FIRE Calculator

How to use it

1. Type what you spend in a year, in today's money, and the savings you already have invested.
2. Enter what you add to the savings each year and the real return you expect after inflation.
3. Keep the withdrawal rate at 4% to test the classic rule, or enter a lower one for a longer retirement.
4. Read the target and the time to reach it, then open the year-by-year table to see the age at each step.

How the target and the years are calculated

The savings target is the yearly spending divided by the withdrawal rate. At 4%, the target is 25 times the yearly spending, because 1 ÷ 0.04 = 25. The savings are assumed to grow by the real return, and what you add each year is added at the end of the year.

The number of years solves the savings formula for the target. Years can be fractional, so the calculator shows the time in years and months, and the age in whole years, rounded up.

T = spending ÷ w
S(n) = S × (1 + r)^n + A × ((1 + r)^n − 1) ÷ r
n = ln((T + A ÷ r) ÷ (S + A ÷ r)) ÷ ln(1 + r)

T  savings target
w  withdrawal rate
S  savings now
A  saved each year
r  real return per year
n  years to the target

The 4% rule and where it comes from

The 4% rule is a rule of thumb: a portfolio of stocks and bonds can pay 4% of its starting value in the first year, and then raise that amount each year for inflation, without running out over a retirement. It comes from the Trinity Study, published in February 1998 in the AAII Journal by Cooley, Hubbard and Walz of Trinity University. The study tested withdrawal rates against U.S. stock and bond returns from 1926 to 1995, over payout periods of 15 to 30 years.

The study found that withdrawal rates of 3% and 4% were extremely unlikely to exhaust a portfolio that held stocks and bonds, and it reports a 95% success rate for a 4% withdrawal over the periods it tested. Some starting years, such as 1965 and 1966, would have needed a rate a little below 4%.

The limits of the 4% rule

The study uses historical U.S. returns and inflation. Future returns can be lower, and other countries have had different histories. The 4% rule was tested for retirements of 15 to 30 years, so a longer retirement needs a lower rate. The article also suggests that most retirees keep at least half of the portfolio in stocks.

• Taxes and fees, which lower the return you keep.
• Pensions, state benefits and other income, which reduce the savings you need. This calculator counts only the spending that the savings must pay for.
• Spending that rises faster than inflation, for example for health care.

Frequently asked questions