Guide · Savings & Investing
FIRE Explained: How to Calculate Your Number
Financial Independence, Retire Early comes down to one formula. Here is what it is, where it comes from, and how to work out how far away you are.
The 25× rule
The foundation of FIRE is a single calculation: annual spending × 25 = your FIRE number. Once your invested portfolio reaches that number, you can — in theory — withdraw 4% per year indefinitely, because a diversified portfolio historically generates enough returns to replenish what you withdraw and keep pace with inflation.
This 4% withdrawal rate comes from the Trinity Study, a 1998 analysis of US stock and bond returns that found 4% was sustainable across every 30-year rolling period in history. It is a guideline, not a guarantee — and many FIRE practitioners use 3–3.5% to add a safety margin for longer retirements.
The formula
FIRE number = Annual spending ÷ 0.04 = Annual spending × 25
What is your FIRE number?
The number varies enormously depending on your lifestyle. Here is how three different spending levels translate into FIRE targets:
| Annual spending | FIRE number (25×) | Monthly withdrawal |
|---|---|---|
| £18,000 (Lean FIRE) | £450,000 | £1,500 |
| £30,000 (Standard) | £750,000 | £2,500 |
| £50,000 (Fat FIRE) | £1,250,000 | £4,167 |
Based on the 4% rule. A 3.5% rate requires 28.6× spending instead of 25×.
How long will it take?
The timeline to FIRE depends on your savings rate more than almost anything else. Assume a 7% annual real return (after inflation) on a diversified portfolio:
| Savings rate | Years to FIRE | Example (£50k income) |
|---|---|---|
| 10% | ~43 years | Save £5,000/yr |
| 25% | ~32 years | Save £12,500/yr |
| 50% | ~17 years | Save £25,000/yr |
| 70% | ~8.5 years | Save £35,000/yr |
Starting from zero. Years to FIRE fall dramatically as savings rate rises because you simultaneously need less (lower spending) and accumulate faster.
The maths behind this is why FIRE practitioners focus so intensely on the savings rate rather than income. Earning more helps, but spending less compresses the timeline from both ends at once.
The UK FIRE toolkit: ISAs, SIPPs, and the bridge
UK FIRE planning has a structural challenge: SIPPs (pensions) cannot be accessed until age 57 (rising to 57 in 2028). If you plan to retire at 45, you need to fund a 12-year bridge before pension access. The standard approach:
Build both an ISA (for the bridge) and a SIPP (for the long term) in parallel. The SIPP gets you 20–45% tax relief on contributions, making it far more capital-efficient for long-term growth — but you need enough in taxable or ISA accounts to cover the years before you can access it.
Frequently asked questions
What is a FIRE number?
Your FIRE number is the total invested portfolio you need to sustain your lifestyle indefinitely. It is calculated as your annual spending multiplied by 25 — which is equivalent to a 4% annual withdrawal rate. For example, if you spend £30,000 a year, your FIRE number is £750,000.
Where does the 4% rule come from?
The 4% rule comes from the Trinity Study (1998), which found that a portfolio of 50–75% stocks could sustain 4% annual withdrawals over any 30-year period in US market history. More recent research suggests 3.5% is more conservative for longer retirements or all-stock portfolios, and markets outside the US.
What is the difference between Lean FIRE, Fat FIRE, and Coast FIRE?
Lean FIRE is retiring on a minimal budget (often £15,000–£20,000/year or less). Fat FIRE targets a comfortable or luxurious lifestyle (£50,000+/year). Coast FIRE means you have enough invested that — without any more contributions — compound growth will hit your number by traditional retirement age, so you only need to cover current expenses.
Does FIRE work in the UK with ISAs and SIPPs?
Yes. UK FIRE investors typically use a Stocks & Shares ISA for accessible pre-retirement withdrawals and a SIPP for tax-efficient long-term growth (accessed from age 57 from 2028). A common strategy is to build both in parallel so there is a bridge between early retirement and SIPP access age.