How is the FIRE Number Calculated?
The FIRE number is the corpus that generates enough passive income to cover your expenses indefinitely. It is based on the safe withdrawal rate — the % you can withdraw annually without depleting your corpus.
FIRE Number = Annual Expenses (at retirement) / Safe Withdrawal Rate
Annual Expenses at FIRE = Current Monthly Expenses × 12 × (1 + inflation)^years
Real Return = ((1 + portfolio return) / (1 + inflation)) - 1
Portfolio grows via:
Corpus(y) = Corpus(y-1) × (1 + annual return) + Monthly Savings × 12 × (1 + annual return / 2)
The 4% Rule — Does it Work for India?
The 4% rule was derived from US market data (the Trinity Study, 1998) and assumes 30-year retirement with a 50/50 equity-bond portfolio. For India, most planners recommend 3–3.5% because: Indian inflation historically runs higher (5–7% vs 2–3% in the US), equity market history is shorter, and Indian retirees may have 40+ year retirement horizons.
Types of FIRE
Lean FIRE: Minimal corpus, frugal lifestyle. Good for those who can keep expenses very low (₹20,000–₹30,000/month). Fat FIRE: Large corpus, comfortable lifestyle with travel and luxuries. Needs ₹5–10 crore+ typically. Barista FIRE: Semi-retire with a small corpus; part-time work covers day-to-day expenses while investments grow. Coast FIRE: You have invested enough that even without adding more, compounding alone will take you to full FIRE by traditional retirement age.
Frequently Asked Questions
What is FIRE? ⌄
FIRE stands for Financial Independence, Retire Early. The goal is to accumulate enough wealth so that investment returns cover your living expenses indefinitely — so you never need to work for money again.
What is the 25x rule? ⌄
The 25x rule says you need 25 times your annual expenses to retire. This is derived from the 4% safe withdrawal rate — if you withdraw 4% of your corpus annually, it lasts 30+ years historically. So if you spend ₹10L/year, you need ₹2.5 crore.
What is the safe withdrawal rate for India? ⌄
The 4% rule comes from US data. For India, most planners recommend 3–3.5% as a safe withdrawal rate, accounting for higher inflation, shorter equity market history, and longer retirement periods. This means a 28–33x expense target.
What are the types of FIRE? ⌄
Lean FIRE: Retiring with a minimal lifestyle and small corpus. Fat FIRE: Retiring with a large corpus for a comfortable lifestyle. Barista FIRE: Semi-retirement where part-time work covers some expenses. Coast FIRE: You have enough invested that compounding alone will hit your target by traditional retirement age.
How does inflation affect my FIRE number? ⌄
Inflation is the biggest risk to FIRE. If you spend ₹5L/year today and inflation is 6%, you will need ₹9L/year in 10 years. Your FIRE corpus must account for this — either by using a real return (return minus inflation) or by inflating your expense target.