Glossary · UK
What is FIRE Number?
The portfolio size at which 4% a year covers your spending, marking financial independence.
Full Definition
In the FIRE movement (Financial Independence, Retire Early), your FIRE number is the invested pot large enough that a safe withdrawal each year covers your living costs indefinitely. It is based on the 4% rule, derived from research suggesting a diversified portfolio can sustain annual withdrawals of about 4% (rising with inflation) for 30+ years. Dividing annual spending by 4% is the same as multiplying it by 25. A more cautious 3.5% rate gives a larger target (about 28.5x spending). It is a planning rule of thumb, not a guarantee, and ignores tax wrappers and sequence-of-returns risk.
How FIRE Number is calculated
FIRE number = Annual spending / Safe Withdrawal Rate
(at 4% this equals Annual spending x 25)- Annual spending
- Yearly cost of living in retirement, in today money.
- Safe Withdrawal Rate
- Share of the pot drawn each year, typically 4% (0.04).
Worked example: To cover GBP 24,000 a year at a 4% withdrawal rate: 24,000 / 0.04 = GBP 600,000 (the same as 24,000 x 25).
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