How to Calculate Your FIRE Number

One formula, one real assumption behind it, and the three mistakes that make most people's FIRE number meaningfully wrong.

The Formula

FIRE number = Annual expenses × 25

This comes from the 4% rule: withdraw 4% of your portfolio in year one, adjust for inflation each year after, and historical US market data suggests this survives a 30-year retirement in most historical scenarios. 25 is just the inverse of 4% (1 ÷ 0.04 = 25).

Mistake 1: Using Current Expenses, Not Retirement Expenses

Your expenses today include costs that disappear in retirement (commute, work clothes, possibly EMIs that will be paid off) and exclude costs that appear (more healthcare spending, more travel, potentially supporting parents or children longer). Calculate your projected retirement annual expense, not your current one.

Mistake 2: Ignoring Healthcare Specifically

Healthcare costs tend to rise with age and inflate faster than general inflation. Build a specific, separate healthcare cost estimate into your annual expense figure — don't fold it into a generic inflation-adjusted "current expenses" number, since medical inflation in India has historically outpaced general CPI.

Mistake 3: Using 25x for a Genuinely Early Retirement

The 4% rule (25x) was modeled on a 30-year retirement. Retire at 40 and you might need the portfolio to last 50+ years. Many FIRE planners use 3-3.5% (28.5x-33x) for genuinely early retirements — a meaningfully larger number than the standard 25x multiple.

Worked Example

Three Numbers to Actually Calculate, Not One

• Lean FIRE — bare-minimum essential expenses only
• Regular FIRE — your realistic, comfortable lifestyle expense
• Fat FIRE — including discretionary spending, travel, buffer for uncertainty

Most people benefit from knowing all three, not just picking one — Lean FIRE is your absolute floor, Regular FIRE is your realistic target, Fat FIRE is what you're working toward if things go well.

What This Number Doesn't Account For

• Sequence-of-returns risk — a market downturn in your first few retirement years is far more damaging than the same downturn a decade in, regardless of average returns
• Major one-off expenses (a child's education, a health event) not built into "annual expenses"
• Tax on withdrawals, which varies by which accounts you're drawing from

The Bottom Line

25x annual expenses is a starting point, not a finished number. Adjust for your actual retirement-age expense profile, use a higher multiple if your retirement horizon is genuinely long, and calculate lean/regular/fat versions rather than a single figure.