We calculate your FIRE number based on the 4% rule. This rule suggests that you can withdraw 4% of your investments (adjusted for inflation) each year without running out of money for at least 30 years. For example, if your annual retirement expenses are $40,000, you would need $1,000,000 in investments ($40,000 / 0.04) to retire.

The 4% rule originates from William P. Bengen's well-known and extensively studied paper "Determining Withdrawal Rates Using Historical Data." It provides simple and practical guidance, especially for people new to FIRE.

Reference:
1. Cooley, Philip L., Hubbard, Carl M., and Walz, Daniel T. "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable". American Association of Individual Investors Journal, February 1998.
2. "Inflation Calculator: Historical Inflation Rate for the U.S." Calculator.net, n.d.,https://www.calculator.net/inflation-calculator.html .

The FIRE number, based on the 4% rule, is a great way to get started. It provides an easy and actionable guideline, acting as a general benchmark for safe retirement planning. This clarity is invaluable when planning for the future.

Furthermore, the value of a FIRE number lies not just in its precision, but in the motivation it provides. A clear goal, even if not 100% accurate, keeps you on track and helps you make steady progress toward financial independence. Without a defined goal, it's easy to drift without direction

Of course, retirement planning can be more complex. Things like pensions or changes in expenses after retirement could affect your needs. If you're getting closer to FIRE or want a more detailed number that fits your situation, you can use our advanced FIRE calculator for a more accurate and personalized plan.

Reference:
Locke, Edwin A., and Gary P. Latham. A Theory of Goal Setting and Task Performance. Prentice Hall, 1990.