FIRE Retirement Calculator: How can I retire early?

FIRE stands for Financial Independence, Retire Early, and is a method of saving with the goal of retiring before the traditional retirement age. FIRE practitioners focus on achieving their financial goals as early and as sustainably as possible, to be able to prioritize different aspects of their life later on.

Boldin’s FIRE calculator will help you create your retirement plan and determine how much you can viably spend if you aim to retire in your 30s or 40s. The FIRE formula is not complicated. Once you add your income, savings, and expenses, you’ll get a clear picture of your financial trajectory. From then on, you can identify the lifestyle adjustments you can make in order to achieve your FIRE goals.

How to Use the Retirement Calculator for FIRE Planning

Our calculator is designed to help with traditional retirement planning, but with a few tweaks, it can be one of the most detailed and practical FIRE tools online. Here’s how to use our calculator to learn how long your savings will last at different retirement ages and calculating different scenarios for optimal retirement planning.

Adjust Your Retirement Age
FIRE focuses on retiring earlier than traditional timelines. Instead of setting the default retirement age at 65, you make it reflect your FIRE goal, such as 40 or 50. The earlier you aim to retire, the more intentional you’ll need to be with your savings and investments.

For example, if your desired retirement age is 45 and you expect to live until 90, the calculator will project how long your savings will last given your current contributions and spending patterns.

Input Current Savings, Income, and Expenses
Enter the fields including your current income, savings, and monthly expenses. These numbers form the baseline for evaluating your readiness to retire early.

Key FIRE Adjustments

• Savings Rate: For the FIRE method, aim for a higher-than-average savings rate—often 50% or more of your income.
• Spending: The FIRE practitioners focus on reducing expenses, often through strategies like minimalism, house hacking, or geoarbitrage (moving to a place with a lower cost of living). Enter your optimized monthly expenses and see how the reduction impacts your FIRE timeline.
• Pro Tip: The calculator doesn’t account for reduced expenses after retirement. For the FIRE method, adjust post-retirement expenses to reflect your planned frugal lifestyle.

Simulate FIRE-Friendly Scenarios
Next up, you’ll notice the calculator’s “What if I…” section. It will allow you to test scenarios that can fast-track your FIRE journey. Some of the things you can try:

• Reduce Expenses by 10%: Cutting non-essential expenses like dining out or subscription services can have a huge impact on your timeline.
• Work Part-Time: Many FIRE followers choose to work part-time after reaching financial independence to cover expenses without drawing from their portfolio.
• Downsize: Switching to a smaller home or relocating to a low-cost area noticeably lowers expenses.

As you’re testing these, you can notice how even smaller changes can have an impact on the results.

Evaluate Your Results
Once you enter the data, the calculator will project how long your savings can last. This is an example projection:

• Monthly income: $7,000
• Monthly expenses: $3,000
• Current savings: $200,000
• Savings rate: 50%
• Desired FIRE age: 45

Then the calculator will show how you can adjust your savings and expenses to hit your FIRE target sooner. For FIRE, aim that your portfolio can sustain your desired lifestyle indefinitely—typically using the 4% rule as a guideline (something you’ll see explained in the section below).

Why FIRE Matters

Young professionals tend to opt for FIRE more regularly these days. The financial hardships and unforeseen events over the last years have made people hyper-aware of the pressure of living paycheck to paycheck, and they want a way to remedy that.

• Financial independence removes the pressure, giving you the ability to live without being tied to a traditional 9-to-5.
• The FIRE method gives you back control and enables a new level of freedom, focusing on the things that matter most to you, whatever those are. Those who achieve financial independence often focus on traveling, passion projects, spending more quality time with the family, or giving back to the community.
• The FIRE method gives a level of security in an unpredictable world. With a well-structured portfolio, you’re less reliant on job stability or the ups and downs of the economy. Market downturns, job losses, or unexpected expenses will not have the same effect if you have the financial resources to weather the storm and maintain peace of mind.

