FIRE target formula

Dec 20, 2021 29 Comments

Too many of all these posts asking “ I have x, can I FIRE?

Here is a decent approximation on FIRE number:

Annual spending * (1+marginal tax rate) * (1 + inflation) * IF(life expectancy- age > 30, THEN 30, ELSE life expectancy - age)

Multiply by another factor of 2 if you think divorce is in the cards.

30x multiple gives you a 3.3% withdraw rate, pretty good estimate for long retirement. 25x is for a standard retirement age at 65 which is a 4% withdraw rate. I don’t include Social Security as this is for FIRE. Remember, it’s all about how much you spend so get a good estimate on that. In addition, learn about safe withdraw rates for different portfolio allocations to make sure that multiple makes sense for you. And don’t forget to account for medical insurance. Tweak to fit your own circumstances.

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TOP 29 Comments
  • Oracle
    Rinku1143

    Go to company page Oracle

    Rinku1143
    By this formula, I can never retire
    Dec 20, 2021 1
  • Amazon
    vidkx73’x

    Go to company page Amazon

    vidkx73’x
    seems like most folks talking that game can already do it but too chicken to jump lol
    Dec 20, 2021 2
    • OP
      Maybe chicken or not knowledgeable enough about personal finance. Remember they are asking internet strangers for help.
      Dec 20, 2021
    • Amazon
      vidkx73’x

      Go to company page Amazon

      vidkx73’x
      i seen simpler formulas u can just multiply by 25 or 33 depending on risk tolerance. inflation is already accounted for in those growth estimates. then long term cap gain and roth ladder brings down tax to much lower than current marginal rate
      Dec 20, 2021
  • Apple
    Ksz

    Go to company page Apple

    PRE
    AMD
    BIO
    Spittoon of Upper Mgmt
    Ksz
    (Life expectancy-current age)*$average annual expense

    is what you need to have in your account when you retire. No need for complicated formulas. Taxes, Market downturns, Unforeseen expenses and Inflation would eat up your annual investment growth. So that evens out.
    Dec 20, 2021 2
  • Mavenir
    temPoral

    Go to company page Mavenir

    temPoral
    (Annual expense) x 2 + [ add zero in the end] . This is the simplest formula to go fire.

    No mortgage is a bonus.
    Dec 20, 2021 3
  • Adobe
    fjb777

    Go to company page Adobe

    fjb777
    Wrong formula. You're retired if your passive income exceeds your living expenses. That's it!
    Age, life expectancy, withdrawal rate has nothing to do with it.
    Dec 20, 2021 12
    • Google
      !blind!

      Go to company page Google

      !blind!
      Thanks much @Adobe, for a very detailed sharing. I’ve heard of Bigger Pockets. Will surely check it out, as I consider RE as more sane long term passive investment route compared to peanut dividends in this hyper inflated stock market.

      Are you based in Bay Area? Do you happen to know any such event organized by deal sponsors, where I could join virtually? I’m fine to travel to meet some quality sponsor. Also before first deal, I’d talk to some lawyer to verify the paperwork’s. 80/20 distribution looks reasonable for hands-free RE investment. Don’t know why Opendoor or Offerpad yet offer such investment tool.
      Dec 21, 2021
    • Adobe
      fjb777

      Go to company page Adobe

      fjb777
      I am in Texas. You could search meetup.com and FB groups. One virtual event I know of is hosted by Rod Kheif (google him).

      It's a good idea to have a lawyer to review the paperwork. Make sure that lawyer specializes in private security offerings.

      80/20 is on the generous side. More typical is 8% preferred return and 70/30 afterwards.

      I also know of very greedy sponsors where they would pay 8% preferred return, then refinance the investors out (return their capital), and then pay them 10% of the rest of the profits while keeping 90%.
      Dec 21, 2021