE = (Annual_Expenses × 0.7) / SWR

// Fat FIRE (130% of expenses)
Fat_FIRE = (Annual_Expenses × 1.3) / SWR

// Real return (FIRE_Number is in today's dollars)
realReturn = (1 + returnRate) / (1 + inflation) − 1

// Years to FIRE: first year the balance reaches FIRE_Number
balance(n) = balance(n−1) × (1 + realReturn) + Annual_Savings

// Coast FIRE Number
Coast_FIRE = FIRE_Number / (1 + realReturn)^yearsToRetirement

// Freedom Days
Freedom_Days = (Current_Assets / Annual_Expenses) × 365

// Barista FIRE (expenses minus part-time income)
Barista_FIRE = (Annual_Expenses - PartTimeIncome) / SWR

// Future dollars: an amount in today's dollars, t years from now
priceLevel(t) = (1 + inflation)^t

// Monte Carlo (500 iterations)
Growth to retirement, year t = 1 … yearsToRetirement (not randomised):
  balance = balance × (1 + expectedReturn) + Annual_Savings × priceLevel(t)
For each iteration, each year from retirement to age 95 (t years from now, withdrawal at year end):
  Return = random draw from Normal(mean = your expected return, s.d. = 17%)
  Classic withdrawal = (Annual_Expenses − PartTimeIncome) × priceLevel(t)
  Apply withdrawal strategy rules (thresholds use the FIRE number × priceLevel at the start of the year)
  balance = balance × (1 + Return) − withdrawal
  Track portfolio survival to age 95
Success_Rate = surviving_portfolios / total_iterations

// Year-by-year projection: the same rules at your expected return every year.
// Its inflation-adjusted column divides each withdrawal by priceLevel(t), so it is in today's dollars.

Withdrawal Strategies

• 4% Rule (Classic): Withdraw a fixed percentage of initial portfolio, inflation-adjusted annually. Based on Bengen (1994) and the Trinity Study.
• Dynamic (Guyton-Klinger): Guardrails — cut spending 10% if withdrawal rate exceeds 120% of target; raise 10% if below 80%.
• Ratcheting: Inflation adjustments only go up. When portfolio outperforms, spending locks at the higher level.
• Floor & Upside: Spend 75% of classic withdrawal when portfolio is down; up to 150% when running hot.

Data Sources

• Monte Carlo returns — each year's return is drawn at random from a normal distribution centred on the expected return you enter, with a 17% standard deviation (an assumed figure for stock-market volatility). It is not a historical return series. To test a plan against actual historical sequences, use the Sequence of Returns Calculator, which replays it through every start year in Robert Shiller's US market data.
• Trinity Study (Cooley, Hubbard, Walz, 1998) — Foundation for the 4% safe withdrawal rate.
• Bengen, W. (1994) — "Determining Withdrawal Rates Using Historical Data." Original 4% rule research.
• Guyton & Klinger (2006) — "Decision Rules and Maximum Initial Withdrawal Rates." Dynamic withdrawal guardrails.

Limitations

• Monte Carlo uses 500 iterations (not 10,000) for browser performance — precision is ±2-3 percentage points.
• Does not model taxes on withdrawals.
• Does not account for Social Security or pension income.
• Each year's return is drawn independently, so the simulation rarely produces long bad stretches like the 1930s or 1970s. Real sequences can be worse than it suggests.
• Growth before retirement uses your expected return every year; only the retirement years are randomised.
• Does not model healthcare cost inflation separately from general inflation.
• Assumes a fixed asset allocation — does not model glide paths or bond tents.

Last Updated

October 2026 — With nothing invested and nothing saved, the success rate showed 100%; a simulation that starts retirement with $0 and spending to fund now counts as running out. The year-by-year table's FIRE marker now uses the same rule as Years to FIRE (your balance against the FIRE number raised by inflation to that year), so both name the same age: 53 for the default plan, where the marker used to sit at 47.

October 2026 — The success rate and the year-by-year projection now raise your spending by inflation from today, not from your retirement date. Retirement used to start at today's spending, which made it look smaller than it is: for the default plan (age 30 to 55, $100,000 saved, $20,000 a year, $40,000 spending, 7% return, 2.5% inflation) $40,000 of spending today is about $74,000 in dollars of the year you turn 55, not $40,000, and the success rate falls from about 85% to about 64%. Savings now rise with inflation in both, as they already did for years to FIRE.

October 2026 — Years to FIRE and Coast FIRE now use the real return. They used the full return against a target in today's dollars, which reached FIRE early: 15 years instead of 18 for $100,000 saved, $30,000 a year, $40,000 spending, 7% return and 2.5% inflation.

October 2026 — Corrected the data-source description. The Monte Carlo has always drawn returns from a normal distribution; it does not use a historical return series. An April 2026 note here said it had been updated with historical return data, which was wrong.