What is the 4% safe withdrawal rate?

William Bengen's 1994 research (later expanded by the Trinity Study at Trinity University) found that retirees who withdrew 4% of their starting portfolio in year one, then adjusted for inflation each subsequent year, historically did not run out of money over 30-year periods using a diversified stock/bond portfolio. Many planners now suggest 3-3.5% for retirements longer than 30 years.

What investment return should I use?

Use a real (inflation-adjusted) return. The S&P 500 has historically returned approximately 7% annually after inflation over long periods. A diversified portfolio with bonds returns less. Using a nominal return without subtracting inflation will make the timeline look shorter than it actually is.

How does savings rate affect the timeline so much?

Savings rate has a double effect. Higher savings means more money invested each year AND, if achieved through lower expenses, a lower FIRE number. A person saving 50% of income reaches FIRE in roughly 17 years regardless of income level, while someone saving 10% may need 50+ years. Verify current figures with the IRS or relevant authority before making financial decisions, as rates change annually.

Should I include my home equity in the portfolio?

Generally no, unless you plan to sell the home and downsize in retirement. Your FIRE portfolio should consist of liquid, income-producing investments you can withdraw from. Home equity is a real asset but not one you can spend without selling or borrowing against it.

What about Social Security or a pension?

If you expect guaranteed income in retirement, it reduces the amount your portfolio needs to cover. Subtract your expected annual Social Security or pension income from your annual expenses before dividing by the withdrawal rate. For example: $40,000 expenses minus $18,000 Social Security = $22,000 portfolio must cover, so FIRE Number = $22,000 / 0.04 = $550,000.

Can I reach FIRE with an average income?

Yes, but the timeline depends on expenses and savings rate, not income alone. Someone earning $60,000 who saves 40% with $30,000 annual expenses needs a FIRE number of $750,000. At 7% real return, that takes roughly 18 years. The key variable is the gap between income and spending.

FIRE Calculator (Financial Independence)

This calculator computes your FIRE number (the portfolio size needed to retire and live off investments) and projects how many years it will take to reach it at your current savings rate and expected return. It includes a year-by-year growth chart and a sensitivity table showing how changes in savings rate shift the timeline.

How this tool works

FIRE (Financial Independence, Retire Early) uses a safe withdrawal rate (SWR) to size the portfolio needed for perpetual spending. FIRE Number = Annual Expenses ÷ SWR. At the standard 4% SWR, spending $40,000/year requires a $1,000,000 portfolio. The tool then runs a year-by-year projection: Portfolio(Y) = Portfolio(Y−1) × (1 + return rate) + Annual Savings. It iterates until Portfolio(Y) ≥ FIRE Number and reports that year as your target retirement year. A sensitivity table shows years-to-FIRE at five different annual savings levels, illustrating how savings rate dominates the timeline far more than investment return for most people at early stages. Key assumption: the return rate input should be an inflation-adjusted (real) return; using a nominal return without adjusting expenses for inflation overstates how long the portfolio will last. Edge case: the 4% rule was derived from historical 30-year retirement horizons in US equity markets. Retiring decades early (at 35–45) implies a 50–60-year retirement window; at that horizon, historical data supports a lower SWR in the range of 3.3–3.5% to maintain high portfolio survival probability. The tool allows custom SWR entry for this reason.

Worked example

Current portfolio: $50,000. Annual expenses: $40,000. Annual income: $80,000. Annual savings: $20,000. Expected return: 7% (inflation-adjusted). Safe withdrawal rate: 4%. FIRE Number: $1,000,000. Gap: $950,000. Savings rate: 25%. At these inputs, the portfolio crosses $1,000,000 at approximately year 21-22. Increasing the savings rate from 25% to 35% cuts roughly 5 years off the timeline.

Frequently asked questions

What is the 4% safe withdrawal rate?
William Bengen's 1994 research (later expanded by the Trinity Study at Trinity University) found that retirees who withdrew 4% of their starting portfolio in year one, then adjusted for inflation each subsequent year, historically did not run out of money over 30-year periods using a diversified stock/bond portfolio. Many planners now suggest 3-3.5% for retirements longer than 30 years.
What investment return should I use?
Use a real (inflation-adjusted) return. The S&P 500 has historically returned approximately 7% annually after inflation over long periods. A diversified portfolio with bonds returns less. Using a nominal return without subtracting inflation will make the timeline look shorter than it actually is.
How does savings rate affect the timeline so much?
Savings rate has a double effect. Higher savings means more money invested each year AND, if achieved through lower expenses, a lower FIRE number. A person saving 50% of income reaches FIRE in roughly 17 years regardless of income level, while someone saving 10% may need 50+ years. Verify current figures with the IRS or relevant authority before making financial decisions, as rates change annually.
Should I include my home equity in the portfolio?
Generally no, unless you plan to sell the home and downsize in retirement. Your FIRE portfolio should consist of liquid, income-producing investments you can withdraw from. Home equity is a real asset but not one you can spend without selling or borrowing against it.
What about Social Security or a pension?
If you expect guaranteed income in retirement, it reduces the amount your portfolio needs to cover. Subtract your expected annual Social Security or pension income from your annual expenses before dividing by the withdrawal rate. For example: $40,000 expenses minus $18,000 Social Security = $22,000 portfolio must cover, so FIRE Number = $22,000 / 0.04 = $550,000.
Can I reach FIRE with an average income?
Yes, but the timeline depends on expenses and savings rate, not income alone. Someone earning $60,000 who saves 40% with $30,000 annual expenses needs a FIRE number of $750,000. At 7% real return, that takes roughly 18 years. The key variable is the gap between income and spending.