FIRE and the 4% Rule Explained
FIRE stands for Financial Independence, Retire Early. The core concept: accumulate enough invested assets that your portfolio's returns cover all living expenses indefinitely. The 4% rule, derived from the Trinity Study, provides the formula — withdraw 4% annually and your portfolio has historically lasted 30+ years, meaning your FIRE number is 25x annual expenses.
If your annual expenses are $50,000, your FIRE target is $1,250,000. With $200,000 already saved, adding $25,000/year at 7% return would take roughly 23 years to reach that target. Lower your expenses or increase your savings rate to accelerate the timeline significantly.
Frequently Asked Questions
For retirements lasting 40+ years, many FIRE practitioners use 3–3.5% withdrawal rate (28–33x expenses) to account for sequence-of-returns risk and prolonged market downturns.
No. If you plan to receive Social Security benefits later, you can reduce your annual expense input by the expected SS benefit to get a more accurate FIRE number.