Achieving FIRE is more than just leaving work—it’s building a life where you can prioritize the lifestyle that brings you the most joy and fulfillment.

What are the Core Principles of FIRE?

To achieve your FIRE goals, you’ll need financial discipline, strategic planning, and the willingness to commit to long-term goals. Those are reflected in the 3 main principles.

The 4% Rule
The 4% rule is the cornerstone of the FIRE method. The rule states that you can safely withdraw 4% of your savings a year without depleting your portfolio.

For example, If your annual expenses are $40,000, you will need a portfolio of $1,000,000. That way, 4% of your portfolio would account for your annual expenses, and you’d be able to retire early. 

In the first year of your retirement, you’ll be withdrawing 4% of your portfolio. For subsequent years, the amount you’ll withdraw will be the amount of dollars from the first year + the amount that will account for the inflation.

Save Aggressively:
Faster saving equals reaching your financial independence sooner. That doesn’t mean living a life of deprivation, or jeopardizing the quality of life. Instead, you should focus on reallocating your resources so that they align with your values and long-term goals.

• Cut Major Expenses: Housing and transportation are often the biggest contributors to your monthly spending. You can manage these expenses through downsizing, carpooling, and the use of public transport.
• Increase Income: Side hustles, freelancing, or career advancements can add to your savings without significantly affecting your quality of life. 
• Automate Savings: Set up automatic transfers to investment accounts to make saving effortless.

Invest Strategically:
Strategic investments can help grow your savings in the background while you’re actively earning your income. Combined, these are what actually make FIRE possible. It’s understandable if you feel intimidated by the market if you haven’t dipped your toes in it before. 

In that case, it’s best to take the slow and steady approach and learn as you go. Investing in low-cost, diversified portfolios is the best way to maximize returns while minimizing risk. It’s best if you look into:

• Index Funds: These provide broad market exposure with minimal fees.
• Real Estate: Rental properties can generate significant passive income over time.
• Tax-Advantaged Accounts: Maximize contributions to accounts like 401(k)s, IRAs, and HSAs for additional tax benefits. The earlier you start, the more you’ll benefit from compound growth.

What are Monte Carlo Simulations?

As the FIRE movement started growing, so did the need for advanced tools to help better model financial futures of their practitioners. A significant improvement to these tools is the integration of Monte Carlo simulations in financial calculators.

The flaw with traditional retirement calculators is that they tend to use static assumptions about market returns and withdrawal rates. Monte Carlo simulations, which can be run in Boldin’s PlannerPlus tool, take a dynamic approach by running thousands of potential market scenarios. These simulations show how your portfolio might perform under varying conditions, from the best-case scenarios to the worst-case market downturns.

Why are Monte Carlo simulations so valuable?

The biggest challenge of achieving early retirement is ensuring your savings last often far longer than traditional retirements. Monte Carlo simulations let you stress-test your withdrawal strategy and investment portfolio. They help understand how likely your plan is to succeed in different economic situations. That level of precision is extremely valuable for your planning.

With Monte Carlo simulations, you’ll be able to see how your portfolio can perform during periods of high inflations, lower-than-expected returns, or prolonged market volatility. These are especially important if you are considering more flexible withdrawal strategies.

They provide a clearer picture of how adjusting withdrawals or reallocating investments could impact your long-term plan. These tools can give you the confidence to make more informed decisions and adapt to uncertainties with a clearer sense of financial stability.

Understanding the Different Types of FIRE

There is not one correct way to follow the FIRE method. Depending on your unique situation and the goals you are looking to achieve, your FIRE journey will be different. Two approaches you’ll hear about commonly are LeanFIRE and FatFIRE.

LeanFIRE is for those who prefer a more minimalist approach. Think of it as retiring early with a tight budget but still meeting all your basic needs. People who pursue LeanFIRE often embrace minimalism—they live simply, cut unnecessary expenses, and focus on what truly brings them joy. The budget range of $25,000 or $30,000 a year can be considered LeanFIRE.

