Understanding the FIRE method and how we calculate your financial independence number
FIRE stands for Financial Independence, Retire Early. It's a movement and methodology focused on saving and investing aggressively to achieve financial independence much earlier than traditional retirement age.
The foundation of FIRE is the 25x rule: you need 25 times your annual expenses saved to retire safely.
FIRE Number = Annual Expenses × 25
Based on the 4% safe withdrawal rate from the Trinity Study
Minimal expenses, typically $40,000-60,000/year. Requires significant lifestyle optimization.
Comfortable middle-class lifestyle, typically $60,000-100,000/year. Most common approach.
Luxury lifestyle maintained, typically $100,000+/year. Requires higher income or longer timeline.
The 4% withdrawal rate is based on historical market data showing that a diversified portfolio can safely support 4% annual withdrawals for 30+ years, even through market downturns.
Starting early and investing consistently allows compound interest to work its magic. A 7% average return doubles your money every 10 years.
You choose one option in each category (housing, transportation, food, travel, healthcare, entertainment, shopping).
We start from reputable, national datasets (detailed below).
We apply a location multiplier keyed to local rent levels vs. the U.S. typical (Zillow, ZORI).
Housing and transportation are generally household-level; food is per-person and scaled using USDA household adjustments.
Anchor: Typical asking rent and regional differentials (Zillow Research, ZORI).
Method: "Modest" ≈ below-median stock; "Comfortable" ≈ near national typical; "Premium urban condo" reflects prime-metro amenity stock.
Anchor: All-in annual ownership cost (AAA, Your Driving Costs).
Transit-heavy tiers: Benchmarked with common big-city monthly passes plus modest rideshare.
Anchor: At-home food costs (USDA Food Plans).
Organic / high-quality: Adds a moderate premium informed by USDA Economic Research Service analyses of organic price differentials.
Anchors: Average domestic airfare (Bureau of Transportation Statistics) and typical hotel average daily rates (STR).
Method: Airfare + 3–7 hotel nights + meals; tiers reflect trip frequency and distance (domestic vs. international).
Employer reference: Average single-coverage premium (KFF Employer Health Benefits Survey).
Individual/ACA reference: Marketplace benchmark trends (HealthCare.gov / CMS) plus typical out-of-pocket assumptions for bronze/silver vs. gold.
Benchmarks: National spending shares and levels (BLS Consumer Expenditure Survey).
Method: Tier "ladder" brackets the national average up/down for lifestyle differences (from low/free hobbies to premium clubs; from necessities to luxury).
• These are national anchors adjusted by simple location multipliers; actual costs vary by city, household makeup, and choices (e.g., car type, miles driven, dining frequency).
• Amounts reflect spending, not tax liabilities.
• Organic premiums vary widely by item and market; our organic tier uses a conservative uplift over the USDA "moderate" basket.
• Travel tiers assume economy airfare and midscale lodging; peak-season or luxury choices will be higher.