F.I.R.E. stands for “financial independence, retire early,” and it refers to the idea of saving and investing enough money so that you can retire before the traditional retirement age and live off of your investments. To calculate your F.I.R.E. number, you’ll need to consider a few key factors, including your current and future expenses, the expected rate of return on your investments, and the length of time you want to spend in retirement.
**Please take into account your own personal/family requirements and adjust the guidelines. The below are just the standard baseline thoughts.
Here are the steps you can follow to calculate your F.I.R.E. number using formulas:
• Determine your annual expenses: First, you’ll need to estimate your annual expenses in retirement. This should include all of your necessary expenses, such as housing, food, and healthcare, as well as any discretionary expenses you want to include, such as travel or hobbies.
• Calculate your required savings rate: Next, you’ll need to determine how much you need to save each year in order to achieve your F.I.R.E. goal. You can do this by dividing your annual expenses by the expected rate of return on your investments. For example, if your annual expenses are $50,000 and you expect a 6% rate of return on your investments, your required savings rate would be 8.3% (50,000 / 6).
• Determine your F.I.R.E. number: Once you know your required savings rate, you can use it to calculate your F.I.R.E. number. To do this, multiply your required savings rate by the number of years you want to spend in retirement. For example, if you want to retire in 25 years and your required savings rate is 8.3%, your F.I.R.E. number would be 208.75 (8.3 x 25).
Keep in mind that these calculations are based on a number of assumptions, and your actual F.I.R.E. number may be different depending on your specific circumstances and the performance of your investments. It’s important to regularly review and adjust your F.I.R.E. plan to make sure you’re on track to reach your goals.
*We are not financial advisors and only present our findings. Please do your own due diligence and what you feel you can make work in your own unique situation.