Lean FIRE practitioners prioritize financial independence over luxuries, and choose to spend time with loved ones, enjoying nature, or pursuing hobbies that don’t cost much.

On the other hand, FatFIRE is far from frugal. With FatFIRE, you aim to retire early while maintaining a more comfortable or even luxurious lifestyle. This could mean dining out regularly, traveling often, or enjoying a larger home. FatFIRE can be made possible by saving and investing more money upfront, while still providing more flexibility in lifestyle choices. People aiming for FatFIRE might have annual spending goals of upwards of $80,000.

Another type of FIRE that some investors follow is BaristaFIRE and it is a mix of fully retiring and continuing to work. The term BaristaFIRE was coined due to many people choosing jobs with benefits—like working at a coffee shop. The name is not literal, though: The idea is to have the flexibility to pursue work that’s enjoyable or less stressful, without relying on a traditional 9-to-5.

BaristaFIRE followers save enough to cover most of their living expenses through investments but plan to work part-time to bridge any financial gaps or cover discretionary spending. This option appeals to those who want more financial independence but enjoy the social or mental stimulation of work in a reduced capacity.

How can I start with the FIRE method?

Planning a FIRE journey doesn’t need to be overwhelming. Here’s how to start in four easy steps.

1. Calculate your FIRE number 

Your FIRE Number is the total amount of savings you’ll need to retire early. Most often, this number is determined by multiplying your annual expenses by 25, a formula based on the 4% rule. 

This figure gives you a clear target to aim for, whether that’s $750,000, $2 million, or whatever else reflects your lifestyle. 

2. Track your spending

Once you’ve established your FIRE Number, the next step is understanding where your money is going. Tracking your spending is critical, as it will allow you to optimize it. Optimizing your savings rate is one of the main levers you can pull to accelerate your FIRE journey.

Tools like Mint and YNAB can help you break down your expenses and see where adjustments can be made. Maybe you’re spending more on subscriptions than you realized, or you can trim your dining-out budget. 

3. Establish saving methods

These insights will reveal opportunities to reallocate your resources toward savings and investments. Even small changes can make a significant impact over time.

• Automate contributions to high-yield savings accounts or investment funds, ensuring that saving becomes a habit.
• Challenge yourself to increase your savings rate gradually, aiming for at least 50%.
• Cancel unused subscriptions
• Opt for meal prepping instead of dining out whenever possible
• Look into house hacking: Even renting out a part of your home can free up more money without feeling like you’re sacrificing too much,

4. Start investing

The earlier you start investing, the greater your returns will be over time. Smart, controlled investments are what really make an impact on your FIRE. Here are some guidelines to keep in mind:

• If you compile a diversified portfolio of low-cost index funds, bonds, and real estate, you’ll be able to provide steady returns for yourself while minimizing the risk.
• Reinvesting your dividends. This will allow the power of compounding to work in your favor, turning your money into a tool that works for you.
• Monitor your progress regularly. Tracking your net worth on a monthly or quarterly basis can be incredibly motivating as you watch your savings grow and your FIRE number get closer. Whether you use a spreadsheet or a financial app, it helps you stay the course and adjust as needed.

Common Myths About FIRE

The FIRE method has risen to popularity in recent years, but so did many misconceptions about it. Those misconceptions made it seem like it’s unrealistic for many people. It’s time to debunk some of those.

FIRE is only for higher earners
One of the biggest myths is that FIRE is only achievable for high earners. While a large income can certainly help, it’s not a requirement. The real key to achieving FIRE lies in your savings rate—the percentage of your income that you save and invest.

A disciplined saver earning a modest income can make faster progress toward FIRE than someone with a six-figure salary who spends most of what they earn. The FIRE approach is more about optimizing your lifestyle and being intentional with your money, rather than who has the bigger income.

