Explained

The FIRE calculator gives a simple estimate of how much you need invested to retire, with an income in retirement that is sufficient to cover your expenses, and at what age you will reach that milestone. It is simple in that it does not account for tax and assumes that your income needs in retirement are fixed among many more smaller effects. The full app can be used to get a more accurate estimate.

The calculation works by assuming that your retirement needs are equal to your current expenses (after adjusting for inflation). It then assumes that there is a safe withdrawal rate that allows that percentage of your investments to be withdrawn per year for the duration of your retirement. The FIRE number, that is the amount you need invested to retire, is equal to your expenses divided by the safe withdrawal rate.

The value of the safe withdrawal rate is critical to this calculation and it is typical to use 4% (the 4% rule, or the 25 times rule). This is based on investments in the USA and for a retirement that lasts a max of 30 years, in the UK the equivalent value is 2.5% . It is key that this value represents a high probability of success, e.g. 99%.

The age at which you reach your FIRE number is calculated by assuming you invest your entire income minus your expenses each year (remember there is no tax consideration). It then assumes that the investments grow at 2.5% and that your income grows at 1.5% per year (after adjusting for inflation).