FIRE requires extreme deprivation
Another common misconception is that pursuing FIRE means giving up everything fun or enjoyable in life. This can’t be further from the truth. The FIRE method helps you align your spending with your values. It is actually a method that will allow you to live aligned with your goals and spend your time doing what you enjoy most.

By focusing on what truly brings you joy and cutting back on things that don’t, you can still live a rich and fulfilling life while saving aggressively for your goals. It’s less about sacrifice and more about intentionality.

Do you stop working entirely with FIRE?

Lastly, FIRE doesn’t necessarily mean you’ll stop working completely once you hit your financial goals. Some people do retire in the traditional sense, but others just see FIRE as the means to financial independence that will allow them to pursue their true passions.

It’s not unusual for people who achieve FIRE to start pursuing a creative career, do pro-bono work, dedicate their time to causes, or make their life more fulfilling in different ways. The FIRE method doesn’t mean you won’t work ever again, it means you will have the freedom to choose the work you want to do.

Do I need to adjust FIRE for reduced Social Security benefits

¹ Social Security benefits are calculated based on an individual’s 35 highest-earning years and this can be affected by changes from the Social Security Administration each year. That means retiring early can result in fewer years of earnings, potentially leading to lower benefits. To address this, many members in the FIRE community are adapting their strategies to ensure long-term social security.

A more active method includes continuing part-time work or pursuing passion projects that generate income. Those would supplement your retirement savings and maintain Social Security contributions.

A leaner approach includes considering these factors and adjusting your plans accordingly. This adaptability ensures that early retirement remains a sustainable option.

How to Plan Healthcare and Insurance After Early Retirement

² When you retire early, you no longer have a health plan that is covered by your employer, but you’re probably years away from qualifying for Medicare. The good news is that you can easily manage that gap with proper planning. Planning seems to be a big part of FIRE, so what’s one extra step? Some of the options available out there include:

• Affordable Care Act (ACA) marketplace: You can find plans tailored to your income. Here’s where FIRE can work in your favor. By reducing your taxable income through strategies like maxing out retirement accounts, you may qualify for subsidies that make ACA plans more affordable. These subsidies can lower your premiums, depending on how much you’re earning or withdrawing during retirement.
• Healthcare sharing ministries: These are not insurance but function similarly. The programs pool resources with others to help cover medical expenses. Some retirees find these to be a cost-effective alternative, though they may have limitations on what they cover.
• Spouse family plan: If you’re married, your spouse’s employer-provided health insurance might also be an option.
• Part-time and flexible roles: Some people choose to work part-time or in flexible roles just for health benefits while still enjoying the freedom of early retirement.

The key to planning for healthcare is building it into your FIRE strategy early on. Estimate your potential costs and make sure they’re factored into your overall budget. With the right preparation, it will be just another step to your financial independence and early retirement.

Keep the Fire Burning: Staying Motivated on Your Journey

The road to FIRE is a marathon, not a sprint, and staying motivated makes the goal possible. The hard work and discipline you’re putting in now will pay off in the long run.

If you choose FIRE, you’re choosing a path where early retirement becomes your reality. While others are working into their 60s, you’ll be free to explore your passions or simply enjoy life on your own terms—when you’re still young enough to make the most of it.

Explore More Advanced Tools

Our calculator is a great starting point, but for a more detailed analysis, try Boldin’s financial planning tool that will guide your FIRE journey. Features include:

• Monte Carlo Simulations: Predict multiple market scenarios.
• Scenario Planning: Model “what if” scenarios like job changes or reduced expenses.
• Personalized Plans: Get tailored recommendations to meet your goals.

Start planning smarter today!

References

¹ “How Social Security Benefits Are Calculated and Annual Changes,” Investopedia, accessed December 4, 2024. Read more.

² “Here’s Why Embracing the FIRE Movement Could Leave You Financially Insecure,” The Motley Fool, accessed July 17, 2024. Read more.